What this report is about

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

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

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

Findings

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

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

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

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

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

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

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

Audit recommendations

The NSW Reconstruction Authority should:

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

All audited agencies should:

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

Read the PDF report

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

What this report is about

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

What we found

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

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

What the key issues were

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

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

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

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

What we recommended

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

Portfolio agencies should:

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

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

• financial reporting
• audit observations.

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

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

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

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

Appendix one – Misstatements in financial statements submitted for audit

Appendix two – Early close procedures

Appendix three – Timeliness of financial reporting

Appendix four – Financial data

© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.

What the report is about

Sydney Metro is Australia’s largest public transport project. It requires the acquisition of many private properties, including residential and business properties.

This audit assessed the effectiveness of the acquisition of private properties for the Sydney Metro project. The audited agencies were Sydney Metro, the Department of Planning and Environment (Valuer General NSW) and Transport for NSW (the Centre for Property Acquisition).

The audit assessed agencies against the framework for property acquisitions in New South Wales. It did not re-perform the valuations done for individual properties that were acquired by Sydney Metro.

What we found

Acquisitions of private property for the Sydney Metro project were mostly effective in the sample of acquisitions we assessed. We found Sydney Metro:

• complied with legislative and policy requirements for compensation and communication with people subject to property acquisitions
• kept accurate records of its acquisitions and applied probity controls consistently
• did not complete detailed plans or negotiation strategies for the high-risk and high-value acquisitions we reviewed
• did not comply with legislative timelines for most compulsory acquisitions because of delays in receiving the required information from the Valuer General in these cases.

The Centre for Property Acquisition has overseen the implementation of reforms to residential acquisition processes, but its assessment of the effectiveness of these reforms has not been comprehensive.

What we recommended

The audit made four recommendations to the audited agencies to improve:

• plans and strategies for the acquisition of high-risk and high-value properties
• timeliness of issuing compensation determinations for compulsory acquisitions
• data quality on the experience of people subject to property acquisitions.

The NSW Government has the power to acquire land that is owned or leased by individuals or businesses, if it is needed for a public purpose. The power arises from the Land Acquisition (Just Terms Compensation) Act 1991 (the Just Terms Act). Government agencies that have the power to compulsorily acquire private property are referred to as ‘acquiring authorities’. People who are subject to acquisitions are referred to as ‘affected parties’ and include property owners (business or residential), businesses with a commercial lease on a property, or individuals with residential tenancy leases. In recent years, the vast majority of acquisitions by the NSW Government have been for public transport or road projects.

Sydney Metro is a NSW Government agency with responsibility for building the Sydney Metro railway project. Sydney Metro is Australia’s largest public transport project. The project requires the acquisition of a large number of private properties. Sydney Metro has been one of the largest acquirers of private property in recent years, completing over 500 acquisitions between 2020 and mid-2022, with a total acquisition value of over $2 billion. Other agencies and statutory officers involved in the acquisition of property for the Sydney Metro project include:

• the Department of Planning and Environment (DPE), which supports the minister responsible for the Just Terms Act. DPE also provides staff to the Valuer General of NSW
• the Valuer General of NSW, an independent statutory officer that determines compensation in cases where the acquiring authority and the affected party cannot agree on compensation for property that has been acquired
• Transport for NSW, which includes the Centre for Property Acquisition (CPA). The CPA does not have a direct role in acquiring properties, but its responsibilities include developing guidance for acquiring agencies and monitoring and reporting on their activities.

About this audit

The objective of this audit was to assess the effectiveness of acquisitions of private properties for Sydney Metro projects. The audit assessed agencies against the legislative and policy requirements in place for government acquisitions of private property in New South Wales. In line with the Audit Office's legislative mandate, the audit does not comment on the merits of the policy objectives reflected in the Just Terms Act.

The audit examined a sample of 20 property acquisitions. This was not a statistically representative sample. While our report provides comments on Sydney Metro’s overall acquisition processes, it does not provide assurance regarding the acquisitions that were not examined for this audit.

The audit did not re-perform the valuations done for individual properties that were acquired by Sydney Metro. Affected parties who disagree with the valuation of their property have the right to seek independent assessment of this via the Valuer General and the Land and Environment Court.

This chapter presents our findings on Sydney Metro's acquisition of industrial and commercial properties. Industrial properties include construction businesses and manufacturing facilities. Commercial properties were mostly properties such as shopping centres and office towers. Many of these acquisitions involve businesses and properties that are relatively complex and have high values. This means the valuation process can require multiple experts and can be lengthy and contested. Adherence to governance and probity requirements is important for these acquisitions in order to demonstrate that the acquiring authority has achieved value for money.

This chapter presents our findings on Sydney Metro's acquisition of residential properties, which include apartments and houses, and small business leases, which mostly affected businesses in small shopping centres or arcades. Most of these acquisitions were lower value compared to industrial and commercial property acquisitions and did not require as much expert advice on complex technical issues. However, residential property acquisitions can be personally distressing for the affected parties and require staff from the acquiring authority to provide support and show empathy while ensuring legislative compliance and value for money.

Appendix one – Responses from agencies

Appendix two – About the audit 

Appendix three – Performance auditing 

Copyright notice

© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.

Parliamentary reference - Report number #375 - released 9 February 2023

What the report is about

Result of the Regional NSW cluster agencies' financial statement audits for the year ended 30 June 2022.

What we found

Unmodified audit opinions were issued for Regional NSW cluster agencies. Two audits are ongoing.

What the key issues were

The Department of Regional NSW (the department) and Local Land Services (LLS) accepted changes to their office leasing arrangements managed by Property NSW.

These changes resulted in the collective derecognition of $100.6 million of rights-of-use-assets and $110.4 million of lease liabilities.

In 2021–22, the cluster agencies continued to assist communities in their recovery from recent weather emergencies, including significant flooding in New South Wales.

The Northern Rivers Reconstruction Corporation was established in May 2022 to rebuild communities in the Lismore and Northern Rivers region impacted by floods.

The number of matters reported to management decreased from 36 in 2020–21 to 14 in 2021–22.

Five moderate risk issues were identified and 14% of reported issues were repeat issues.

One moderate risk issue was a repeat issue related to Local Land Services' annual fair value assessment of the asset improvements on land reserves used for moving stock.

This report provides Parliament and other users of the Regional NSW cluster 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 cluster (the cluster) for 2022.

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 cluster.

Appendix one – Misstatements in financial statements submitted for audit

Appendix two – Early close procedures

Appendix three – Timeliness of financial reporting

Appendix four – Financial data

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.

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

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.

What the report is about

The ePlanning program is an initiative of the Department of Planning and Environment (the department) to deliver a digital planning service for New South Wales through the NSW planning portal (the portal).

Using the portal, relevant planning activities can be carried out online, including all stages of development applications.

The portal has been developed under three separate business cases in 2013, 2014 and 2020.

In late 2019, the government mandated the use of the portal for all development applications. This decision took effect across 2020–21.

This audit assessed the effectiveness of the department's implementation, governance and stakeholder engagement in delivering the NSW planning portal. 

What we found

Since implementation commenced in 2013, the NSW planning portal has progressively achieved its objectives to provide citizens with access to consolidated planning information, and allow them to prepare and submit development applications online.

Shortcomings in the department's initial planning and management of the program led to a significant time overrun. It has taken the department longer and cost significantly more to implement the portal than first anticipated. 

In recent years the department has improved the planning, implementation and governance of the ePlanning program, resulting in improved delivery of the portal’s core functions.

The department now has a clear view of the scope necessary to finalise the program, but has not yet published the services it plans to implement in 2022 and 2023.

Mandating the use of the portal for all development applications changed the program's strategic risk environment and required the department to work more closely with a cohort of stakeholders, many of whom did not want to adopt the portal.

Despite this change, the department kept its overall delivery approach the same.

While implementation of the portal has delivered financial benefits, the department has overestimated their value.

The Department has only reported benefits since 2019 and has not independently assured the calculation of benefits.

What we recommended

By December 2022, the department should:

• publish a roadmap of the services it expects to release on the portal across 2022 and 2023
• update its ePlanning program assumptions, benefits targets and change management approach to reflect the government's decision to mandate the use of the portal for all stages of a development application
• independently assure and report publicly the correct calculation of ePlanning program benefits.

The ePlanning program is an initiative of the Department of Planning and Environment (the department) to deliver a digital planning service for New South Wales through the NSW planning portal (the portal, or the planning portal). The department defines the portal as an online environment where community, industry and government can work together to better understand and meet their obligations under the Environmental Planning and Assessment Act 1979 (NSW). Using the portal, relevant planning activities can be carried out online throughout New South Wales. This includes, but is not limited to:

• applying for and gaining planning approval
• applying for and gaining approval for building works, sub-dividing land and similar activities
• issuing occupancy and other certificates.

The portal has been developed under three separate business cases. The first business case in 2013 led to the creation of a central portal, which made planning information available to view by planning applicants and allowed some planning applications to be lodged and tracked online.

Under a second business case prepared in 2014, the department set out to improve and widen the functions available via the portal. The department prepared a third business case in 2020 to fund further improvements to the portal over the period July 2020 to June 2023. The third business case also extended the portal's functions to support the building and occupation stages of the planning cycle.

In late 2019, the government mandated the use of the portal for all stages of development applications. This decision took effect across 2020–21 and applied to all councils as well as certifiers and others involved in the planning process.

The objective of this performance audit was to assess the effectiveness of the department's implementation, governance and stakeholder engagement in delivering the NSW planning portal. We investigated whether:

• delivery of the NSW planning portal was planned effectively
• sound governance arrangements are in place to ensure effective implementation of the program
• users of the NSW planning portal are supported effectively to adopt and use the system.

This part of the report sets out how:

• the ePlanning program has been planned and delivered
• users of the portal have been supported
• the program has been governed.

This part of the report sets out the ePlanning program's:

• expected and reported financial benefits
• calculation of financial benefits.

In 2019, the department increased its expectations for net financial benefits

The department's three ePlanning business cases each forecast substantial financial benefits from the implementation of the planning portal. The department expected that most financial benefits would flow to planning applicants due to a quicker and more consistent planning process. It also expected that government agencies and councils would benefit from the portal.

In 2019 the department commissioned a review to explore opportunities to better identify, monitor and realise the benefits of the ePlanning program. Using this work, the department updated the expected benefits for business cases 1 and 2 to take account of:

• errors and miscalculations in the original benefits calculations
• slower delivery of the portal and changes to the take-up of portal services by councils
• changes to the services supported by the portal.

Reported benefits significantly exceed the current targets

In September 2021, the department reported that the program had achieved $334 million of benefits over the three financial years up to June 2021 plus the first two months of 2021–22. These reported benefits were significantly higher than expected. 

The department attributes the higher-than-expected financial benefits to the following:

• benefit targets have not been updated to reflect the impact of the 2019 decision to mandate the use of the portal for all development applications. This decision brought forward the expected benefits as well as potential costs of the program. However, the department did not update its third business case which was draft at the time. The business case was subsequently approved in July 2020
• one-off cost savings for agencies not having to develop their own systems
• public exhibitions of planning proposals continuing to be available online during 2020 when some newspapers stopping printing due to COVID-19.

The calculation of benefits is overstated

The department reported $334 million of benefits in September 2021 due to the ePlanning program. This calculation is overstated because:

• a proportion of reported benefits is likely to be due to other planning reforms
• the calculation of the largest single benefit is incorrect
• the reported benefits may not fully account for dis-benefits reported by some stakeholders.

The program’s benefits are calculated primarily from changes in planning performance data, such as the time it takes to determine a planning development application. The department currently attributes the benefits from shorter planning cycles entirely to the effect of the ePlanning program. However, planning cycles are impacted by many other factors such as the complexity of planning regulations and the availability of planning professionals. Planning cycles may also be impacted by other departmental initiatives which are designed to improve the time that it takes for a planning application to be evaluated. The Introduction describes some of these initiatives.

The largest contribution to the department’s September 2021 benefit report was an estimated saving of $151 million for developers due to lower costs associated with holding their investment for a shorter time. However, the department’s calculation of this benefit assumes a high baseline for the time to determine a development application. It also assumes that all development applications except for additions or alterations to existing properties will incur financing costs. However, a small but material number of these applications will be self-financed. The calculation also includes several data errors in spreadsheets.

The calculation of some benefits relies upon an extrapolation of the benefits experienced by a small number of early-adopter councils, including lower printing and scanning costs, fewer forms and quicker processing times. However, some councils report that their costs have increased following the introduction of the portal, primarily because aspects of the portal duplicate work that they carry out in their own systems. The portal has also required some councils to re-engineer aspects of their own systems, such as the integration of their planning systems with other council systems such as finance or property and rating systems. It has also required councils to create new ways of integrating council information systems with the planning portal.

The department has published information to help councils and certifiers to automatically integrate their systems with the planning portal. This approach uses application programming interfaces (or APIs) which are an industry-standard way for systems to share information. In April and May 2021, the government granted $4.8 million to 96 regional councils to assist with the cost of developing, implementing and maintaining APIs. The maximum amount of funding for each council was $50,000. The department is closely monitoring the implementation of APIs by councils and other portal users. Once they are fully implemented the department expects APIs to reduce costs incurred by stakeholders.

The department has not yet measured stakeholder costs. It was beyond the scope of this audit to validate these costs.

The department has not independently assured the calculation of reported benefits

In 2020 the department appointed an external provider to calculate the benefits achieved by the ePlanning program. The department advised that it chose to outsource the calculation of benefits because the provider had the required expertise and because it wanted an independent calculation of the benefits. The process involves:

• extraction and verification of planning performance data by the department
• population of data input sheets by the department
• calculation of benefits by the external provider using the data input
• confirmation by the department that the calculation includes all expected benefit sources.

The department does not have access to the benefits calculation model which is owned and operated by the external provider. The department trusts that the provider correctly calculates the benefits and does not verify the reported benefit numbers. However, as the benefits model involves many linked spreadsheets and approximately 300 individual data points, there is a risk that the calculation model contains errors beyond those discussed in this audit.

The reported benefits have only been calculated since 2019

The department originally intended to track benefits from October 2014. However, it only started to track benefits in 2019 when it appointed an external provider to calculate the benefits achieved by the portal. Any benefits or dis-benefits between the introduction of the portal and 2019 are unknown and not included in the department’s calculation of benefits.

Appendix one – Response from agency

Appendix two – About the audit

Appendix three – Performance auditing

Copyright notice

© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.

Parliamentary reference - Report number #366 - released 21 June 2022

What the report is about

The term ‘machinery of government’ refers to the way government functions and responsibilities are organised.

The decision to make machinery of government changes is made by the Premier. Changes may be made for a range of reasons, including to support the policy and/or political objectives of the government of the day.

Larger machinery of government changes typically occur after an election or a change of Premier.

This report assessed how effectively the Department of Planning, Industry and Environment (DPIE) and the Department of Regional NSW (DRNSW) managed their 2019 and 2020 machinery of government changes, respectively. It also considered the role of the Department of Premier and Cabinet (DPC) and NSW Treasury in overseeing machinery of government changes.

What we found

The anticipated benefits of the changes were not articulated in sufficient detail and the achievement of benefits has not been monitored. The costs of the changes were not tracked or reported.

DPC and NSW Treasury provided principles to guide implementation but did not require departments to collect or report information about the benefits or costs of the changes.

The implementation of the machinery of government changes was completed within the set timeframes, and operations for the new departments commenced as scheduled.

Major implementation challenges included negotiation about the allocation of corporate support staff and the integration of complex corporate and ICT systems.

What we recommended

DPC and NSW Treasury should:

• consolidate existing guidance on machinery of government changes into a single document that is available to all departments and agencies
• provide guidance for departments and agencies to use when negotiating corporate services staff transfers as a part of machinery of government changes, including a standard rate for calculating corporate services requirements
• progress work to develop and implement common processes and systems for corporate services in order to support more efficient movement of staff between departments and agencies.

The term ‘machinery of government’ refers to the way government functions and responsibilities are allocated and structured across government departments and agencies. A machinery of government change is the reorganisation of these structures. This can involve establishing, merging or abolishing departments and agencies and transferring functions and responsibilities from one department or agency to another.

The decision to make machinery of government changes is made by the Premier. These changes may be made for a range of reasons, including to support the policy and/or political objectives of the government of the day. Machinery of government changes are formally set out in Administrative Arrangements Orders, which are prepared by the Department of Premier and Cabinet, as instructed by the Premier, and issued as legislative instruments under the Constitution Act 1902.

The heads of agencies subject to machinery of government changes are responsible for implementing them. For more complex changes, central agencies are also involved in providing guidance and monitoring progress.

The NSW Government announced major machinery of government changes after the 2019 state government election. These changes took place between April and June 2019 and involved abolishing five departments (Industry; Planning and Environment; Family and Community Services; Justice; and Finance, Services and Innovation) and creating three new departments (Planning, Industry and Environment; Communities and Justice; and Customer Service). This also resulted in changes to the 'clusters' associated with departments. The NSW Government uses clusters to group certain agencies and entities with related departments for administrative and financial management. Clusters do not have legal status. Most other departments that were not abolished had some functions added or removed as a part of these machinery of government changes. For example, the functions relating to regional policy and service delivery in the Department of Premier and Cabinet were moved to the new Department of Planning, Industry and Environment.

Our Report on State Finances 2019, tabled in October 2019, outlined these changes and identified several issues that can arise from machinery of government changes if risks are not identified early and properly managed. These include: challenges measuring the costs and benefits of machinery of government changes; disruption to services due to unclear roles and responsibilities; and disruption to control environments due to staff, system and process changes.

In April 2020, the Department of Regional NSW was created in a separate machinery of government change. This involved moving functions and agencies related to regional policy and service delivery from the Department of Planning, Industry and Environment into a standalone department.

This audit assessed how effectively the Department of Planning, Industry and Environment (DPIE) and the Department of Regional NSW (DRNSW) managed their 2019 and 2020 machinery of government changes, respectively. It also considered the role of the Department of Premier and Cabinet and NSW Treasury in overseeing machinery of government changes. The audit investigated whether:

• DPIE and DRNSW have integrated new responsibilities and functions in an effective and timely manner
• DPIE and DRNSW can demonstrate the costs of the machinery of government changes
• The machinery of government changes have achieved or are achieving intended outcomes and benefits.

Appendix one – Response from agencies

Appendix two – About the audit

Appendix three – Performance auditing

Copyright notice

© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.

Parliamentary reference - Report number #359 - released (17 December 2021).

What the report is about

The report examined whether NSW Treasury, Service NSW and the Department of Customer Service effectively administered grants programs funded under the $750 million Small Business Support Fund, including:

• $10,000 Small Business Support Grant
• $3,000 Small Business Recovery Grant.

What we found

The agencies effectively implemented the grants within required timeframes, reflecting the NSW Government’s decision to deliver urgent financial support to small businesses impacted by the COVID-19 pandemic.

NSW Treasury met urgent timeframes to design the grants and Service NSW made timely payments in line with the grants' objectives and eligibility criteria.

Service NSW and the Department of Customer Service strengthened processes to detect and minimise fraud in response to identified external fraud risks, and to investigate suspected fraudulent applications.

Fraud security checks and investigations are ongoing, and the agencies will not know the full extent of fraud across the grants until these processes have been completed.

The agencies regularly monitored and reported on the timeliness of payments to small business applicants but have not yet measured all benefits of the grants programs.

The $10,000 Support Grant and the $3,000 Recovery Grant have provided around $630 million in one off grant payments to eligible small businesses.

What we recommended

NSW Treasury should finalise and implement an evaluation of both grants programs, including obtaining feedback from businesses.

Service NSW should develop a framework that documents expected controls for how it administers grants, including business processes, fraud control and governance and probity requirements.

Service NSW should publish information on all grants programs, including grants distribution and uptake.

The Department of Customer Service should ensure its processes for managing conflicts of interest meets its policy requirements.

Upcoming performance audit

The Audit Office is conducting a further performance audit into grants administration for disaster relief focussing on bushfire grants. This is planned to complete in 2021-22.

Further information

Please contact Ian Goodwin, Deputy Auditor-General on 9275 7347 or by email.

The NSW Government responded to the partial shutdown of the NSW economy caused by the COVID-19 pandemic in 2020 by, among other measures, announcing on 3 April 2020 that it would place $750 million into the Small Business Support Fund (the Fund).

Under the Fund, the NSW Government would pay one-off grants of up to $10,000 to small business impacted by the shutdown. The objectives of the $10,000 Small Business Support Grant ($10,000 Support Grant) were to:

• ease the pressure on small businesses that have been affected by the COVID-19 pandemic
• support the ongoing operations of small businesses highly impacted by the COVID-19 restrictions
• deliver cash-flow into small businesses as soon as possible so that small businesses could meet pressing financial needs.

Grant applications were assessed against eligibility criteria that were determined by the NSW Government. The eligibility criteria for the $10,000 Support Grant required an employing small business to demonstrate it was significantly impacted by the COVID-19 pandemic by self-declaring or demonstrating a significant decline of 75 per cent or more in turnover compared to 2019. Documentation requirements were relaxed for small businesses within highly impacted industries.

In June 2020, the NSW Government announced a second round of one-off grants of up to $3,000 to small businesses that were highly impacted by the COVID-19 pandemic ($3,000 Recovery Grant). The objective of the $3,000 Recovery Grant was to help small businesses in 'highly impacted industries' — those directly impacted by the restrictions and closures put in place under the Public Health Orders — to meet the costs of safely reopening or scaling up operations.

The eligibility criteria for the $3,000 Recovery Grant required that a small business be in a highly impacted industry, demonstrate that it was significantly impacted by the COVID-19 pandemic by declaring a significant decline in turnover, and had costs associated with reopening under the 'COVID-Safe' requirements.

NSW Treasury and Service NSW implemented both grants on behalf of the NSW Government. The process of applying for a grant was intended to be quick and easy, with Service NSW using automated assessments and simple online application forms to process applications. Applicants applied for the $10,000 Support Grant through the Service NSW website between 14 April 2020 to 30 June 2020 and applied for the $3,000 Small Business Recovery Grant between 1 July 2020 and 31 August 2020.

At May 2021, around $520 million has been paid to over 52,500 grant applicants under the $10,000 Support Grant and around $109 million had been paid to around 36,700 grant applicants under the $3,000 Recovery Grant.

The Audit Office plans to undertake a performance audit into grants administration for disaster relief focussing on bushfire grants in 2021–22.

This audit assessed whether the grants funded under the $750 million Small Business Support Fund were effectively administered and implemented to provide disaster relief. It addressed the following questions:

• Were funded grants programs planned, designed and targeted effectively?
• Were funded grants programs implemented in line with the objectives and criteria and delivery requirements?
• Have agencies established measures to monitor intended benefits and outcomes?

This audit did not seek to assess the effectiveness of any other grant programs or stimulus measures. It also did not seek to assess the impact of the funding on applicants, or the future prospects of small businesses that received support.

1. Key findings

Around $630 million in timely one-off grant payments have been made to small businesses

Service NSW and NSW Treasury have paid around $630 million in one-off grant payments to small businesses via two grants administered under the $750 million Small Business Support Fund. At May 2021:

• around $520 million has been paid to over 52,500 grant applications received for the $10,000 Small Business Support Grant ($10,000 Support Grant)
• around $109 million has been paid to 36,700 grant applications received for the $3,000 Small Business Recovery Grant ($3,000 Recovery Grant).

Across both grants, over 65,000 small businesses received a payment across either grant, and over 23,000 businesses received payments under both grants.

NSW Treasury advise that, while no data was collected on the time to pay applicants for the $10,000 Support Grant, from its monitoring of the grants' outputs it was satisfied that payment timeframes met its expectations. Service NSW met its targeted time to pay applicants with payments made within ten days for the $3,000 Recovery Grant.

Funds for both grants were not fully spent due to limitations in data and uncertainty of the COVID-19 pandemic's impact. At May 2021, the final demand for the $10,000 Support Grant was around 30 per cent less than initially anticipated and the final demand for the $3,000 Recovery Grant was around 40 per cent less than initially anticipated.

NSW Treasury developed proposals establishing high level design and delivery expectations within rapid timeframes

NSW Treasury put forward proposals to the NSW Government for the two grants administered under the $750 million Small Business Support Fund. It met rapid timeframes for producing this advice: within one day for the $10,000 Support Grant and within four days for the $3,000 Recovery Grant. NSW Treasury's advice to the NSW Government on how to best target the total funding, eligibility criteria and the feasibility of delivering the grants through Service NSW was based on comparable grants programs – including the $10,000 Small Business Bushfire Support Grant – which at that time were ongoing.

The proposals established, at a high-level, the rationale for the grants, expected financial costs, risks and analysis on budget impacts, and confirmation that Service NSW could deliver the grants applications platform. NSW Treasury's demand projections were uncertain due to limited data in the early stages of the pandemic regarding potential economic impact.

Given the tight timeframes, the proposals did not fully consider all planning and design aspects for both grants. For example, there was minimal identification of the costs and benefits of the programs, and a lack of detailed design and delivery requirements. The proposals outlined that arrangements to finalise the risk management, controls, and auditing plan would be agreed by Service NSW and NSW Treasury before implementation.

In future circumstances where urgent advice on program design is required, NSW Treasury could set clearer expectations for the delivery agency, including fully considering costs, benefits and delivery requirements that could be carried through to project governance and implementation.

Service NSW implemented both grants in line with delivery expectations

Service NSW met urgent timeframes to stand-up both grants: 11 days for the $10,000 Support Grant and 26 days for the $3,000 Recovery Grant. Delivery expectations for each grant were established under a grant project agreement (grant agreement). Service NSW delivered the online application platform, assessment of applications, payments and reporting of the grants' uptake as per the grant agreements.

The urgent timeframes to deliver the grants contributed to gaps in Service NSW's project and risk management processes throughout the lifecycle of both grants. For example, the requirement to meet pressing timeframes for the $10,000 Support Grant launch meant agencies had reduced time to achieve sign-off on key documentation. As a result, important documents and processes – including the grant agreement, risk documentation and key business process and quality assurance processes – were not finalised ahead of launch.

Quality assurance and compliance processes for detecting fraud were not settled until after the conclusion of the applications for the $10,000 Support Grant, and were not completed until late 2020. Some project documents, including risk registers, communication plans and project briefs are still not finalised.

The longer timeframe to develop the $3,000 Recovery Grant meant that agencies were able to build on their understanding of the implementation requirements from the $10,000 Support Grant, and better document these expectations and understanding while ensuring that key documents and sign-offs were in place prior to launch.

Service NSW tightened its risk management and controls in response to evidence of fraudulent applications

In May 2020, Service NSW and the Department of Customer Service (DCS) were alerted to suspected fraudulent activity within grants administered by Service NSW. Initially, Service NSW anticipated that up to $8.8 million of the $10,000 Support Grant was at risk of exposure to fraudulent applications. However, Service NSW reported that, at April 2021, $1.9 million for the $10,000 Support Grant and $254,000 for the $3,000 Recovery Grant from paid applications were at risk of fraud exposure.

Following an internal review of the potential exposure to fraudulent or ineligible applications, Service NSW implemented additional automated security checks on applications, increased manual assessments of grant applications, established a dedicated taskforce for grants administration and engaged a unit within DCS to manage high-risk investigations.

Service NSW and DCS's increased governance and oversight has resulted in an established case management function, increased referrals to law enforcement, prioritised investigations of suspicious applications and the development of a 'Fraud Control Framework' aimed at addressing external fraud risks. Given Service NSW had limited experience in these processes in context of administering grant payments, such actions were an appropriate response.

Security checks and investigations of suspicious applications are ongoing. Service NSW will not know the full extent of fraud across the grants until these processes have been fully completed.

Service NSW and Department of Customer Service can improve how conflicts of interest are managed for future programs

Compliance with agency policies and processes to manage conflicts of interest and financial subdelegations demonstrates that investment decisions are being made by appropriately skilled and experienced staff, allowing agencies to operate efficiently, and reducing the risk of internal fraud.

DCS was unable to produce employee conflicts of interest declarations for the $10,000 Support Grant. Therefore, it is not known how many employees had completed conflicts of interest declarations for this round.

DCS provided information on conflicts of interest declarations for the $3,000 Recovery Grant. Twenty-nine per cent of declarations provided for employees undertaking grant assessments for the $3,000 Recovery Grant were incomplete at March 2021, and a further nine per cent were not finalised even though they indicated a real, potential or perceived conflict.

For future grants programs, ensuring compliance with conflicts of interest policies would help DCS and Service NSW to have greater confidence that conflicts of interest are appropriately identified and managed.

NSW Treasury has not yet measured all benefits or outcomes of the grants

In April 2021, NSW Treasury updated its evaluation plan for the $10,000 Support Grant and $3,000 Recovery Grant in support of an economic evaluation to commence from mid-2021. The updated evaluation plan outlines inputs, activities, and outputs as well as immediate, short term and medium term outcomes for both grants.

The evaluation will consider the extent to which both grants achieved their intended outcomes, and whether the economic benefits exceeded the costs to help inform decisions about the nature and design of any future small business support programs. This will complement, and feed into a broader review of all NSW Government COVID-19 stimulus measures.

Service NSW rapidly developed an approach to administer the grants

Over recent disasters, such as the 2019–20 bushfires and the COVID-19 pandemic, Service NSW has been responsible for administering grant programs on behalf of other government agencies.

Service NSW implemented both grants under its Project Management Framework and under each grant agreement with NSW Treasury as it does not have its own grants administration framework. To address the risks that emerged during delivery, Service NSW developed an approach to standardise and monitor the administration of the grants while they were being implemented.

Service NSW now has an opportunity to establish a grants administration framework, based on the processes, lessons and outcomes captured under the grants administration taskforce and in developing its fraud control framework. Embedding these processes into business as usual for grants administration will enable Service NSW to have a consistent set of expectations for controls, business processes and governance and probity requirements for future grants it implements.

2. Recommendations

By December 2021, NSW Treasury should:

1. finalise and implement an evaluation of the $10,000 Support Grant and $3,000 Recovery Grant, including obtaining direct feedback from businesses on how grant funds achieved the grant objectives.

By December 2021, Service NSW should:

2. develop a grants administration framework, which documents expected controls – including fraud controls – business processes and governance and probity requirements

3. publish information on all grants programs, including grants distribution and uptake.

By December 2021, the Department of Customer Service should:

4. ensure its process for managing conflicts of interest meets policy requirements by:

• ensuring employees promptly declare any real, potential or perceived conflicts of interest
• annually producing a list of conflicts of interest for records retention purposes
• requiring a separate register of conflicts of interest declarations where a grant program is deemed as high risk.

3. Lessons for grants administered within urgent timeframes

The two grants this audit examined were administered within a context of urgent timeframes, and increased complexity and uncertainty about the impact of the COVID-19 pandemic. The following lessons are shared to assist sponsor and delivery agencies in administering future grants where rapid implementation is required.

Sponsor agencies should consider the following lessons:

1. develop an approach to define and measure benefits for rapidly developed programs and projects where a full business case and cost-benefit analysis is not feasible

2. establish common processes and expectations for co-administered grants:

• periodically assure agencies' capability to deliver grants programs
• agree and establish risk appetite statements with administering agencies
• clearly establish expected performance levels and targets under any agreement

3. review the processes and outcomes of rapidly developed programs, capture lessons learned, and apply these in planning and delivering future programs.

Delivery agencies should consider the following lessons:

1. risk management and risk appetite:

• perform robust assessment procedures to ensure risks associated with delivery of the project are identified
• ensure the controls implemented adequately address identified risks
• agree and document the acceptable risk appetite at the outset
• review risk management processes after the grants are issued when unable to finalise risk management processes ahead of launch

2. grant agreements between NSW public sector agencies:

• ensure agreements are finalised in a timely manner
• ensure agreements clearly outline:
  • roles and responsibilities of both parties,
  • changes in scope of services provided
  • fees and charges applicable

3. frameworks for grants administration:

• ensure that there is a common set of expectations in place to guide grants administration including standard controls and processes for managing risk, capturing lessons learned and reporting on outcomes.

Appendix one – Response from agencies

Appendix two – Summary of other COVID‑19 Stimulus and Support for small businesses in NSW in April 2020

Appendix three – Public Health Orders

Appendix four – Highly impacted industries

Appendix five – About the audit

Appendix six – 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 #352 - released (24 June 2021).

This report focuses on whether Destination NSW (DNSW) can demonstrate that its support for major events achieves value for money.

The audit found that DNSW’s processes for assessing and evaluating the major events it funds are mostly effective, but its public reporting does not provide enough transparency.

DNSW provides clear information to event organisers seeking funding and has a comprehensive methodology for conducting detailed event assessments. However, the reasons for decisions to progress events from the initial assessment to the detailed assessment stage are not documented in sufficient detail.

DNSW does not publish detailed information about the events it funds or the outcomes of these events. This means that members of the public are unable to see whether its activities achieve value for money. However, DNSW’s internal reporting to its key decision‑makers, including the CEO, the Board and the Minister is appropriate.

The Auditor-General made four recommendations to DNSW, aimed at improving the transparency of its activities, improving the documentation of decisions and certain compliance matters, and streamlining its approach to assessing and evaluating events that receive smaller amounts of funding.

Read full report (PDF)

Destination NSW (DNSW) provides funding to attract a range of major events to New South Wales, including high-profile professional sports matches and tournaments, musicals, art and museum exhibitions, and participation-focused events such as festivals and sports events that members of the public can enter. The NSW Government's rationale for providing funding is to encourage event organisers to hold events in New South Wales, and to ensure that events held in New South Wales maximise the potential for attracting overseas and interstate visitors.

This audit assessed whether DNSW can demonstrate that its support for major events achieves value for money. In making this assessment, the audit examined whether:

• DNSW effectively assesses proposals to support major events
• DNSW effectively evaluates the impact of its support for major events.

This audit focused on DNSW's work to attract major events to New South Wales. It did not assess DNSW's tourism promotion or development work, which includes developing tourism strategies, marketing and advertising campaigns, national and international partnerships, and regional programs.

Appendix one – Response from Destination NSW

Appendix two – About the audit 

Appendix three – Performance auditing

Copyright Notice

© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.

Parliamentary reference - Report number #332 - released 9 April 2020.

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.