Reports
Managing growth in the NSW prison population
The Department of Justice has relied heavily on temporary responses to accommodate growing prisoner numbers according to a report released today by the Acting Auditor-General for New South Wales, Ian Goodwin.
At the time of this audit, the NSW Department of Justice (DOJ) was responsible for delivering custodial corrections services in New South Wales through its Corrective Services NSW division (Corrective Services NSW). From 1 July 2019, the Department of Family and Community Services and Justice will be responsible for these functions.
Within DOJ, Corrective Services NSW is responsible for administering sentences and legal orders through custodial and community-based management of adult offenders. Its key priorities are:
- providing safe, secure and humane management of prisoners
- reducing reoffending
- improving community safety and confidence in the justice system.
The prison population in New South Wales grew by around 40 per cent between 2012 to 2018, from 9,602 to 13,630 inmates. This rate of growth was higher than experienced prior to 2012. DOJ forecasts growth to continue over the short and longer-term.
DOJ has responded to inmate population growth by doubling-up and tripling-up the number of prison beds in cells, reactivating previously closed prisons, and a $3.8 billion program of new prison capacity. DOJ has also developed a long-term prison infrastructure strategy that projects long-term needs and recommended investments to meet these needs.
This audit assessed how efficiently and effectively DOJ is responding to growth in the NSW prison population. In this report, we have not analysed the sources of demand or recommended ways that custody may be avoided. These are largely government policy issues.
The Productivity Commission’s Report on Government Services outlines the performance indicator framework for corrective services in Australia (Appendix three). We have used measures from this framework to assess the efficiency and effectiveness of DOJ’s responses to prison bed capacity needs.
In this section, we analyse system-wide indicators as DOJ has not consistently published or reported data for individual correctional centres over the period of review.
Appendix one - Response from agency
Appendix two - Managing women in custody
Appendix three - Corrective services performance indicator framework
Appendix four - About the audit
Appendix five – Performance auditing
Parliamentary Reference: Report number #319 - released 24 May 2019
Wellbeing of secondary school students
The Department of Education has a strong focus on supporting secondary school students’ wellbeing. However, it is difficult to assess how well the Department is progressing as it is yet to measure or report on the outcomes of this work at a whole-of-state level.
The Department of Education’s (the Department) purpose is to prepare young people for rewarding lives as engaged citizens in a complex and dynamic society. The Department commits to creating quality learning opportunities for children and young people, including a commitment to student wellbeing, which is seen as directly linked to positive learning outcomes. Wellbeing is defined broadly by the Department as “the quality of a person’s life…It is more than the absence of physical or psychological illness”. Student wellbeing can be supported by everything a school does to enhance a student's learning—from curriculum to teacher quality to targeted policies and programs to whole-school approaches to wellbeing.
Several reforms have aimed to support student wellbeing in recent years. 'Local Schools, Local Decisions' gave NSW schools more local authority to make decisions, including schools' approaches to support student wellbeing. In 2016, the 'Supported Students, Successful Students' initiative provided $167 million over four years to support the wellbeing of students. From 2018, the 'Every Student is Known, Valued and Cared For' initiative provides a principal led mentoring program, and a website with policies, procedures and resources to support student wellbeing.
This audit assessed how well the Department of Education supports secondary schools to promote and support the wellbeing of their students and how well secondary schools are promoting and supporting the wellbeing of their students.
Conclusion
The Department has implemented a range of programs and reforms aimed at supporting student wellbeing. However, the outcomes of this work have yet to be measured or reported on at a system level, making it difficult to assess the Department's progress in improving student wellbeing.
Secondary schools have generally adopted a structured approach to deliver wellbeing support and programs, using both Department and localised resources. The approaches have been tailored to meet the needs of their school community. That said, public reporting on wellbeing improvement measures via annual school reports is of variable quality and needs to improve.
The Department’s wellbeing initiatives are supported by research and consultation, but outcomes have not been reported on
The Department’s development of wellbeing policy, guidance, tools and resources has been transparent, consultative and well researched. It has drawn on international and domestic evidence to support its aim to deliver a fundamental shift from welfare to wellbeing at the school and system level.
However, the key performance indicator to monitor and track progress in wellbeing has yet to be reported on despite the strategic plan including this as a priority for the period 2018 to 2022. This includes not yet reporting a baseline for the target, nor how it will be measured.
The Department’s wellbeing resources are mostly well targeted but there is room for improvement
The Department’s allocation of resources to deliver wellbeing initiatives in schools is mostly well targeted, reflects a needs basis and supports current strategic directions. This could be improved with some changes to formula allocations and clearer definitions of the resourcing required for identified wellbeing positions in schools. The workforce modelling for forecasting supply and demand, specifically for school counsellors and psychologists, needs to separately identify these positions as they are currently subsumed in general teacher numbers.
Schools' reporting on wellbeing improvement measures is of variable quality and needs to improve
Schools we visited demonstrated a variety of approaches to wellbeing depending on their local circumstances and student populations. They make use of Department policies, guidelines, and resources, particularly mandatory policies and data collections, which have good compliance and take-up at school level. Professional learning supports specific wellbeing initiatives and online systems for monitoring and reporting have contributed to schools’ capacity and capabilities.
Schools report publicly on wellbeing improvement measures through annual school reports but this reporting is of variable quality. The Department plans to improve the capability of schools in data analysis and we recommend that this include the setting and evaluation of improvement targets for wellbeing.
The implementation of the 2015 Wellbeing Framework in schools is incomplete and the Department has not effectively prioritised and consolidated tools, systems and reporting for wellbeing
Schools' take up of the 2015 Wellbeing Framework is hindered by it not being linked to the school planning and reporting policy and tools—the School Excellence Framework. At some schools we visited, this disconnect has led to a lack of knowledge and confidence in using it in schools. The Department has identified the need to improve alignment of policies, frameworks and plans and has commenced work on this.
We found evidence of overburdening in schools for addressing student wellbeing—in the number of tools, online systems for information collection, and duplication in reporting. Following the significant reforms of recent years, the Department should consolidate its efforts by reinforcing existing effective programs and systems and addressing identified gaps and equity issues, rather than introducing further change for schools. In particular, methods and processes for complex case coordination need improvement.
The NSW Department of Education commits to creating quality learning opportunities for students. This includes strengthening students’ physical, social, emotional and spiritual development. The Department sets out to enable students to be healthy, happy, engaged and successful.
Welfare and wellbeing
The Department’s approach has significantly shifted from student welfare to wellbeing of the whole child and young person. Wellbeing is defined in departmental policy and strategy documents broadly, and as directly linked to learning and positive learning outcomes. “Wellbeing can be described as the quality of a person’s life…It is more than the absence of physical or psychological illness…Wellbeing, or the lack of it, can affect a student’s engagement and success in learning…”
Student wellbeing can be supported by everything a school does to enhance a student's learning—from curriculum to teacher quality to targeted policies and programs to whole-school approaches to wellbeing. Distinctions between wellbeing and welfare in the school context are outlined below.
| Welfare | Wellbeing |
|---|---|
| Operates from a basis of student need and doesn't always take into account a whole child view. | For all students. |
| Rather than building on the strengths of students, operates from a deficit model of individual student problems or negative behaviours. | Goes beyond just welfare needs of a few students and aims for all students to be healthy, happy, successful and productive individuals who are active and positive contributors to the school and society in which they live. |
Appendix one - Response from agency
Appendix two - Key policies, guidance, and systems
Appendix three - Funding and resources for schools
Appendix four - Measuring wellbeing
Appendix five - About the audit
Appendix six - Performance auditing
Parliamentary Reference: Report number #318 - released 23 May 2019
Workforce reform in three amalgamated councils
The Inner West Council and the Snowy Monaro and Queanbeyan-Palerang Regional Councils have all made progress towards efficient organisational structures following the amalgamation of their former council areas in 2016, according to a report released today by the Auditor-General of New South Wales.
All three councils are now operating with a single workforce and have largely achieved the milestones they planned for the first stage of their amalgamations. None have finished reviewing and aligning services across their former council areas nor integrated their ICT systems. They need to do this to be in a position to implement an optimal structure.
On 12 May 2016, the NSW Government announced the amalgamation of 42 councils into 19 new councils. This followed a period of 18 months during which the NSW Independent Pricing and Regulatory Tribunal (IPART) had assessed councils' ‘fitness for the future’, and communities were consulted about proposed mergers. A further amalgamated council was created on 9 September 2016.
Upon amalgamation, existing elected councils were abolished, interim General Managers appointed, and Administrators engaged to undertake the role of the previously elected councils until Local Government elections were held 18 months later. During the period of administration, councils were asked to report on the progress of their amalgamations to the Department of Premier and Cabinet (DPC).
Council amalgamations not only require a re-drawing of boundaries, but re-establishment of local representation, decisions about alignment of services across the former council areas, and establishment of an amalgamated workforce.
The objective of this audit was to assess whether three councils, Inner West Council, Queanbeyan-Palerang Regional Council and Snowy Monaro Regional Council, are effectively reforming their organisation structures to realise efficiency benefits from amalgamation and managing the impact on staff.
Following amalgamation, all three councils developed detailed plans to bring their former workforces together, review positions and salaries, amalgamate salary structures and align human resources policies. All three councils have largely achieved the milestones included in these plans.
Benefits realisation plans show that councils did not expect to achieve material savings or efficiencies from workforce reform within the first three years of amalgamation.
Administrators at all three councils endorsed lower savings targets than the NSW Government’s early analysis suggested may be possible. All three councils have plans or strategies to progress and achieve benefits from the amalgamation. However, Inner West Council and Snowy Monaro Regional Council could more clearly link their reform initiatives with expected benefits and include this in public reporting.
Amalgamations represent a substantial period of change for affected communities and amalgamated councils should be routinely reporting to their communities about the costs and benefits of amalgamation.
Councils have not yet determined their future service offerings and service levels nor completed integration of ICT systems. These decisions need to be made before an optimal organisation structure can be implemented.
Before amalgamated councils can implement an optimal organisation structure, they need to review and confirm their customer service offerings and service levels in consultation with their communities. This work is underway but is not yet complete in any of the councils.
Progress towards an efficient structure has been slowed by staff protections in the Local Government Act 1993 (the Act) and a range of logistical and administrative issues associated with amalgamation. These include multiple IT systems and databases that need to be integrated and different working conditions, policies and practices in the former councils that are not yet fully
harmonised.
The councils implemented legislated staff protections and focused on the people side of change but cannot reliably measure the impact of their change management efforts.
The Act provides protections that reduce the impact of amalgamations on staff. Beyond implementing these protections, the councils have communicated with staff, sought to prepare them for change, and involved staff in key decisions. All councils have conducted staff surveys over time. However, at this stage these staff surveys have not provided an effective or reliable measure of the impact of change management efforts.
Appendix one - Response from councils and Office of Local Government
Appendix two - Compliance with staff protections in the Local Government Act 1993
Appendix three - About the audit
Appendix four - Performance auditing
Parliamentary Reference: Report number #317 - released 1 May 2019
Supply of secondary teachers in STEM-related disciplines
The NSW Department of Education’s plans and strategies to respond to the demand for secondary teachers in STEM-related disciplines are limited by incomplete data and underperforming scholarship and sponsorship program. The Department does not collect sufficient information to monitor what disciplines teachers actually teach nor does it predict supply and demand for teachers by discipline and location. This restricts the Department’s ability to track and forecast the supply and demand for secondary teachers in STEM-related disciplines.
In recent years, Australian and international education policy has focused on improving outcomes in Science, Technology, Engineering and Mathematics (STEM) subjects. However, research has identified a shortage of qualified secondary teachers in STEM-related disciplines 1. This is projected to worsen due to a combination of student population increases, an ageing workforce, and fewer people going into teaching. Shortfalls are likely to be more acute in rural and remote areas, and areas of low socio-economic status.
The Department of Education (the Department) has a variety of strategies to encourage teachers to practise in locations or disciplines of need. These include scholarships for tertiary students going into teaching, sponsorships for teachers seeking approval to teach additional disciplines, and incentives to attract teachers to rural and remote locations.
This audit assessed the effectiveness of the Department's workforce plans and strategies in responding to the demand for secondary teachers in STEM-related disciplines. We assessed:
- how well the Department tracks the supply and demand for secondary teachers in STEM-related disciplines across NSW
- whether the Department has effective strategies to attract and retain secondary teachers in STEM-related disciplines.
There are two key shortcomings that fundamentally limit the effectiveness of the Department's plans and strategies to respond to the demand for secondary teachers in STEM-related disciplines. First, the Department is not accurately tracking the supply and demand for secondary teachers by discipline due to incomplete data. Second, not all scholarship and sponsorship places are allocated and many scholars withdraw from the programs before completion. The Department has recognised and started to address these problems with a new workforce model, revised incentives and scholarship programs.
The Department’s current workforce planning model does not provide the information needed to target workforce plans and strategies to areas of need. This is because it does not predict supply and demand for teachers by discipline and location. An internal review in 2017 acknowledged the limitations of this model. In response the Department developed a new model, which it is currently enhancing, to predict supply and demand for teachers by discipline and location. For this to be successful, the Department needs to monitor the level of out-of-field teaching and improve data on the willingness of teachers to work in particular locations.
The Department does not allocate all available scholarship and sponsorship places and around 30 per cent of recipients do not complete the term of their agreement. An internal review in 2017 highlighted that some programs were not targeting workforce need and that there were no key performance indicators to determine the overall effectiveness of these programs. However, scholarship programs and incentives are promoted well through social media and face-to-face events at Universities. Further, the Department has used findings from internal reviews of incentives and scholarships in 2016 and 2017 to inform recent changes to programs.
The Department has little oversight of access to practicum placements for pre-service teachers in areas of need. Professional experience agreements were established with each University in 2015 to improve the placement process for disciplines of need. Initial teacher education students must complete several ‘practicum placements’ before they can be qualified to teach in a school. Several universities we consulted reported difficulties finding practicum placements for pre-service teachers specialising in STEM-related disciplines. The Department is now revising the agreements to improve the quality of data it collects on the number, location and subject area of practicum placements.
The Department is not accurately tracking the supply and demand for secondary teachers by discipline due to incomplete data.
The Department’s current workforce planning model does not accurately predict supply and demand for teachers by discipline and location. An internal review in 2017 acknowledged the limitations of this model. In response the Department developed a new model which it is currently enhancing to address the findings of the review. For this model to be successful, the Department needs to monitor the level of out-of-field teaching and improve data on the willingness of teachers to work in particular locations. Further work also needs to be undertaken to refine the assumptions that underpin the Department’s workforce planning models as it starts to predict the need for teachers by discipline.
The Department has not publicly reported on the supply and demand for teachers by discipline since 2015. While it does report annually on its current workforce profile, this information is not detailed enough to inform future strategies or programs. More detailed public reporting may help the Department to influence the future supply of teachers by communicating its projected areas of need. Planned improvements to the Department's workforce planning model, as relayed to us, will add to the data available on areas of need. Once available, this should be reported publicly.
Recommendations
By December 2019, the Department of Education should:
- Improve its workforce planning model to better understand and communicate supply and demand for teachers by:
- determining the extent, and analysing the impact, of out-of-field teaching by permanent and temporary teachers in each school
- sourcing additional data to more accurately reflect teacher location preferences
- projecting supply and demand by subject level and geographic area
- regularly reporting on the supply and demand for secondary teachers in each discipline to communicate future areas of need to future teacher education students.
The Department's current scholarship and sponsorship programs are not allocating all available places and many scholars withdraw from the programs before completion. An internal review in 2017 raised several issues with the effectiveness of programs and the Department has started to revise its scholarship, sponsorship and incentive programs.
An internal review in 2017 highlighted that scholarship and sponsorship programs were not targeting workforce need, and that there were no key performance indicators to determine the overall effectiveness of these strategies. In addition, the review found that only 79 per cent of available scholarship placements are allocated each year, and 31 per cent of scholarship recipients withdraw prior to completing their required service period. The Department recently announced changes to its scholarship programs from 2019 onwards.
The Department has incentives to encourage teachers to work in rural and remote areas, including teachers in STEM-related disciplines. Incentives include access to priority transfers, rental subsidies and other allowances. Research conducted in 2016 examined the influence of incentives in encouraging teachers to work in rural and remote areas. The Department used findings of this research when updating its set of rural and remote incentives in 2017.
The Department promotes its scholarship and sponsorship programs through the teach.NSW website. It uses social media to direct applicants to this website. It also promotes its programs through careers fairs, University open days, and professional events. Past applicants have reported that the website clearly communicates eligibility criteria and the terms of agreement for all scholarship programs.
The Department could strengthen its relationship with universities to attract teachers to areas of need by collecting and analysing data on practicum placements, facilitating placements for scholarship recipients, and communicating predicted teacher needs by discipline.
Recommendations
By December 2019, the Department of Education should:
2. Implement changes to address the findings of the 'Teacher Scholarship Realignment' report, including by:
- testing a range of program designs with target candidates to determine the best options to attract more suitable applicants
- establishing key performance indicators, and setting targets, to better monitor the effectiveness of the programs
- reducing the number of scholars appointed to over-establishment positions
- increasing the proportion of scholars appointed to priority locations
- further analysing scholarship recipients career paths to inform future improvements to the scholarship programs.
3. Review its role in the practicum placement process of pre-service teachers by:
- analysing how many students each school accommodates per year, to ensure there are appropriate placements available for students in high needs disciplines
- working with universities to facilitate practicum placements for scholarship recipients
- establishing mechanisms for ongoing monitoring of its partnerships with universities to ensure they are meeting their aims.
Appendix one - Response from agency
Appendix two - About the audit
Appendix three - Performance auditing
Parliamentary Reference - Report number #313 - released 29 January 2019.
Education 2018
The Auditor-General for New South Wales, Margaret Crawford, released her report today on the results of the financial audits of agencies in the Education cluster. The report focuses on key observations and findings from the most recent financial audits of these agencies. 'I am pleased to report that unqualified audit opinions were issued on the financial statements of both agencies in the Education cluster', the Auditor-General said. Statements were submitted and audited within statutory deadlines.
This report analyses the results of our audits of financial statements of the Education cluster for the year ended 30 June 2018. The table below summarises our key observations.
This report provides parliament and other users of the Education cluster’s financial statements with the results of our audits, our observations, analysis, conclusions and recommendations in the following areas:
- financial reporting
- audit observations
- service delivery.
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 Education cluster for 2017–18.
| Observation | Conclusions and recommendations |
| 2.1 Quality of financial reporting | |
| Unqualified audit opinions were issued on the financial statements of both cluster agencies. | Sufficient audit evidence was obtained to conclude the financial statements were free of material misstatement. |
| 2.2 Timeliness of financial reporting | |
| Both cluster agencies met the statutory deadlines for completing early close procedures and submitting financial statements. | Early close procedures continue to facilitate the timely preparation of cluster agencies’ financial statements and completion of audits, but scope exists to improve outcomes by resolving issues and supplying supporting documentation earlier. |
| 2.3 Key issues from financial audits | |
| Inconsistencies in the Department’s annual leave and long service leave data, identified over the past three audits, remain unresolved. This issue impacts the Department’s liability estimates for annual leave and long service leave, including associated on-costs. It also on-flows to the Crown Entity, which assumes the Department's liability for long service leave. | Recommendation: The Department should confirm leave data and review assumptions following deployment of the new HR/Payroll system to better estimate the liability for employee benefits and the amount to be assumed by the Crown Entity. |
| 2.4 Key financial information | |
| Cluster agencies recorded net deficits in 2017–18. |
The Department recorded a net deficit of $30.7 million in 2017–18 against a budgeted surplus of $122 million. The NSW Education Standards Authority recorded a net deficit of $4.1 million against a budgeted deficit of $4.7 million. |
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 Education cluster for 2018
- the areas of focus identified in the Audit Office work program.
The Audit Office Annual Work Program provides a summary of all audits to be conducted within the proposed time period as well as detailed information on the areas of focus for each of the NSW Government clusters.
| Observation | Conclusions and recommendations |
| 3.1 Internal controls | |
| Twenty internal control deficiencies were identified during our audits of cluster agencies. We assessed one as a high risk finding. | |
| Eight internal control weaknesses were repeat issues from previous financial audits that had not been fully addressed by management. | Recommendation: Management should prioritise and action recommendations to address internal control weaknesses. |
| 3.2 Information technology | |
| Delivery of the Learning Management and Business Reform (LMBR) program is complete. |
The LMBR program has been a major project for the Department since it was established in 2006. A staged approach was adopted for implementing the Department’s new HR/Payroll system to manage the risks associated with this large-scale roll-out. |
| 3.3 Valuation of the Department’s land and buildings | |
| The Department completed a revaluation of land and building assets during 2017–18. |
A market approach was used to revalue the Department’s land, resulting in a revaluation increment of $2.3 billion. A current replacement cost approach was used to revalue the Department’s school buildings, resulting in an increment of $6.2 billion. |
| 3.4 Maintenance of school facilities | |
| The Department regularly assesses the condition of school buildings and uses Life Cycle Costing to predict maintenance and capital renewal, and to prioritise maintenance activities. | The Life Cycle Costing assessment conducted by the Department in 2017–18 rated 70 per cent of school buildings as being in either as new or good condition. No school buildings were rated as being in end-of-life condition. |
| 3.4 School asset delivery | |
| The Department’s School Assets Strategic Plan is designed to ensure that there are sufficient fit-for-purpose places for students up to 2031. | The Department created a new division, School Infrastructure NSW, to oversee the planning, supply and maintenance of schools and implement major school infrastructure projects. |
This chapter provides service delivery outcomes for the Education cluster for 2017–18. It provides important contextual information about the cluster's operation, but the data on achievement of these outcomes is not audited. The Audit Office does not have a specific mandate to audit performance information.
Industry 2018
The Auditor-General for New South Wales, Margaret Crawford, released her report today on the Industry cluster. The report focuses on key observations and findings from the most recent financial audits of agencies in the cluster. Cluster agencies received unqualified audit opinions for 41 out of the 47 financial statements presented for audit for 30 June 2018. Six audits remain incomplete. 'While it is pleasing to note that unqualified audit opinions have been issued, the timeliness of financial reporting needs to be improved through better oversight, prompt resolution of issues, and an increased focus on early close procedures', the Auditor-General said.
This report analyses the results of our audits of financial statements of the Industry cluster for the year ended 30 June 2018. The table below summarises our key observations.
This report provides parliament and other users of the Industry cluster agencies' financial statements with the results of our audits, including our observations, analysis, conclusions and recommendations in the following areas:
- financial reporting
- audit observations
- service delivery.
The Department of Industry (the Department) is the lead agency in a cluster of 50 agencies. Other significant agencies in the cluster include Local Land Services, New South Wales Rural Assistance Authority, Technical and Further Education Commission (TAFE NSW), various sporting agencies, Forestry Corporation NSW and Water NSW.
The cluster:
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 Industry cluster for 2018.
| Observation | Conclusions and recommendations |
| 2.1 Quality of financial reporting | |
| Unqualified audit opinions were issued for 41 out of 47 financial statement audits. Six audits are continuing. The number of misstatements identified in financial statements submitted for audit increased from 73 in 2016–17 to 92 in 2017–18. |
Conclusion: Agencies continue to address financial reporting issues and ensure significant matters that may impact the audit opinion are appropriately dealt with. The increase in the number of misstatements indicates a renewed focus on quality is required. |
| 2.2 Timeliness of financial reporting | |
| Nineteen out of 37 audit opinions were issued within the statutory deadline. Delays occurred due to the time required to resolve issues identified during the audit, or to obtain appropriate evidence to support balances or disclosures in the financial statements. There were also delays in receiving the signed certification from the agency, required before we can issue an audit opinion. We reviewed the conduct of early close procedures at 17 agencies. Fifteen of these agencies were assessed as not fully addressing mandatory early close procedures. |
Recommendation: Timeliness of financial reporting should be improved through better oversight of the preparation of financial statements, prompt resolution of issues, and an increased focus on early close procedures. |
| 2.3 Key financial reporting issues | |
| Information system limitations continue at TAFE NSW. TAFE NSW implemented additional processes to verify the accuracy and completeness of revenue from student fees. | Conclusion: Procedures to address system limitations are costly, causing delays in financial reporting and increased resource commitments for staff, contractors and audit. |
| Misstatements and internal control issues continue to be identified in accounting for Crown land. | The information system used to record Crown land was not designed to facilitate efficient financial reporting. These limitations and other control weaknesses impacted the completeness and accuracy of the Department's financial statements. Recommendation: The Department should address system limitations and control weaknesses to ensure complete and accurate reporting for Crown land. |
| Unprocessed Aboriginal land claims continue to increase. | Recommendation (repeat issue): The Department should reduce unprocessed Aboriginal land claims. |
| 2.4 Financial information and sustainability | |
| Cluster agencies recorded a combined surplus of $58.0 million compared to a combined deficit of $86.0 million in the previous year. |
|
| We identified five agencies with potential sustainability issues such as low liquidity or negative net assets. | Conclusion: Adequate arrangements are in place to mitigate potential sustainability issues. These arrangements include a commitment from the Department to provide financial support if required. |
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 Industry cluster for 2018
- the areas of focus identified in the Audit Office work program.
The Audit Office Annual Work Program provides a summary of all audits to be conducted within the proposed time period as well as detailed information on the areas of focus for each of the NSW Government clusters.
| Observation | Conclusions and recommendations |
| 3.1 Internal control | |
| Almost one in three internal control issues identified in 2017–18 were repeat issues. | Recommendation (repeat issue): Recommendations to management to address internal control issues from prior years should be addressed promptly to reduce risks and improve processes. |
| 3.2 Information technology controls | |
| User access administration over financial systems remains an area of weakness. Two high risk and 18 moderate risk issues related to user access administration across nine agencies were identified. | Recommendation (repeat issue): Agencies' controls over administration of user access to critical systems should:
|
| 3.3 Annual work program | |
| Errors continue to be identified in the Crown land database. Instances were identified where Crown land was not recognised by the appropriate entity, or was recognised by more than one entity. |
Recommendation: The Department 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. |
| Approximately 700 managers of Crown land do not submit financial statements required by the Public Finance and Audit Act 1983. | NSW Treasury and the Department are continuing work to clarify reporting arrangements for these entities. |
| 3.4 Managing maintenance | |
| Some cluster agencies do not monitor their backlog maintenance. Consequently, the total backlog maintenance in the Industry cluster is unknown. This impacts the reliability and consistency of information about assets and their condition. | When backlog maintenance is unknown, it is difficult for agencies to develop an accurate and effective maintenance plan that focuses on areas of highest need. It also means agencies' maintenance plans are reactive rather than preventative. Effective maintenance planning helps agencies to:
|
| Maintenance budgets in some cluster agencies are not set based on actual maintenance needs. | Recommendation: Cluster agencies should set their maintenance budgets based on identified maintenance needs to more accurately budget and prioritise expenditure. |
Agencies in the Industry cluster provide services across a wide variety of areas. This chapter outlines certain service delivery outcomes for 2017–18 for the Industry cluster. It provides important contextual information about the cluster's operation, but the data on activity levels and performance is provided by Cluster agencies. The Audit Office does not have a specific mandate to audit performance information. Accordingly, the information in this chapter is unaudited.
In our recent performance audit, Progress and measurement of Premier's Priorities, we identified 12 limitations of performance measurement and performance data. We recommended that the Department of Premier and Cabinet ensure that processes to check and verify data are in place for all agency data sources.
Family and Community Services 2018
The Auditor-General for New South Wales, Margaret Crawford released her report today on the Family and Community Services cluster. The report focuses on key observations and findings from the most recent financial audits of agencies in the cluster. Cluster entities received unqualified audit opinions for their 30 June 2018 financial statements. Opportunities to improve the quality of financial reporting were identified and reported to management.
This report analyses the results of our audits of financial statements of the Family and Community Services cluster for the year ended 30 June 2018. The table below summarises our key observations.
This report provides NSW Parliament and other users of the financial statements of Family and Community Services' agencies with the results of our audits, our observations, analysis, conclusions and recommendations in the following areas:
- financial reporting
- audit observations
- service delivery.
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 Family and Community Services cluster for 2018.
| Observation | Conclusions and recommendations |
| 2.1 Quality of financial reporting | |
| Unqualified audit opinions were issued for all cluster agencies' financial statements. | Conclusion: Sufficient audit evidence was obtained to conclude the financial statements were free of material misstatement. |
| Agencies complied with NSW Treasury’s mandatory early close requirements. Completing other early close procedures was inconsistent and not always supported by adequate evidence. |
Conclusion: There are opportunities for agencies to improve the quality of financial reporting by:
|
| 2.2 Timeliness of financial reporting | |
| Agencies completed revaluations of property, plant and equipment and submitted 31 March 2018 financial statements by the due date as required by NSW Treasury. Agencies submitted year-end financial statements by the statutory deadline. |
Conclusion: Early revaluations of property, plant and equipment contributes to agencies meeting the year-end statutory reporting deadline. |
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 Family and Community Services cluster for 2018
- the areas of focus identified in the Audit Office annual work program.
The Audit Office Annual Work Program provides a summary of all audits to be conducted within the proposed time period as well as detailed information on the areas of focus for each NSW Government cluster.
| Observation | Conclusions and recommendations |
| 3.1 Internal controls | |
| The 2017–18 audits reported 47 internal control weaknesses. While none were high risk, there were 15 repeat issues. |
Conclusion: Management accepted audit findings and advised they are actioning recommendations. Timely action is important to ensure internal controls operate effectively. |
| Twenty-two of these internal control weaknesses related to information technology processes and control environment. | Conclusion: Control weaknesses in information systems may compromise the integrity and security of financial data used for decision making and financial reporting. Recommendation: Agencies should strengthen user access administration to prevent inappropriate access to key IT systems by:
|
| The Department, NSW Land and Housing Corporation (LAHC) and three other cluster agencies’ contract registers are incomplete and/or inaccurate. | Recommendation: Agencies should ensure their contract registers are complete and accurate so they can more effectively govern contracts and manage compliance obligations. |
| 3.2 Audit Office annual work program | |
| Financial impact of the commissioning approach. The transfer of disability services to the National Disability Insurance Scheme and other commissioning of service delivery has contributed to a 36 per cent decrease in frontline employee numbers since 2015–16. Similarly, corporate services’ employee numbers reduced by 34 per cent. The Department’s salary costs have reduced by $232 million or 18 per cent from 2016–17. |
Conclusion: The ratio of corporate services employee numbers to support frontline and support services has remained at 1:10 since 2015–16, which indicates restructures have been planned to align with the transfer of disability services. |
| Impact of the new social housing maintenance contract Maintenance expenses have increased by about 40 per cent since the new maintenance contract commenced in April 2016. LAHC measures the benefits of the new maintenance contract such as improved tenant satisfaction. |
Conclusion: The new maintenance contract has contributed to some positive social outcomes such as tenants being employed by the contractors to conduct maintenance, as call centre operators and in administration. However, more can be done to ensure value for money is being achieved. |
| ChildStory IT Project Whilst phase one of the ChildStory IT project went 'live' in 2017–18, the planned timetable has not been met and the revised date for full implementation is end of 2018. According to the 2014–15 NSW Budget, the budget for ChildStory was $100 million over a four-year period. During the design and implementation stage, this amount was revised to $128 million, with approval of the Expenditure Review Committee. The actual cost incurred over the four years until 30 June 2018, is approximately $131 million. We identified issues with the data migration from the legacy systems to ChildStory. |
Conclusion: To inform future IT projects, we understand the Department is capturing our findings, along with the findings from the Department of Finance, Services and Innovation’s ‘Healthchecks’. |
This chapter outlines certain service delivery outcomes for 2017–18. The data on activity levels and performance is provided by Cluster agencies. The Audit Office does not have a specific mandate to audit performance information. Accordingly, the information in this chapter is unaudited.
In our recent performance audit, Progress and measurement of Premier's Priorities, we identified 12 limitations of performance measurement and performance data. We recommended that the Department of Premier and Cabinet ensure that processes to check and verify data are in place for all agency data sources.
Transport 2018
The Auditor-General for New South Wales, Margaret Crawford released her report today on key observations and findings from the 30 June 2018 financial statement audits of agencies in the Transport cluster. Unqualified audit opinions were issued for all agencies' financial statements. However, assessing the fair value of the broad range of transport related assets creates challenges.
This report analyses the results of our audits of financial statements of the Transport cluster for the year ended 30 June 2018. The table below summarises our key observations.
This report provides Parliament and other users of the Transport cluster’s financial statements with the results of our audits, our observations, analysis, conclusions and recommendations in the following areas:
- financial reporting
- audit observations.
Financial reporting is an important element of good governance. Confidence and transparency in public sector decision making are enhanced when financial reporting is accurate and timely.
This chapter outlines our audit observations related to the financial reporting of agencies in the Transport cluster for 2018.
| Observation | Conclusions and recommendations |
| 2.1 Quality of financial reporting | |
| Unqualified audit opinions were issued for all agencies' financial statements | Sufficient audit evidence was obtained to conclude the financial statements were free of material misstatement. |
| 2.2 Key accounting issues | |
| Valuation of assets continues to create challenges. Although agencies complied with the requirements of the accounting standards and Treasury policies on valuations, we identified some opportunities for improvements at RMS. |
RMS incorporated data from its asset condition assessments for the first time in the valuation methodology which improved the valuation outcome. Overall, we were satisfied with the valuation methodology and key assumptions, but we noted some deficiencies in the asset data in relation to asset component unit rates and old condition data for some components of assets. Also, a bypass and tunnel were incorrectly excluded from RMS records and valuation process since 2013. This resulted in an increase for these assets’ value by $133 million. The valuation inputs for Wetlands and Moorings were revised this year to better reflect the assets' characteristics resulting in a $98.0 million increase. |
| 2.3 Timeliness of financial reporting | |
| Residual Transport Corporation did not submit its financial statements by the statutory reporting deadline. | Residual Transport Corporation remained a dormant entity with no transactions for the year ended 30 June 2018. |
| With the exception of Residual Transport Corporation, all agencies completed early close procedures and submitted financial statements within statutory timeframes. | Early close procedures allow financial reporting issues and risks to be addressed early in the reporting and audit process. |
| 2.4 Financial sustainability | |
| NSW Trains and the Chief Investigator of the Office of Transport Safety Investigations reported negative net assets of $75.7 million and $89,000 respectively at 30 June 2018. | NSW Trains and the Chief Investigator of the Office of Transport Safety Investigations continue to require letters of financial support to confirm their ability to pay liabilities as they fall due. |
| 2.5 Passenger revenue and patronage | |
| Transport agencies revenue growth increased at a higher rate than patronage. | Public transport passenger revenue increased by $114 million (8.3 per cent) in 2017–18, and patronage increased by 37.1 million (5.1 per cent) across all modes of transport based on data provided by TfNSW. |
| Negative balance Opal Cards resulted in $3.8 million in revenue not collected in 2017–18 and $7.8 million since the introduction of Opal. A total of 1.1 million Opal cards issued since its introduction have negative balances. | Transport for NSW advised it is liaising with the ticketing vendor to implement system changes and are investigating other ways to reduce the occurrences. |
| 2.6 Cost recovery from public transport users | |
| Overall cost recovery from users has decreased. | Overall cost recovery from public transport users (on rail and bus services by STA) decreased from 23.2 per cent to 22.4 per cent between 2016–17 and 2017–18. The main reason for the decrease is due to expenditure increasing at a faster rate than revenue in 2017–18. |
Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision making.
This chapter outlines our observations and insights from:
- our financial statement audits of agencies in the Transport cluster for 2018
- the areas of focus identified in the Audit Office annual work program.
The Audit Office Annual Work Program provides a summary of all audits to be conducted within the proposed time period as well as detailed information on the areas of focus for each of the NSW Government clusters.
| Observation | Conclusions and recommendations |
| 3.1 Internal controls | |
| There was an increase in findings on internal controls across the Transport cluster. | Key themes related to information technology, employee leave entitlements and asset management. Eighteen per cent of all issues were repeat issues. |
| 3.2 Audit Office Annual work program | |
| The Transport cluster wrote-off over $200 million of assets which were replaced by new assets or technology. |
Majority of this write-off was recognised by RMS, with $199 million relating to the write-off of existing assets which have been replaced during the year. |
| RailCorp is expected to convert to TAHE from 1 July 2019. | Several working groups are considering different aspects of the TAHE transition including its status as a for-profit Public Trading Enterprise and which assets to transfer to TAHE. We will continue to monitor developments on TAHE for any impact to the financial statements. |
| RMS' estimated maintenance backlog at 30 June 2018 of $3.4 billion is lower than last year. Sydney Trains' estimated maintenance backlog at 30 June 2018 increased by 20.6 per cent to $434 million. TfNSW does not quantify its backlog maintenance. | TfNSW advised it is liaising with Infrastructure NSW to develop a consistent definition of maintenance backlog across all transport service providers. |
| Not all agencies monitor unplanned maintenance across the Transport cluster. | Unplanned maintenance can be more expensive than planned maintenance. TfNSW should develop a consistent approach to define, monitor and track unplanned maintenance across the cluster. |
This chapter outlines certain service delivery outcomes for 2017–18. The data on activity levels and performance is provided by Cluster agencies. The Audit Office does not have a specific mandate to audit performance information. Accordingly, the information in this chapter is unaudited.
We report this information on service delivery to provide additional context to understand the operations of the Transport cluster and to collate and present service information for different modes of transport in one report.
In our recent performance audit, Progress and measurement of Premier's Priorities, we identified 12 limitations of performance measurement and performance data. We recommended that the Department of Premier and Cabinet ensure that processes to check and verify data are in place for all agency data sources.
Internal Controls and Governance 2018
The Auditor-General for New South Wales Margaret Crawford found that as NSW state government agencies’ digital footprint increases they need to do more to address new and emerging information technology (IT) risks. This is one of the key findings to emerge from the second stand-alone report on internal controls and governance of the 40 largest NSW state government agencies.
This report analyses the internal controls and governance of the 40 largest agencies in the NSW public sector for the year ended 30 June 2018.
This report covers the findings and recommendations from our 2017–18 financial audits that relate to internal controls and governance at the 40 largest agencies (refer to Appendix three) in the NSW public sector.
This report offers insights into internal controls and governance in the NSW public sector
This is our second 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. The way agencies deliver services increasingly relies on contracts and partnerships with the private sector. Many of these arrangements deliver front line services, but others provide less visible back office support. For example, an agency may rely on an IT service provider to manage a key system used to provide services to the community. The contract and service level agreements are only truly effective where they are actively managed to reduce risks to continuous quality service delivery, such as interruptions caused by system outages, cyber security attacks and data security breaches.
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 report divides these into the following five areas:
- Internal control trends
- Information technology (IT), including IT vendor management
- Transparency and performance reporting
- Management of purchasing cards and taxis
- Fraud and corruption control.
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 2018 cluster financial audit reports, which will be tabled in Parliament from November to December 2018.
The focus of the report has changed since last year
Last year's report topics included asset management, ethics and conduct, and risk management. We are reporting on new topics this year. We plan to introduce new topics and re-visit our previous topics in subsequent reports on a cyclical basis. This will provide a baseline against which to measure the NSW public sectors’ progress in implementing appropriate internal controls and governance processes to mitigate existing, new and emerging risks in the public sector.
Agencies selected for the volume account for 95 per cent of the state's expenditure
While we have covered only 40 agencies in this report, those selected are a large enough group to identify common issues and insights. They represent about 95 per cent of total expenditure for all NSW public sector agencies.
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 findings, level of risk and the most common deficiencies we found across agencies. The rest of this volume presents this year’s controls and governance findings in more detail.
| Observation | Conclusions and recommendations |
|---|---|
| 2.1 High risk findings | |
| We found six high risk findings (seven in 2016–17), one of which was repeated from both last year and 2015–16. | Recommendation: Agencies should reduce risk by addressing high risk internal control deficiencies as a priority. |
| 2.2 Common findings | |
| We found several internal controls and governance findings common to multiple agencies. | Conclusion: Central agencies or the lead agency in a cluster can play a lead role in helping ensure agency responses to common findings are consistent, timely, efficient and effective. |
| 2.3 New and repeat findings | |
| Although internal control deficiencies decreased over the last four years, this year has seen a 42 per cent increase in internal control deficiencies. | The increase in new IT control deficiencies and repeat IT control deficiencies signifies an emerging risk for agencies. |
| IT control deficiencies feature in this increase, having risen by 63 per cent since last year. The number of repeat IT control deficiencies has doubled and is driven by the increasing digital footprint left by agencies as government prioritises on-line interfaces with citizens, and the number of transactions conducted through digital channels increases |
Recommendation: Agencies should reduce IT risks by:
|
Government agencies’ financial reporting is now heavily reliant on information technology (IT). IT is also increasingly important to the delivery of agency services. These systems often provide the data to help monitor the efficiency and effectiveness of agency processes and services they deliver. Our audits reviewed whether agencies have effective controls in place to manage both key financial systems and IT service contracts.
| Observation | Conclusions and recommendations |
|---|---|
| 3.1 Management of IT vendors | |
| Contract management framework Although 87 per cent of agencies have a contract management policy to manage IT vendors, one fifth require review. |
Conclusion: Agencies can more effectively manage IT vendor contracts by developing policies and procedures to ensure vendor management frameworks are kept up to date, plans are in place to manage vendor performance and risk, and compliance with the framework is monitored by:
|
| Contract risk management Forty-one per cent of agencies are not using contract management plans and do not assess contract risks. Half of the agencies that did assess contract risks, had not updated the risk assessments since the commencement of the contract. |
Conclusion: Instead of applying a 'set and forget' approach in relation to management of contract risks, agencies should assess risk regularly and develop a plan to actively manage identified risks throughout the contract lifecycle - from negotiation and commencement, to termination. |
|
Performance management Only 24 per cent of agencies sought assurance about the accuracy of vendor reporting against KPIs, yet sixty-seven per cent of the IT contracts allow agencies to determine performance based payments and/or penalise underperformance. |
Conclusion: Agencies are monitoring IT vendor performance, but could improve outcomes and more effectively manage under-performance by:
|
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Transitioning services Where IT vendor contracts do make provision for transitioning-out, only 28 per cent of agencies have developed a transitioning-out plan with their IT vendor. |
Conclusion: Contract transition/phase out clauses and plans can mitigate risks to service disruption, ensure internal controls remain in place, avoid unnecessary costs and reduce the risk of 'vendor lock-in'. |
| Contract Registers Eleven out of forty agencies did not have a contract register, or have registers that are not accurate and/or complete. |
Conclusion: A contract register helps to manage an agency’s compliance obligations under the Government Information (Public Access) Act 2009 (the GIPA Act). However, it also helps agencies more effectively manage IT vendors by:
Recommendation: Agencies should ensure their contract registers are complete and accurate so they can more effectively govern contracts and manage compliance obligations. |
| 3.2 IT general controls | |
| Governance Ninety-five per cent of agencies have established policies to manage key IT processes and functions within the agency, with ten per cent of those due for review. |
Conclusion: Regular review of IT policies ensures risks are considered and appropriate strategies and procedures are implemented to manage these risks on a consistent basis. An absence of policies can lead to ad-hoc responses to risks, and failure to consider emerging IT risks and changes to agency IT environments. |
|
User access administration
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Recommendation: Agencies should strengthen the administration of user access to prevent inappropriate access to key systems. |
| Privileged access Forty per cent of agencies do not periodically review logs of the activities of privileged users to identify suspicious or unauthorised activities. |
Recommendation: Agencies should:
|
| Password controls Twenty-three per cent of agencies did not comply with their own policy on password parameters. |
Recommendation: Agencies should ensure IT password settings comply with their password policies. |
| Program changes Fifteen per cent of agencies had deficient IT program change controls mainly related to segregation of duties and authorisation and testing of IT program changes prior to deployment. |
Recommendation: Agencies should maintain appropriate segregation of duties in their IT functions and test system changes before they are deployed. |
This chapter outlines our audit observations, conclusions and recommendations from our review of how agencies reported their performance in their 2016–17 annual reports. The Annual Reports (Statutory Bodies) Regulation 2015 and Annual Reports (Departments) Regulation 2015 (annual reports regulation) currently prescribes the minimum requirements for agency annual reports.
| Observation | Conclusion or recommendation |
| 4.1 Reporting on performance | |
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Only 57 per cent of agencies linked reporting on performance to their strategic objectives. The use of targets and reporting performance over time was limited and applied inconsistently. |
Conclusion: There is significant disparity in the quality and consistency of how agencies report on their performance in their annual reports. This limits the reliability and transparency of reported performance information. Agencies could improve performance reporting by clearly linking strategic objectives to reported outcomes, and reporting on performance against targets over time. NSW Treasury may need to provide more guidance to agencies to support consistent and high-quality performance reporting in annual reports. |
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There is no independent assurance that the performance metrics agencies report in their annual reports are accurate. Prior performance audits have noted issues related to the collection of performance information. For example, our 2016 Report on Red Tape Reduction highlighted inaccuracies in how the dollar-value of red tape reduction had been reported. |
Conclusion: The ability of Parliament and the public to rely on reported information as a relevant and accurate reflection of an agency's performance is limited. The relevance and accuracy of performance information is enhanced when:
|
| 4.2 Reporting on reports | |
|
Agency reporting on major projects does not meet the requirements of the annual reports regulation. Forty-seven per cent of agencies did not report on costs to date and estimated completion dates for major works in progress. Of the 47 per cent of agencies that reported on major works, only one agency reported detail about significant cost overruns, delays, amendments, deferments or cancellations. |
NSW Treasury produce an annual report checklist to help agencies comply with their annual report obligations. Recommendation: Agencies should comply with the annual reports regulation and report on all mandatory fields, including significant cost overruns and delays, for their major works in progress. |
|
The information the annual reports regulation requires agencies to report deals only with major works in progress. There is no requirement to report on completed works. Sixteen of 30 agencies reported some information on completed major works. |
Conclusion: Agencies could improve their transparency if they reported, or were required to report:
|
This chapter outlines our audit observations, conclusions and recommendations, arising from our review of agency preventative and detective controls over purchasing card and taxi use for 2017–18.
| Observation | Conclusion or recommendation |
| 5.1 Management of purchasing cards | |
| Volume of credit card spend Purchasing card expenditure has increased by 76 per cent over the last four years in response to a government review into the cost savings possible from using purchasing cards for low value, high volume procurement. |
Conclusion: The increasing use of purchasing cards highlights the importance of an effective framework for the use and management of purchasing cards. |
| Policy framework We found all agencies that held purchasing cards had a policy in place, but 26 per cent of agencies have not reviewed their purchasing card policy by the scheduled date, or do not have a scheduled revision date stated within their policy. |
Recommendation: Agencies should mitigate the risks associated with increased purchasing card use by ensuring policies and purchasing card frameworks remain current and compliant with the core requirements of TPP 17–09 'Use and Management of NSW Government Purchasing Cards'. |
| Preventative controls We found that:
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Agencies have designed and implemented preventative controls aimed at deterring the potential misuse of purchasing cards. Conclusion: Further opportunities exist for agencies to better control the use of purchasing cards, such as:
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Detective controls Major reviews, such as data analytics (29 per cent of agencies) and independent spot checks (49 per cent of agencies) are not widely used. |
Agencies have designed and implemented detective controls aimed at identifying potential misuse of purchasing cards. Conclusion: More effective monitoring using purchasing card data can provide better visibility over spending activity and can be used to:
|
| 5.2 Management of taxis | |
| Policy framework Thirteen per cent of agencies have not developed and implemented a policy to manage taxi use. In addition:
|
Conclusion: Agencies can promote savings and provide more options to staff where their taxi use policies:
|
| Detective controls All agencies approve taxi expenditure by expense reimbursement, purchasing card and Cabcharge, and have implemented controls around this approval process. However, beyond this there is minimal monitoring and review activity, such as data monitoring, independent spot checks or internal audit reviews. |
Conclusion: Taxi spend at agencies is not significant in terms of its dollar value, but it is significant from a probity perspective. Agencies can better address the probity risk by incorporating taxi use into a broader purchasing card or fraud monitoring program. |
Fraud and corruption control is one of the 17 key elements of our governance lighthouse. Recent reports from ICAC into state agencies and local government councils highlight the need for effective fraud control and ethical frameworks. Effective frameworks can help protect an agency from events that risk serious reputational damage and financial loss.
Our 2016 Fraud Survey found the NSW Government agencies we surveyed reported 1,077 frauds over the three year period to 30 June 2015. For those frauds where an estimate of losses was made, the reported value exceeded $10.0 million. The report also highlighted that the full extent of fraud in the NSW public sector could be higher than reported because:
- unreported frauds in organisations can be almost three times the number of reported frauds
- our 2015 survey did not include all NSW public sector agencies, nor did it include any NSW universities or local councils
- fraud committed by citizens such as fare evasion and fraudulent state tax self-assessments was not within the scope of our 2015 survey
- agencies did not estimate a value for 599 of the 1,077 (56 per cent) reported frauds.
Commissioning and outsourcing of services to the private sector and the advancement of digital technology are changing the fraud and corruption risks agencies face. Fraud risk assessments should be updated regularly and in particular where there are changes in agency business models. NSW Treasury Circular TC18-02 NSW Fraud and Corruption Control Policy now requires agencies develop, implement and maintain a fraud and corruption control framework, effective from 1 July 2018.
Our Fraud Control Improvement Kit provides guidance and practical advice to help organisations implement an effective fraud control framework. The kit is divided into ten attributes. Three key attributes have been assessed below; prevention, detection and notification systems.
This chapter outlines our audit observations, conclusions and recommendations, arising from our review of agency fraud and corruption controls for 2017–18.
| Observation | Conclusion or recommendation |
| 6.1 Prevention systems | |
|
Prevention systems Only 54 per cent of agencies have an employment screening policy and all agencies have IT security policies, but gaps in IT security controls could undermine their policies. |
Conclusion: Most agencies have implemented fraud prevention systems to reduce the risk of fraud. However poor IT security along with other gaps in agency prevention systems, such as employment screening practices heightens the risk of fraud and inappropriate use of data. Agencies can improve their fraud prevention systems by:
|
| Twenty-three per cent of agencies were not performing fraud risk assessments and some agency fraud risk assessments may not be as robust as they could be. | Conclusion: Agencies' systems of internal controls may be less effective where new and emerging fraud risks have been overlooked, or known weaknesses have not been rectified. |
| 6.2 Detection systems | |
| Detection systems Several agencies reported they were developing a data monitoring program, but only 38 per cent of agencies had already implemented a program. |
Studies have shown data monitoring, whereby entire populations of transactional data are analysed for indicators of fraudulent activity, is one of the most effective methods of early detection. Early detection decreases the duration a fraud remains undetected thereby limiting the extent of losses. Conclusion: Data monitoring is an effective tool for early detection of fraud and is more effective when informed by a comprehensive fraud risk assessment. |
| 6.3 Notification systems | |
| Notification system All agencies have notification systems for reporting actual or suspected fraud and corruption. Most agencies provide multiple reporting lines, provide training and publicise options for staff to report actual or suspected fraud and corruption. |
Conclusion: Training staff about their obligations and the use of fraud notification systems promotes a fraud-aware culture |
Progress and measurement of the Premier's Priorities
The Premier’s Implementation Unit uses a systematic approach to measuring and reporting progress towards the Premier’s Priorities performance targets, but public reporting needed to improve, according to a report released today by the Auditor-General of NSW, Margaret Crawford.
The Premier of New South Wales has established 12 Premier’s Priorities. These are key performance targets for government.
| The 12 Premier's Priorities | |
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Source: Department of Premier and Cabinet, Premier’s Priorities website.
Each Premier’s Priority has a lead agency and minister responsible for achieving the performance target.
The Premier’s Implementation Unit (PIU) was established within the Department of Premier and Cabinet (DPC) in 2015. The PIU is a delivery unit that supports agencies to measure and monitor performance, make progress toward the Premier’s Priorities targets, and report progress to the Premier, key ministers and the public.
This audit assessed how effectively the NSW Government is progressing and reporting on the Premier's Priorities.
The Premier’s Implementation Unit (PIU) is effective in assisting agencies to make progress against the Premier’s Priorities targets. Progress reporting is regular but transparency to the public is weakened by the lack of information about specific measurement limitations and lack of clarity about the relationship of the targets to broader government objectives.The PIU promotes a systematic approach to measuring performance and reporting progress towards the Premier’s Priorities’ performance targets. Public reporting would be improved with additional information about the rationale for choosing specific targets to report on broader government objectives.
The PIU provides a systematic approach to measuring performance and reporting progress towards the Premier's Priorities performance targets. Public reporting would be improved with additional information about the rationale for choosing specific targets to report on broader government objectives. The data used to measure the Premier’s Priorities comes from a variety of government and external datasets, some of which have known limitations. These limitations are not revealed in public reporting, and only some are revealed in progress reported to the Premier and ministers. This limits the transparency of reporting.
The PIU assists agencies to avoid unintended outcomes that can arise from prioritising particular performance measures over other areas of activity. The PIU has adopted a collaborative approach to assisting agencies to analyse performance using data, and helping them work across organisational silos to achieve the Premier’s Priorities targets.
Data used to measure progress for some of the Premier’s Priorities has limitations which are not made clear when progress is reported. This reduces transparency about the reported progress. Public reporting would also be improved with additional information about the relationship between specific performance measures and broader government objectives.
The PIU is responsible for reporting progress to the Premier, key ministers and the public. Agencies provide performance data and some play a role in preparing progress reports for the Premier and ministers. For 11 of the Premier's Priorities, progress is reported against measurable and time-related performance targets. For the infrastructure priority, progress is reported against project milestones.
Progress of some Priorities is measured using data that has known limitations, which should be noted wherever progress is reported. For example, the data used to report on housing completions does not take housing demolitions into account, and is therefore overstating the contribution of this performance measure to housing supply. This known limitation is not explained in progress reports or on the public website.
Data used to measure progress is sourced from a mix of government and external datasets. Updated progress data for most Premier’s Priorities is published on the Premier’s Priorities website annually, although reported to the Premier and key ministers more frequently. The PIU reviews the data and validates it through fieldwork with front line agencies. The PIU also assists agencies to avoid unintended outcomes that can arise from prioritising single performance measures. Most, but not all, agencies use additional indicators to check for misuse of data or perverse outcomes.
We examined the reporting processes and controls for five of the Premier’s Priorities. We found that there is insufficient assurance over the accuracy of the data on housing approvals.
The relationships between performance measures and broader government objectives is not always clearly explained on the Premier’s Priority website, which is the key source of public information about the Premier’s Priorities. For example, the Premier’s Priority to reduce litter volumes is communicated as “Keeping our Environment Clean.” While the website explains why reducing litter is important, it does not clearly explain why that particular target has been chosen to measure progress in keeping the environment clean.
By December 2018, the Department of Premier and Cabinet should:
- improve transparency of public reporting by:
- providing information about limitations of reported data and associated performance
- clarifying the relationship between the Premier’s Priorities performance targets and broader government objectives.
- ensure that processes to check and verify data are in place for all agency data sources
- encourage agencies to develop and implement additional supporting indicators for all Premier’s Priority performance measures to prevent and detect unintended consequences or misuse of data.
The Premier's Implementation Unit is effective in supporting agencies to deliver progress towards the Premier’s Priority targets.
The PIU promotes a systematic approach to monitoring and reporting progress against a target, based on a methodology used in delivery units elsewhere in the world. The PIU undertakes internal self-evaluation, and commissions regular reviews of methodology implementation from the consultancy that owns the methodology and helped to establish the PIU. However, the unit lacks periodic independent reviews of their overall effectiveness. The PIU has adopted a collaborative approach and assists agencies to analyse performance using data, and work across organisational silos to achieve the Premier’s Priorities targets.
Agency representatives recognise the benefits of being responsible for a Premier's Priority and speak of the value of being held to account and having the attention of the Premier and senior ministers.
By June 2019, the Department of Premier and Cabinet should:
- establish routine collection of feedback about PIU performance including:
- independent assurance of PIU performance
- opportunity for agencies to provide confidential feedback.
Appendix one: Response from agency
Appendix three: About the audit
Appendix four: Performance auditing
Parliamentary reference - Report number #307 - released 13 September 2018
