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Published

Actions for Internal controls and governance 2024

Internal controls and governance 2024

Whole of Government
Gift and benefit
Compliance
Cyber security
Financial reporting
Information technology
Internal controls and governance
Management and administration
Regulation
Risk
Service delivery
Shared services and collaboration

About this report

Internal controls are key to the accuracy and reliability of agencies’ financial reporting processes. This report analyses the internal controls and governance of 26 of the NSW public sector’s largest agencies for the 2023–24 financial year.

Findings

There are gaps in key business processes, which expose agencies to risks. These gaps are identified in 121 findings across the 26 agencies—including 4 high risk, 73 moderate risk and 44 low risk findings. All four high-risk issues related to IT controls and 19% of control deficiencies were repeat issues. Thirty-five per cent of agencies had deficiencies in control over privileged access.

Shared IT services

Six agencies provide IT shared services to 120 other customer agencies. All six had control deficiencies—three of these were high risk. Four agencies provide no independent assurance to their customers about the effectiveness of their own IT controls.

Cyber security

Eighteen agencies assessed cyber risk as being above their risk appetite. Fourteen of these agencies had not set a timeframe to resolve these risks and two agencies have not funded plans to improve cyber security.

Fraud and corruption control

Agencies need to improve fraud and corruption control. Instances of non-compliance with TC18-02 NSW Fraud and Corruption Policy were identified, including gaps such as a lack of comprehensive employment screening policies and not reporting matters to the audit and risk committee.

Gifts and benefits

Management of gifts and benefits requires better governance and transparency. All agencies had policy and guidance but all had gaps in management and implementation—such as not publishing registers nor providing ongoing training.

Information Technology

Nine agencies did not effectively restrict or monitor user access to privileged accounts.

Recommendations

The report makes recommendations to agencies to implement proper controls and improve processes in relation to:

  • organisational processes
  • information technology
  • cyber security
  • fraud and corruption, and
  • gifts and benefits.

 

Read the PDF report

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 found across agencies.

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 agencies' cyber security.

This chapter outlines our audit observations, conclusions and recommendations from our review of agencies' fraud and corruption control framework, policies and practices. Our Internal Controls and Governance 2018 found a number of fraud and corruption control gaps in NSW Government.

The NSW Treasury Circular TC18-02 NSW Fraud and Corruption Control Policy (the Circular) requires NSW government agencies to develop, implement and maintain a fraud and corruption control framework. The Circular sets out minimum standards for a NSW Government agency’s fraud and corruption control framework.

Previous Audit Office report on agency fraud and corruption control

Report on Internal Controls and Governance 2018 (published October 2018)

The report found there were gaps in the fraud and corruption controls by some agencies, which increased the risk of reputational damage and financial loss.

Where relevant, we have included the results from our 2018 report on Internal Controls and Governance below for comparison purposes.

This chapter outlines our audit observations, conclusions and recommendations arising from our review of agencies' managing of gifts and benefits.

In progress

Actions for Land titles registry

Land titles registry

Industry
Finance
Compliance
Management and administration
Regulation
Risk

Australian Registry Investments (trading as NSW Land Registry Services) was granted the right to operate the titling and registry operations of New South Wales in April 2017, under a 35-year concession which commenced on 1 July 2017. The NSW Government continues to own the land titles register and guarantees title under the Torrens Assurance Fund. The Office of the Registrar General regulates NSW Land Registry Services (NSW LRS) as the operator of the NSW land titles registry under a regulator-operator model. 

This audit will assess the effectiveness of the Office of the Registrar General in overseeing and monitoring the operation and maintenance of the land titles registry by a private operator to ensure the integrity and security of the registry. The audit will address the following questions: 

  • Does the Office of the Registrar General ensure that appropriate measures are taken to establish, maintain and protect the integrity (including quality) and security of information held on the land titles registry?
  • Does the Office of the Registrar General ensure that there are effective arrangements for responding and resolving breaches of performance standards or obligations relating to the integrity, quality or security of information held on the land titles registry?

The Office of the Registrar General is situated in the Better Regulation Division of the Department of Customer Service.

Estimated tabling date: February 2025

 

Department of Customer Service and NSW Treasury.

Published

Actions for Threatened species and ecological communities

Threatened species and ecological communities

Environment
Compliance
Financial reporting
Information technology
Internal controls and governance
Management and administration
Project management
Risk

About this report

Over 1,100 native animals, plants and ecological communities are listed as threatened in New South Wales. The Department of Climate Change, Energy, the Environment and Water (DCCEEW) delivers programs and activities aiming to reduce the risk of extinction for threatened species and ecological communities. 

This audit assessed whether DCCEEW has effectively delivered outcomes to support threatened species and ecological communities across New South Wales including delivery of the statutory Biodiversity Conservation Program (Saving our Species). 

Findings

DCCEEW uses a risk‑based approach to guide and deliver a range of programs aiming to improve the outcomes for threatened species and ecological communities.

However, DCCEEW has not effectively determined departmental priorities, coordinated programs to align efforts, or reported on the overall outcomes it is delivering for threatened species and ecological communities. 

Further, DCCEEW does not capture sufficient data to monitor species that it is not actively managing, creating a risk that it cannot readily identify or respond to further decline.

Under the Saving our Species program, DCCEEW is delivering conservation actions for less than one‑third of all threatened species and ecological communities. This number has reduced over time, in line with reduced program funding. 

Gaps in core program planning and risk management frameworks create program delivery risks. 

Recommendations

The report made several recommendations to DCCEEW, focusing on:

  • Strengthening Saving our Species program compliance, governance, planning and risk management frameworks.
  • Developing a long‑term framework to coordinate and align efforts across DCCEEW for the delivery of threatened species outcomes.
  • Expanding activities to improve coordination with other parts of government delivering activities that impact on outcomes for threatened species.

This chapter assesses the effectiveness of DCCEEW’s ability to report on threatened species outcomes across its various programs and activities, and its strategic planning for the delivery of these outcomes at a departmental level.

Under Part 4, Division 6 of the BC Act, DCCEEW is required to deliver a Biodiversity Conservation Program. The program’s statutory objectives are to:

  • maximise the long-term security of threatened species and ecological communities in nature
  • minimise the impacts of key threatening processes on biodiversity and ecological integrity.

Under Section 4.36 of the BC Act, the program must have:

  • strategies to achieve the objectives of the program in relation to each threatened species and threatened ecological community
  • a framework to guide the setting of priorities for implementing the strategies
  • a process for monitoring and reporting on the overall outcomes and effectiveness of the program.

Appendix one – Response from agency

Appendix two – Legislative and regulatory provisions relevant to threatened species

Appendix three – Programs and activities relevant to threatened species

Appendix four – Comparison of statutory provisions for the conservation of threatened species

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 #399 released 15 August 2024.

Published

Actions for Regional Digital Connectivity program

Regional Digital Connectivity program

Industry
Information technology
Infrastructure
Internal controls and governance
Management and administration
Procurement
Project management
Risk
Service delivery

About this report

The Regional Digital Connectivity program (RDCP) is intended to improve mobile coverage and internet connectivity in regional NSW.

The RDCP includes two funding programs, one for improving mobile coverage and the other for improving internet connectivity. Both programs provide grant funding to commercial telecommunications providers for eligible mobile and internet projects.

This audit assessed whether the Department of Regional NSW (the department) is effectively administering the RDCP to meet program objectives.

Findings

The department's approach to identifying priority areas for RDCP funding was comprehensive and it largely distributed funding in line with these priorities.

The department has not specifically defined the overall objectives of the RDCP. The department has developed business cases that set out each program’s respective objectives, but these do not consistently describe the objectives of the RDCP.

The department also has not developed an overarching investment strategy, which would assist it in addressing potentially conflicting priorities.

Deficiencies in project and risk management have contributed to delays in the department’s implementation of the program.

The department is not monitoring progress against outcomes, which limits its ability to demonstrate that the program is achieving its intended purpose.

The department did not meet its original mobile coverage performance target but met its internet connectivity target.

Recommendations

To improve RDCP administration, the report recommends that by June 2025, the department should:

  1. develop an overarching investment strategy for the RDCP
  2. outline the expected timelines for RDCP projects and ensure that these timelines are updated regularly
  3. develop and report on RDCP outcome indicators
  4. update the RDCP evaluation plan
  5. update the expected benefits of the program to reflect changes in the RDCP.

The Regional Digital Connectivity program (RDCP) is funded through the Snowy Hydro Legacy Fund (SHLF). Under the Snowy Hydro Legacy Fund Act 2018 (SHLF Act), the purpose of the SHLF is to improve economic development in regional New South Wales and to fund infrastructure projects that primarily benefit regional New South Wales. A priority area for SHLF investment is delivering improved mobile coverage and internet connectivity in underserved and remote communities.

The RDCP has been implemented by the Department of Regional NSW (the department) since 2019. The RDCP is broadly split into two funding programs. The larger funding program is for improving mobile coverage and the other funding program is for improving internet connectivity and is referred to as the Gig State program. Both programs provide grant funding to commercial telecommunications providers for eligible mobile and internet projects.

Over $300 million from the RDCP was allocated to improve mobile phone coverage and increase the number of mobile service providers across regional NSW. The mobile coverage program is being delivered through the following sub-programs:

  • Snowy Mountains Highway Safety project – co-funding with Snowy Hydro Limited to build five mobile towers along the Snowy Mountains Highway to improve mobile coverage.
  • Active Sharing Partnership (ASP) pilot – co-funding with private providers to deliver active sharing mobile technology in regional areas.
  • ASP main program – This is the main round of the mobile coverage program. A business case has been developed, but no funding has been distributed through this sub-program.
  • Mobile Black Spot Program Round 5A – co-funding with the Australian Government’s Mobile Black Spot Program to deliver new or upgraded mobile towers in regional and remote locations.
  • Mobile Black Spot Program Round 7 (MBSP7) – co-funding with the Australian Government’s Mobile Black Spot Program to deliver new mobile infrastructure.

Over $100 million from the RDCP was allocated to the Gig State program to improve regional internet connectivity through partnering with multiple providers and using a range of technologies suitable for rural and regional locations. The Gig State program was launched in 2019 and underwent significant changes in 2021 following an Infrastructure NSW deep dive review into the project. These changes to the program are referred to as the Gig State addendum. The Gig State program is being delivered through the following sub-programs:

  • Cobar corridor connectivity – providing fixed wireless internet access to five locations between Narromine and Cobar.
  • nbn regional NSW fixed wireless – co-funding with nbn to deliver new or co-located fixed wireless broadband towers in 56 locations.
  • Wamboin, Bywong and Sutton connectivity – improving internet connectivity in these three towns as part of a NSW Government commitment.
  • Regional Connectivity Program Round 3 (RCP3) – co-funding with the Australian Government’s Regional Connectivity Program to provide additional internet infrastructure.

The objective of this audit was to assess whether the Department of Regional NSW is effectively administering the Regional Digital Connectivity program to meet program objectives. The audit examined:

  • how effectively the department identifies priority areas to target RDCP funding
  • how effectively the department distributes RDCP funding in line with program objectives
  • how effectively the department measures the performance of the RDCP.

The department has not specifically defined the overall objectives of the RDCP

The RDCP is delivered as part of the SHLF. Under the SHLF Act, the purpose of the SHLF is to improve economic development in regional New South Wales and, for that purpose, to fund infrastructure projects that primarily benefit regional New South Wales. One of the priority areas for SHLF investment is digital connectivity, which is being delivered through the RDCP.

While the purpose of the SHLF is set out in the SHLF Act, the department has not specifically set out the overall purpose and objectives of the RDCP and how it will focus the RDCP on achieving the SHLF’s purpose. Such a document would support future business case development, and support the coordination and prioritisation of objectives across the business cases that have already been developed.

While the overall objectives of the RDCP are yet to be defined, there are objectives set out in the business cases for the separate programs but these are not consistently described. The Gig State business case advises that the RDCP’s goal is to enable transformative long-term benefits for regional areas through investment in digital connectivity. This goal aligns with the purpose of the SHLF Act. However, this objective is not set out in the mobile coverage business case, or any other document, and it is not clear how the RDCP is intended to fulfil this objective.

The Gig State business case sets out three objectives for the RDCP that provide further definition to the SHLF Act’s purpose, though it is unclear how these were determined and whether these are intended to cover the entire RDCP:

  • address the digital divide between regional and metro NSW
  • resolve market failures in the regional NSW telecommunications market
  • leverage Government assets and capabilities wherever possible.

The mobile coverage ASP pilot business case sets out a similar set of objectives, though there are some differences, such as the third objective being to ‘leverage Government assets and capabilities to achieve transformative results.’ It is important for the department to clarify the RDCP’s objectives to ensure a unified approach to investment decisions. At the time of the audit, the department’s website had a different set of objectives for the RDCP. They are:

  • build digital infrastructure to increase capacity
  • expand mobile coverage and provider choice
  • improve internet service, speed and quality
  • bridge the digital divide between regions and cities.

The department also provided a 2022–23 ‘division plan’, with goals for the mobile coverage and Gig State programs. These include:

  •  extend and improve internet coverage to deserving locations in regional NSW
  • investigate emerging digital technologies to improve connectivity
  • deliver new and improved mobile coverage to regional NSW communities
  • encourage competition in the regional telecommunications market.

While these different sets of objectives broadly align, there is no consistency across these business cases in describing the objectives of the RDCP. This indicates that there is a lack of clarity about the intended objectives of the RDCP. Further, the origin of the list of objectives in the ‘division plan’ is unclear. This reinforces the need to clearly define objectives for the overall RDCP.

Each business case the department has developed for RDCP programs has defined objectives that align with the SHLF’s purpose

The Gig state and mobile coverage business cases also define objectives for each program. These objectives align with the SHLF’s purpose, set out above. The Gig State business case advises that the purpose of the Gig State program is to:

  • address the digital divide between metro and regional NSW so that the price, quality, and choice of digital connectivity options in metro areas are made available in regional areas of NSW
  • resolve market failures in regional NSW telecommunications
  • leverage Government assets or investment where appropriate to achieve transformative long-term benefits for regional areas.

The ASP pilot business case states similar objectives, though it does not mention the ‘price, quality, and choice’ stated in the Gig State business case. The ASP pilot business case also lists another three objectives:

  • address mobile black spots where people live and work
  • investigate new and emerging technologies to future proof mobile coverage in regional NSW
  • promote consumer choice in the delivery of mobile services.

The ASP main program has a different set of objectives to the ASP pilot and include:

  • reduce the digital divide and enhance social inclusion by improving mobile coverage in regional locations not covered by existing programs
  • encourage competition in the regional telecommunications market to provide consumers greater choice, lower prices and improved services
  • address commercial viability and technical constraints to providing mobile coverage in regional areas
  • improve community resilience to emergency events through improved regional mobile service.

The RDCP program objectives align with relevant whole-of-government strategic objectives

There are several whole-of-government strategies that seek to guide government investment in digital infrastructure. While there is no document setting out the overarching objectives of the RDCP, the objectives set out for the mobile coverage program and the Gig State program align with these whole-of-government objectives.

The objectives align with the 2018 and 2021 ‘20 Year Economic Vision for Regional NSW’. For example, the 2018 ‘20 Year Economic Vision for Regional NSW’ sets out principles for regional NSW investment, including ‘Affordable, reliable and fast internet to support people and businesses.’

The RDCP sub-programs also align with the 2018 and 2022 State Infrastructure Strategies. In particular, the 2018 strategy has a set of recommendations around improving connectivity across NSW and another set of recommendations around investing in technology that improves productivity and social outcomes. One of the roles of the Gig State program is to help to implement the 2018 strategy’s recommendation to support statewide access to 50Mbps download and 10Mbps upload capacity by 2025. These speeds are specifically stated in the Gig State grant guidelines as an eligibility requirement for funded programs.

Both sub-programs of the RDCP also align with the NSW Connectivity Strategy. The NSW Connectivity Strategy has two directions of particular relevance: ‘All customers have metropolitan equivalent digital capacity’ and ‘Connectivity blackspots continually decrease across the State’. The first of these objectives has three strategic directions which are directly relevant to both the Gig State program and the mobile coverage program:

  • remote, rural and peri-urban citizens can access and effectively use digital systems and services for employment, justice, education, health, social, personal and entertainment use
  • Aboriginal and Torres Strait Islander communities have equitable access to connectivity that meets their local community needs
  • connectivity services are affordable for citizens no matter where they live, with access to a choice of providers.

Elements of both the Gig State and mobile coverage programs align with these, including the focus on expanding access and affordability.

In regard to regional Aboriginal communities, the RDCP may also contribute to the NSW Closing the Gap Implementation Plan, as the merit criteria in the grant guidelines for mobile coverage and Gig State grants include the extent to which the project will contribute to sustainable procurement and employment outcomes, including supporting Aboriginal businesses and employment. The criteria for prioritising locations for mobile coverage also includes extending coverage to discrete Aboriginal communities as something which could improve the score given to an application. However, this is not set out as an explicit objective of the program.

The department has not set out an overarching investment strategy for the RDCP to address potentially conflicting priorities or identify situations where funding may not align with program objectives

As noted above, the overall objectives of the RDCP have not been defined. The department does not have an overarching strategy setting out program objectives, how funding will be aligned with these objectives, and how the objectives will be prioritised. It is important to set out funding principles to establish how the elements of the stated objectives will be delivered and prioritised. Not setting these out risks funding decisions that do not align with program objectives.

As noted above, the mobile coverage ASP pilot business case lists two objectives around addressing mobile black spots and promoting consumer choice in the delivery of mobile services. These objectives may be potentially in conflict as expanding coverage can be done by funding one carrier to expand their own network, while promoting consumer choice could conceivably be done by funding a carrier to expand their network into areas already covered by only one existing carrier, thus increasing competition in those areas.

The department has not set out the relative weighting of its objectives across the RDCP funding packages and how it will prioritise funding in accordance with them. An overarching strategy would assist the department with prioritising funding in accordance with the objectives of the program, including determining the relative weight of each objective.

In addition, the department has not described the extent to which price reductions in the cost of internet will be prioritised as an objective of the Gig State program. The Gig State business case sets out that one of the objectives of the program will be to provide metropolitan equivalent or better service, quality and pricing for internet services in regional areas. It is unclear how internet pricing fits into the overarching objectives of the RDCP given that it is not mentioned as an objective of the SHLF. There would be value in setting out strategic investment principles and objectives to guide this decision-making and clarify the extent to which internet investment is intended to fulfil this purpose.

A lack of clarity about program objectives may also have impacted decisions about funding priorities. For example, the Gig State program business case sets out a plan to invest in Low Earth Orbit (LEO) satellites through a subsidy program. As noted above, the Gig State business case sets out some objectives for the RDCP, including leveraging government assets. While an investment in LEO satellites through subsidies may assist with bridging the digital divide, it is not clear how this aligns with the objective of leveraging government assets. More clarity over program objectives and a clear investment strategy may assist with clarifying this and similar investment decisions in future. As discussed below, the investment in LEO satellites did not proceed.

The department comprehensively identified priority areas that require improved mobile coverage for the mobile coverage program

As outlined above, the final business case for the mobile coverage ASP pilot program identifies three objectives for the mobile coverage program, including addressing the digital divide between metropolitan and regional NSW, and resolving market failures in regional NSW telecommunications. The department identified priority areas for improved mobile coverage in line with these objectives. The department refined its approach to prioritising locations for the mobile coverage ASP main program which resulted in a more comprehensive analysis of potential sites.

The department developed and implemented a structured process using a range of criteria to identify and prioritise suitable locations for funding. Before allocating funding to its mobile coverage program, it was necessary for the department to determine areas that required additional mobile coverage. The department undertook this work for both its mobile coverage ASP pilot program and the ASP main program as part of designing the grant programs. A key source of information it relied on for identifying priority areas for the pilot program was the Australian Government’s National Mobile Black Spot Database. The database identified around 4,000 mobile black spot locations across NSW. This database is no longer in use as it relied on community reports of mobile black spots which were unverified.

For its mobile coverage ASP pilot program, the department applied a series of filters to the mobile black spots identified in the database. It removed metropolitan areas, areas within a 10km radius of an existing mobile tower site, and areas that had already been selected for funding under either Commonwealth or State funded programs, such as the Connecting Country Communities Fund. This left the department with a list of around 1,200 potential sites.

The department then mapped the 1,200 identified black spot sites to their respective 383 unique locations and assessed and prioritised the mobile black spots and locations against a range of economic, community and feasibility criteria. Under the economic criteria, the department prioritised areas that had higher numbers of employed persons and higher proportions of land being used for agriculture or farming. Under the community criteria, the department prioritised areas based on the increase in the population that would benefit from expanded coverage, the increase in Aboriginal and Torres Strait Islander people that would benefit from the coverage, the increase in the kilometres of highway and main roads that would benefit that were within five kilometres of a mobile black spot, and areas with more square kilometres prone to bushfires or flooding that would benefit. Under feasibility criteria, the department prioritised areas that were closer to government and nbn infrastructure. This process resulted in 50 prioritised locations containing 307 black spot sites across 34 Local Government Areas in NSW.

For its mobile coverage ASP main program, the department undertook a detailed coverage analysis to identify locations with no and limited mobile coverage. It identified these using the latest publicly available coverage maps from the three mobile network operators and the distance of locations from existing sites/towers as published by the Australian Communications and Media Authority and the Radio Frequency National Site Archive databases. Using this data as the key source of information in determining mobile coverage resulted in a more comprehensive outcome than relying on the National Mobile Black Spot Database. The department did not use the National Mobile Black Spot Database, as this information was considered unreliable and had not been updated since 2018, and the coverage maps were more reliable.

The analysis focused on locations with small populations, road corridors, and tourism locations. It identified 257 locations with no or poor coverage consisting of 68 small population locations, 117 road corridors and 72 tourism locations. The department then analysed these possible locations against a range of criteria. These included maximising the number of people and businesses that would be supported, increasing the extent of existing coverage, determining whether coverage would support government strategies or Premier’s Priorities, other positive social impacts, focusing on the greatest length of road and most heavily used roads, and maximising the number of tourism businesses and points of interest impacted.

The department conducted analysis based on these criteria and shortlisted 24 small population locations, 24 road corridor locations and 12 visitor economy locations. These locations were taken forward for concept design, cost estimation, and economic and financial appraisal as part of the final business case.

The department’s initial approach to prioritising Gig State funding was based around larger regional centres

The department undertook a two-stage process for identifying priority areas for Gig State program investment. The first involved the identification of larger NSW towns that would benefit from additional internet coverage and where data centres could be located, and the second involved a selection of more remote locations to receive additional funding.

The department did not undertake an initial detailed analysis of internet coverage across NSW to prioritise funding for the Gig State program. Undertaking this work would have been in line with the Gig State program objectives of addressing the digital divide between metropolitan and regional NSW and resolving market failures in regional NSW telecommunications. In order to meet these objectives, it was important to first establish the extent of the digital divide and market failure before seeking to resolve it.

Instead, it categorised NSW towns according to their relative size and importance from a connectivity perspective. It prioritised towns with larger populations and more business users to maximise the potential benefit of the infrastructure. The department also prioritised locations that were closer to other telecommunications infrastructure, and it also considered proximity to other potential elements of the Gig State network for greater connectivity and to ensure that it was taking a whole-of-State approach to investment decisions. This process identified 14 major regional towns.

The department then prioritised two of these regional towns, Dubbo and Wagga Wagga, due to the higher prices paid by NSW Government agencies in the two locations for average internet bandwidth usage when compared to other regional and metropolitan population centres across NSW. The costs to government were considered a proxy for how much business users are likely to be charged for connectivity services in regional NSW towns. The department conducted surveys in both towns indicating that business users were paying higher prices than their metropolitan counterparts for higher-grade connectivity. This aligned with the department’s Gig State program objectives which related to providing price, quality and choice.

The department also included five satellite towns along the road from Dubbo to Cobar (Cobar corridor) in the Gig State final business case as well as the towns of Wamboin, Bywong and Sutton. The department’s prioritisation of funding for these locations was not based on any detailed analysis of need. The department identified that as part of its initial plan to expand the internet connectivity from Dubbo to Cobar, it would be able to connect a number of towns between those two at a reduced cost. There was no analysis of alternative options for expending this money, such as expanding coverage to other areas, or to determine the extent of coverage required in each town. The Wamboin, Bywong and Sutton project was prioritised as a result of a $5 million NSW Government commitment. This project is discussed further below.

The department strengthened its approach to targeting Gig State funding in 2021

The department reviewed and updated its approach to the Gig State program in September 2021. As part of this, it revised its approach to targeting funding, including the use of additional data and identifying areas with greater digital connectivity issues. This represented an improved approach compared to the original business case and aligned more closely with the changes that were made to the Gig State program in 2021, outlined in the Gig State addendum, which focussed more on the delivery of fixed wireless services rather than data centres.

The department carried out an analysis of areas that only have satellite internet coverage (i.e., no fibre or fixed wireless internet availability) to identify areas suitable for different types of technology such as fibre optic cables, fixed wireless and LEO satellites. This was more in line with the Gig State program objectives of addressing the digital divide and resolving market failures. It identified that these locations had challenging digital connectivity issues that were not likely to be resolved without government intervention. This process identified around 1,000 locations. This list was then refined by looking to maximise the number of premises and businesses, maximising the density of premises, prioritising locations with other Government assets, mobile sites and other technology available in the area, and locations close to an existing exchange to leverage existing infrastructure.

The location list was then prioritised based on scoring criteria for economic drivers, feasibility, risk and stakeholders. The economic criteria included the number of residential and business premises, the number of businesses, and the estimated construction costs for the infrastructure. The feasibility criteria included availability of existing and planned infrastructure. Stakeholder related criteria included identifying synergies with other government led programs, as well as sites that scored low on Australian Digital Inclusion Index (ADII) scores and the Socio-Economic Indexes for Areas. These criteria are appropriate and align with the objectives of the Gig State program.

The department’s process resulted in a list of 23 prioritised areas. These were generally areas with a higher density of premises and affordable access to infrastructure for power supply and data transmission.

The department considered socio-economic data when planning for Gig State and mobile coverage programs but did not use this to inform its pilot mobile coverage program

NSW Government Business Case Guidelines (TPP18-06) state that one of the main reasons for government action is promotion of equity where the distribution of economic costs and benefits is considered inequitable. It is therefore important for the department to consider socio-economic data in the planning of the RDCP.

The department has included some socio-economic data and ADII scores in the profiles it developed for each Local Government Area. It applied socio-economic data to identify additional priority areas for new and improved internet coverage through the Gig State program. However, it did not apply this data to identify priority areas across the pilot mobile coverage program of the RDCP. It improved its approach when developing the ASP main program by including socio-economic data as a component of its scoring for prioritising locations.

The department considered socio-economic data when selecting locations for grant funding. The mobile coverage grant guidelines and the Gig State grant guidelines both include merit criteria that consider whether the proposed solution would address disadvantage within a community. Both guidelines ask the grant applicants to consider the Index of Relative Socio-economic Advantage and Disadvantage.

The department engaged with key stakeholders when developing the RDCP

Under TPP18-06, NSW Government departments are required to identify and consult with key stakeholders as they can contribute to the development of the investment proposal by providing their expert opinions, research, and evidence.

The department identified key stakeholders, developed stakeholder engagement plans, and used feedback gained through consultations to design and adjust the RDCP. Key stakeholders have been involved on the RDC Steering Committee and the RDC Project Control Group ensuring that they have an avenue to provide input into the overall RDCP. This includes the Commonwealth department responsible for telecommunications infrastructure and telecommunication providers.

The department engaged with stakeholders when developing the ASP pilot program. As discussed below, the department transitioned the program from a one-stage pilot program, where telecommunication providers would be procured to provide the solution, to a two-stage program where the department would first work with telecommunication providers to identify technical solutions and then carry out the procurement. This involved significant engagement with stakeholders to identify the technical solution and procurement model.

The department has assessed the suppliers of internet and mobile connectivity to determine their capacity and willingness to participate in RDCP sub-programs

As part of procurement planning, when building a business case, NSW Government agencies are required to analyse and engage with the market. This involves developing a profile of the market, the capabilities of suppliers, innovative and emerging technology, and factors that influence the market such as customer preferences and competition.

The department considered the capacity of telecommunications suppliers, their level of interest, and willingness to participate in the program when developing the business cases for its mobile and internet coverage programs. In addition to doing this when constructing initial business cases, the department adjusted its approach when market factors changed, as evidenced by the changes it made to its Gig State program in 2021. In September 2020, the nbn announced an expansion of its fibre network nationally, with a focus on regional improvements. This meant that internet coverage for some of the locations included in the Gig State business case would be addressed by nbn and continued investment was not needed in those areas. The initial Gig State business case also planned an initial investment in data centres in regional NSW. Following this, a private market operator also announced plans to construct 14 regional data centres across NSW. This meant that the planned Gig State data centres were no longer required. The department changed it approach to avoid duplication by ceasing its planned internet coverage expansion into regional centres, including the data centres, and prioritising a range of new sites for coverage.

Conflicts of interest and probity procedures have largely been followed, although there were some gaps in declarations

Maintaining a record of conflict of interest declarations is important to provide a higher level of transparency, and therefore control, over officials in high-risk roles. Disclosing an interest before it becomes a conflict of interest also reduces the likelihood that an official will be tempted to conceal or favour the interest.

Conflict of Interest declaration forms have been completed for staff involved in the mobile coverage program, Gig State program and the Australian Government co-funded Regional Connectivity Program Round 3 (RCP3) and Mobile Black Spot Program Round 7 (MBSP7). Whilst the list of declarations is extensive, it is unclear whether it includes all relevant staff from the department, the NSW Telco Authority and consultants involved with the program.

In relation to the mobile coverage and Gig State programs, there was no declaration recorded for one consultant and three staff from the department, including the program sponsor. These omissions have the potential to create risks that conflicts of interest go unmanaged. The department advises that the register is now complete for all those working directly on the program. It also advises that, due to the breadth of programs senior staff oversee, conflicts of interest are managed by the department's Governance team centrally through a Declarations App.

Four declarations of a ‘real, potential or perceived conflict of interest’ were made under the RCP3 and MBSP7 grant programs, which were co-funded with the Australian Government. No declared conflicts were made for the other programs. The identified conflicts of interest have documented actions to manage them, and there is evidence to indicate that these were implemented. For example, a senior staff member and a consultant excluded themselves from parts of a grant process due to declared conflicts.

The NSW Grants Administration Guide states that officials must seek probity advice for all grant opportunities that are complex, high-risk or high-value, to support the design, application, assessment and decision-making phases. The department followed appropriate probity processes throughout and these probity reports did not find any material breaches of probity in the grant processes.

There have been delays in all streams of the RDCP which may have been reduced through proactive project and risk management

The business cases set out expected timelines for each program of the RDCP. The department has not met any of these expected timelines, with some projects delayed by over a year compared to their initial planned timelines. Some of these delays have been caused by changes to the department’s approach to the mobile coverage and Gig State business cases. While some of these changes were outside of the department’s control, others could have been anticipated and better managed by a stronger approach to project management and risk management.

Exhibits 1 and 2 set out the status of each Gig State and mobile coverage project reviewed as part of this audit as at April 2024 and the planned completion date for that project at the outset of the program. Note that this does not include projects co-funded by the Australian Government due to the department’s limited ability to influence the process. This also excludes projects which have not yet distributed funding, such as the mobile coverage ASP main program.

Exhibit 1: Status of Gig State projects as at April 2024.
ProjectCurrent statusPlanned completion
Cobar corridorSolution designJune 2022
NBN fixed wirelessFeasibility studiesEarly 2024
Other provider fixed wirelessContract negotiationEarly 2024
Wamboin, Bywong and SuttonConstruction (paused)

Original business case:
June 2022

Gig State addendum:
Mid 2023


Source: Audit Office analysis.

Exhibit 2: Status of mobile coverage projects as at April 2024.
ProjectCurrent statusPlanned completion
Snowy Mountains Highway Safety programCompleted March 2023Early 2022
Active Sharing Partnership pilotConstructionJune 2023

Source: Audit Office analysis.

As can be seen from Exhibits 1 and 2, each project in the RDCP has been delayed past its initially planned completion date, and the Wamboin, Bywong and Sutton project has been delayed past both its original planned completion date and also the revised completion date in the Gig State addendum.

Some of these delays can be accounted for by the fact that the department revised its approach to both the mobile coverage ASP pilot and the Gig State programs. While some of these changes were outside of the department’s control, others could have been anticipated and managed by more proactive risk management. In the case of the mobile coverage program, some of this change in approach may have been foreseeable. The March 2021 mobile coverage ASP pilot business case set out a one-stage tendering process with construction planned for completion in June 2022. The department revised this approach in July 2021, when it changed to a two-stage process involving a technical stage and then a grant process. This was the result of additional research by the department that identified that the market may not have sufficient interest in the initial proposed approach. Undertaking this additional research earlier may have allowed for this alternative approach to be identified sooner.

In addition, the department only allowed two months in the business case for contract negotiations with providers for the mobile coverage ASP pilot program, however this has taken a significantly longer time and in one case has been ongoing for over twelve months. Given the complexities of the funding deed negotiations, this may also have been foreseeable. The department advised that some delays in the mobile coverage program can be attributed to the proposed merger of major mobile network operators which delayed funding deed negotiations.

As with the mobile coverage program, the Gig State program was also delayed by a change in approach, though this was driven by market changes. As part of the original Gig State business case, the department intended to deliver data centres in regional NSW, as well as expanding internet coverage. The business case was approved in December 2019 and the department intended to complete the Gig State program in June 2022. Little progress had been made by the time that the Gig State program underwent a significant change in scope following a review in September 2021. The department removed some aspects of the original business case, such as the construction of data centres in regional NSW, and changed the approach to other parts of the business case. The revised business case, called the Gig State addendum, delayed the planned delivery date of some projects into 2022.

The most significantly delayed sub-program has been the expansion of internet access to the towns of Wamboin, Bywong and Sutton as part of the Gig State program. In January 2019, the NSW Government announced $5 million of funding to provide internet access to these towns. The department ran a tender for this work in mid-2021 with a plan to start construction in late 2021. However, this tender resulted in no contract being awarded due to no providers being willing to provide the project within the proposed $5 million budget. The department started working on technical solutions with providers in late 2021 and gave them until May 2022 to identify solutions and potential budgets. The contract for Wamboin, Bywong and Sutton was executed in June 2022, with an expected completion date of June 2024, though given delays with construction this date will not be met. As discussed below, if the department had provided better advice to Government on the expected costs at the planning stage, it may have reduced the delays in this sub-program.

The department has not effectively managed RDCP timelines

The department has provided limited evidence of effective project management in place to monitor overall progress against program timelines, such as regularly updating a detailed project plan. The department may have identified and managed the above delays sooner through a stronger project management approach.

The department set out timelines at the outset of each of the sub-programs. This was not always done in detail but for all the sub-programs at least key milestones were mapped. While this was done at the outset, there is no evidence that the department regularly updated timelines across the various sub-programs to ensure that these projects were on track and to monitor expected completion dates.

The department provided regular updates on project status to relevant governance committees. This included providing information on upcoming milestones and associated delays. However, holistic monitoring of program completion dates and the impact of delays on subsequent milestones was not presented to the governance committees. As a result, there has been little monitoring and oversight of how projects are tracking against their target end dates.

Gaps in the governance framework have limited the oversight of the implementation of the RDCP

There are three key committees that oversee the implementation of the RDCP: the SHLF Steering Committee, the RDC Steering Committee, and the RDC Program Control Group. These three committees are intended to provide oversight of the implementation of the RDCP, however there are deficiencies that limit the effectiveness of their oversight.

The SHLF Steering Committee is intended to provide oversight of all programs funded through the SHLF, including the RDCP. Despite an intended meeting schedule of quarterly, the committee only met once in 2023 and three times in each of 2021 and 2022. While the Committee did receive reports on each of the programs funded through the SHLF at these meetings, this reporting did not identify any key risks for these projects that might affect achieving the objectives of the SHLF. This reduces the level of oversight that the SHLF Steering Committee can provide for these projects.

The RDC Steering Committee provides oversight of the RDCP and is intended to act as an escalation point for key issues in the program. While the committee receives regular reports on the components of the RDCP, including on program risks, there are some gaps that limit the oversight it can provide. The committee operated throughout 2021, 2022 and 2023 without finalised terms of reference, which were finalised in February 2024. Prior to this, it was unclear how often the RDC Steering Committee was intended to meet, but it met only four times in 2023 compared to six in 2022.

The RDC Steering Committee terms of reference include a role for the committee in making key decisions around program strategy and implementation. Prior to 2023, the committee was involved in many key decisions. For example, in 2022 it endorsed decisions around the ASP pilot grant guidelines. By contrast, a review of meeting minutes since the start of 2023 shows that the RDC Steering Committee has not made decisions or provided endorsements for any key decisions. The committee was not involved in endorsing the MBSP7 and RCP3 grant guidelines in 2023 and was not involved in strategic decision-making about the budget reprofiling in 2023 and the decision to remove the LEO satellite pilot from the Gig State program scope.

The RDC Program Control Group did not have terms of reference until February 2024. The purpose of the RDC Program Control Group is to oversee and support the strategic direction and implementation of the RDCP. This should be carried out through regular meetings and reporting, however the control group only met six times in 2023 despite an intention that they would meet monthly. The expected meeting frequency has since changed to every six weeks.

The RDC governance committees routinely discuss risks, but the department did not identify or mitigate all key risks at the outset of the program

The department has a structured approach to risk management for the RDCP, though this risk management approach has not always succeeded at mitigating key risks. The RDCP program team identified a number of key risks at the outset of each program and designed mitigations for them. In addition, the RDC Steering Committee and RDC Project Control Group both receive risk reports and discuss risks at meetings where appropriate. This reporting indicates a proactive approach to risk management throughout the program.

However, not all key risks were successfully mitigated or identified at the outset of the program. For example, one of the key causes of delays with the mobile coverage program has been protracted contract negotiations. Despite the fact that the program team understood the complexities of the mobile contract negotiations that would be required, this was not identified as a risk at the outset of the program. Later in the program this was identified by the RDC Program Control Group and Steering Committee as a key risk. While the risk was identified, it was not sufficiently mitigated, as demonstrated by the delays that resulted from the contract negotiations.

Other risks were not identified at the outset of the program. For example, the Snowy Mountains Highway Safety program was delayed due to the need to get development approval from the National Parks and Wildlife Service. There is no separate risk register for the Snowy Mountains Highway Safety program, and the potential for delays due to approval processes is not mentioned in any of the overall mobile business cases. Stronger initial project management may have allowed for this to be identified.

The Wamboin, Bywong and Sutton internet coverage program has been delayed numerous times throughout the course of its delivery. One of the key delays in 2023 was that, after the contract was signed and building works had commenced, it was discovered that challenging ground conditions with a higher than anticipated rock concentration around the towns was delaying construction. Potential delays from construction issues were not foreseen in the Gig State program risk register. While the specific issues relating to ground conditions may not have been easily foreseeable at the outset of the program, the department’s evaluation of potential providers in 2021 noted that rock was present and could have an impact on the cost of the program. It is reasonable to expect that this would have led to additional risk mitigation at the time, detailing the potential impact of the rock concentration on both cost and timelines. When the issue was eventually discussed in the RDC Project Control Group in 2023, the only mitigation for the risk was to review and monitor the existing and future schedule. This was not sufficient to mitigate the risk.

The department conducted cost-benefit analyses for all RDCP sub-programs, but did not implement the element with the highest return on investment

The ‘NSW Government Guide to Cost-Benefit Analysis’ requires that a cost-benefit analysis (CBA) be undertaken for capital, recurrent or ICT projects valued at more than $10 million. Undertaking a CBA provides a benefit-cost ratio (BCR) which helps to determine if a program will provide a net benefit to the people of New South Wales. A BCR greater than one indicates that the benefits will exceed the costs. For programs funded through the SHLF, such as the RDCP, there is no requirement for a program to achieve a BCR of greater than one.

The department conducted a CBA for the Gig State and mobile coverage programs, as well as all the sub-programs under both programs, including revising the CBA for the Gig State program after it was reviewed in late 2021. The BCR for the mobile coverage and Gig State programs are shown in Exhibit 3. Only the Gig State initial business case achieved a BCR of one, meaning that it delivers benefits equivalent to its costs. However, when this program was amended in 2021, this BCR reduced to 0.62. When combined, the RDCP does not have a BCR greater than one, meaning that it represents a net cost to New South Wales. However, as noted above, there is no requirement for the RDCP to reach a BCR of one.

Exhibit 3: BCR for each RDCP program.
Business CaseBCR
Mobile coverage project pilot0.59
Mobile coverage ASP main program0.19
Gig State1.00
Gig State addendum0.62

Source: Department of Regional NSW.

The highest BCR was calculated for the planned investment in Low-Earth Orbit (LEO) satellites which is an element of the Gig State addendum, but this investment did not go ahead. LEO satellites can be used to provide digital connectivity to isolated properties. They sit closer to the Earth’s surface than a geostationary satellite and can transmit data with lower delay and improved connectivity. This LEO satellite pilot was identified to deliver a BCR of 2.62, including approximately 40% of the benefits attributable to the Gig State addendum. The Gig State addendum anticipated that the pilot would commence in 2022, however the department did not proceed with this. The 2023 budget reduced the funding for the Gig State program, and the department decided to discontinue the proposed pilot. The department advises it plans to revisit the LEO satellite project in mid 2025.

The RDCP’s grant guidelines largely comply with mandatory NSW Government requirements

In September 2022, the NSW Government released the revised ‘Grants Administration Guide’ (the guide) which, among other things, sets out mandatory requirements for NSW Government grant guidelines. Premier’s Memorandum ‘M2022-07 Grants Administration Guide’ makes it mandatory for agencies to follow the requirements of the guide for all grants released from 19 September 2022.

The guide states that clear and consistent grant guidelines must be prepared that contain the purpose and objectives of the grant, selection criteria (comprising eligibility and assessment criteria) and assessment process, grant value, opening and closing dates, application outcome date, the source agency, and the decision-maker.

The department developed grant guidelines for grant schemes funded by the RDCP. The guidelines explain the application and selection process, eligibility criteria and assessment criteria, and key dates. These include:

  • Mobile Coverage Project – Active Sharing Partnership Grant Guidelines (September 2022)
  • Gig State Grant Guidelines (October 2022)
  • NSW Government Co-Investment in RCP3 and MBSP7 Program Guidelines (July 2023).

The guidelines for these three grant programs largely align with the requirements of the guide, but there were some gaps. The ASP pilot and Gig State program guidelines both note the contact person for complaints, but the RCP3 and MBSP7 guidelines do not state this. While the RCP3 and MBSP7 guidelines set out the relevant decision-maker and the role of key individuals in the assessment process, the guidelines for the ASP pilot did not identify the decision-maker and the Gig State Grant Guidelines did not provide the membership of the assessment panel making the recommendations.

The department’s grant programs were designed to target identified priority locations

Across the RDCP sub-programs, the department designed grant programs in a way that targeted funding towards its priority locations and other locations that met its eligibility criteria. The department has not been prescriptive about locations that would be funded through grant programs, but designed the programs in a way that encouraged providers to co-fund either the target locations or those that fit the criteria that the department was interested in funding.

For the Gig State grant program, the department released a list of preferred locations to potential applicants. The grant guidelines make clear that any proposals to build infrastructure to provide coverage to these areas would be given preferential treatment. The merit criteria are also aligned with this as the department awarded additional points for providing coverage to the target areas. Locations outside the preferred list were also eligible, provided they met the grant program’s objectives and eligibility criteria.

Similarly, for the mobile coverage ASP pilot program, the department released a list of preferred locations to potential applicants. The grant guidelines similarly encouraged potential applicants to follow this target list, both in terms of eligibility and also in terms of the way that the grants program provided additional points for providing coverage to the target areas. In addition, applicants could consider locations outside of the preferred list provided they met the grant program’s objectives and eligibility criteria set out in the grant guidelines.

For the co-funding opportunity with the Australian Government’s RCP3 and MBSP7 programs, a list of target locations was again provided. Applicants could consider locations outside of the target locations provided they were still eligible under Australian Government requirements for the RCP3 and MBSP7. Alternative solutions that provide mobile coverage on road corridors and mobile solutions for First Nations communities in other remote and very remote NSW locations could also be considered, however, funding was to be allocated to target locations and target transport corridors as a priority.

The department was not able to demonstrate a similar approach for the co-investment in the Mobile Black Spot Program Round 5A. The Australian Government developed eligibility criteria for the program, which align with the department’s mobile program objectives.

The department has selected grant recipients in line with its funding priorities

The department developed grant guidelines and an assessment methodology for the Gig State program and the ASP pilot program to guide its assessment panel, and applicants, through the process. The department assessed the applications for the Gig State and the ASP pilot grant programs against the eligibility and merit criteria contained in its guidelines, and in accordance with its assessment methodology. This resulted in the department funding locations that aligned with its target locations or areas that were in line with the purpose of each grant opportunity.

For the Gig State grant program, the department determined that projects were to be located in one of the 93 regional NSW Local Government Areas (LGA) identified in the grant guidelines. Eligible locations were in areas where internet access was via satellite services only and there were no committed or planned projects for fixed services in the area. The assessment panel for the Gig State grants recommended projects in 34 eligible locations from four applicants, for funding totalling $58.3 million (excl. GST), intended to bring improved connectivity to around 13,900 premises.

For the ASP pilot program, eligible locations were areas of regional NSW, where there was no existing handheld coverage provided by any Mobile Network Operators (MNO) or existing handheld coverage was provided by only one MNO. The assessment panel for the ASP pilot grants recommended 32 projects for funding totalling $30.4 million (excl. GST), intended to improve mobile coverage across ten regional LGAs. All other projects were considered not suitable for funding or ineligible.

The department provided a list of preferred locations for both grant programs. Applicants received a marginally higher score against assessment criteria if they put forward a preferred location but the location they identified could still be accepted if it was not in a preferred location but met the eligibility criteria. Funding was allocated to the majority of the Gig State program preferred locations identified in the Gig State business case addendum, but funding was allocated to only two of the 23 preferred locations identified in the business case for the ASP main program.

For the grants co-funded by the Australian Government (RCP3 and MBSP7), the department prioritised and selected grant recipients based on whether they met the eligibility criteria. It developed an assessment methodology to guide the assessment panel through this process. A probity advisor was present at both assessment panel meetings.

The department intends to further verify the RCP3 and MBSP7 application’s compliance with the RDCP objectives and eligibility criteria, following the assessment of applications by the Australian Government. Once verified, deeds will be negotiated and issued.

The department did not advise Government on the full cost of the Wamboin, Bywong and Sutton project, leading to a protracted and difficult process

The department’s process for awarding the grant to construct a fibre network for internet connectivity in the Wamboin, Bywong and Sutton regions was complex. The department appears to have estimated the initial costs of this program to be significantly higher than the funds allocated to the project. The department did not advise Government of this, and conducted the tender process based on the budget of $5 million committed by the Government. This budget proved insufficient, and the department had to request additional funds to contract the project. Not providing this advice to Government at an earlier stage means that the process which followed was more complex and protracted than it may have been if the department had provided this advice.

In January 2019, the NSW Government announced that it would provide $5 million to upgrade internet in the Wamboin, Bywong and Sutton region based on costings undertaken by a local community organisation. The department included this cost in the Gig State business case in December 2019 and also the Gig State addendum in September 2021. Documentation from late 2020 indicates that the department conducted an initial estimate that the full cost of the Wamboin, Bywong and Sutton project would be up to $16.3 million. It is unclear whether this was conducted before the Gig State business case was completed. The department was unable to provide the analysis that led to this initial cost estimate to the audit team. However, this indicates that the department was aware that the cost of the project would be greater than $5 million but did not provide this advice to Government. The additional cost was to be funded from the remainder of the Gig State business case.

In mid-2021, the department commenced a tender process with a budget of $5 million in January 2021. Only two applicants responded to this initial request for tender, and only one was evaluated as meeting the technical and construction requirements of the project. The cost estimates provided in the complying tender response were significantly higher than $5 million. As a result, the department did not award a contract following this tender.

The department then planned to undertake an in-depth analysis into alternative technology options. It noted the most promising option in terms of speed of delivery, quality of service, and value for money was LEO satellites. The department was unable to provide a copy of this analysis and so it is unclear the extent of the work undertaken to find alternative solutions for Wamboin, Bywong and Sutton rather than the construction of a fibre network to the premises.

After the initial market approach resulted in no contract being awarded, the department altered its procurement approach. A closed Expression of Interest (EOI) was sent to both respondents to the request for tender in November 2021 seeking a recommended technical solution, a proposed delivery method and timeframes. Both respondents achieved satisfactory scores for the EOI and were invited to submit a detailed design. As the department had determined through the tender process that the budget of $5 million was insufficient to ensure that it could provide internet services across the Wamboin, Bywong and Sutton region, the budget limit for the procurement was increased.

Both respondents submitted a detailed design and in May 2022 the department received approval to negotiate. The unsuccessful respondent scored marginally higher against the selection criteria. However, the assessment team considered that their proposal contained too much unmitigated risk. In May 2022, the department received approval to proceed to the negotiation phase with the successful proponent. Following this negotiation, a $9.5 million grant was awarded to the successful respondent to connect 1,352 premises. Around 140 premises were not included in the scope due to the significantly higher costs in connecting these premises.

The project cost has since increased to over $12 million, in part due to challenging terrain and ground conditions. Additional funding of around $1.7 million was also approved to connect an additional 134 properties that were identified during the detailed design phase. The department advises that these were initially missed due to boundary changes, incorrect council records and quality issues in the geospatial databases. It indicated that this is a separate group of properties to the 140 premises that were excluded due to higher connection costs.

The fact that the Wamboin, Bywong and Sutton project has a total cost of over $12 million, more closely aligned with the department’s internal cost estimate, indicates that fully advising Government of the costs may have saved significant time in the delivery of the project.

The department monitors the progress of its grant agreements but has not formalised its acquittal process

The department receives progress reports and milestone reports from grant recipients to assist in monitoring the progress of RDCP projects and assess if works provided match the requirements listed in the grant funding agreements. It also advises it has regular meetings with grant recipients, although no minutes are kept of these meetings.

The projects that have progressed to the construction phase are:

  • Mobile coverage to Brewarrina and Wilcannia through the mobile coverage ASP pilot
  • Improved internet to Wamboin, Bywong and Sutton.

The department receives regular progress reports for both projects, including some photographs and technical drawings. The reports provide information on progress against milestones and any changes to expected completion dates.

The department receives quarterly progress reports on improved internet for the Cobar corridor and the 56 other sites scheduled for fixed wireless internet, which are yet to progress to construction. The current scheduled completion date is March 2025. It also receives monthly reports on progress with mobile towers it is co-funding with the Australian Government as part of the Mobile Black Spot Program Round 5A.

The department provided few acquittal process documents or milestone acquittal documents, apart from the site qualification report for the Cobar corridor and its evaluation of the detailed design for the Wamboin, Bywong and Sutton project. The department advises it has an acquittal process in place for processing milestone reports, however it is yet to formalise this process. The three projects which have progressed enough to require acquittal are Wamboin, Bywong and Sutton, Wilcannia and Brewarrina, and the Cobar corridor.

The department has provided funding deeds for each project it has funded. Whilst the deeds include milestones, they do not include the dates for each milestone making it more difficult for the department to track the progress of each project.

The department’s approach to reporting its expenditure on consultants is inconsistent and does not always meet reporting requirements

Under the Annual Reports (Departments) Regulation 2015 agencies are required to report any consultancy engagements over $50,000 in their annual reports. The NSW Procurement Board Direction PBD-2023-05 Engagement of professional services suppliers defines a consultancy agreement as a type of professional services agreement where a person or organisation is engaged to provide recommendations or professional advice to assist decision-making by management.

The department has several professional services agreements as part of the RDCP, some of which are consultancy engagements within this definition and some of which contain elements of the contract that would be considered a consultancy agreement. For example, one of the major consultancy agreements involves providing strategic advice across the Gig State program, as well as providing advice on market engagement, and reviewing technical advice. This aligns with the definition of a consultancy agreement as the contracted organisation is providing professional advice to assist decision-making by management.

The department has not reported any of its agreements used as part of the RDCP in its annual reports, despite having several agreements that exceeded the $50,000 threshold which may fall into this definition.

The department advises that the agreements are categorised in the General Ledger as contractors and as such, are not required to be reported in the Department’s Annual Report. This interpretation is not in accordance with NSW Treasury and NSW Procurement Board requirements. It also identifies one contracted consultant as a ‘consultancy’ in its contract variation documentation but has not reported this expenditure in its annual reports.

Further, the department has not applied its interpretation consistently. For example, it has reported the preparation of some strategic and business planning documents as consultancies in its annual reports and not others.

The department is not monitoring the outcomes of the RDCP

Measuring outcomes of a program is important to determine whether that program is fulfilling its intended purpose. While many elements of the RDCP are still at an early stage, there is value in monitoring the outcomes of those elements which have completed construction to inform project implementation. There are no outcome measures for the effectiveness of the RDCP as a whole, and only limited measures for the mobile and Gig State programs. The department has the following outcome that it has set out for the Gig State program:

  • Improve the digital connectivity (accessibility) in rural and remote NSW communities.

When developing the final business case for the Gig State program, the department utilised the ADII scores to identify the digital divide between Metropolitan Sydney and rural NSW. The ADII uses data from the Australian Internet Usage Survey to measure digital inclusion across three dimensions of access, affordability and digital ability. While the department utilised the ADII to determine the baseline for accessibility of digital connectivity in regional and remote NSW communities, the department is not using the ADII to measure whether the program has led to improvements in these communities. This limits the department’s ability to determine whether the RDCP has met its objectives.

At the time of the Gig State business case being developed, rural NSW ADII scores were reported, allowing the department to utilise the figures as a baseline, but since 2020 these are not publicly reported. The department is in the process of determining how it can use ADII scores to measure the performance of the program over time.

In addition to the Gig State program outcome measure, the department has one outcome measure for its mobile coverage program:

  • Square kilometres with improved mobile coverage in regional NSW.

This outcome measure will not allow the department to understand the impact of the RDCP’s mobile coverage program. While measuring the number of square kilometres of coverage will allow the department to determine whether the mobile towers it is funding are achieving the intended extent of new mobile coverage, it will not allow the department to measure the quality of service, price of coverage, and other key information that could measure the impact of the new coverage.

In December 2023, the NSW Telco Authority released the NSW Digital Connectivity Index (DCI), which provides an overview of connectivity in each LGA and suburb across NSW. Each LGA and suburb is given a score out of 100 for access, affordability and demographics (as a proxy for the ability to use technology). The DCI includes several data points, including coverage from telecommunications providers, mobile signal strength, and internet speed. Given that the DCI includes useful data points and can allow for data to be inspected at the suburb level, there is an opportunity for the department to use this to identify the impact of its program both at a statewide level and in regions targeted for funding. However, the department has no plans to utilise the DCI to measure program performance.

In addition to not collecting data to measure the overall effectiveness of the RDCP, the department is also not collecting data to measure whether a number of the objectives of the Gig State and mobile coverage programs are being achieved. For example, both programs aim to reduce the price of digital services in regional areas, however there is no measurement of price in place to determine whether this is being achieved. Similarly, there is no plan in place to measure the speed of internet services or signal strength for mobile services, despite improvements in these things being part of the objectives of both programs as set out in their business cases.

The department is also not measuring whether there are improvements in competition in the mobile market through the mobile coverage program, despite one of the objectives of that program being to encourage competition in the regional telecommunications market. The department also has no plans to measure its contribution to the Closing the Gap target to understand the impact of the RDCP on Aboriginal communities. This is despite it identifying that seven locations with current or pending funding will support discrete Aboriginal communities. Four of these locations are part of the ASP project for Wilcannia and Brewarrina, and the other three are funded through the MBSP7 project.

The department has some output performance measures in place for the RDCP, but these focus on contracted outputs rather than outcomes

The department has identified performance measures for the program in reporting templates, in its final business cases for the Gig State and mobile coverage programs, and in its evaluation plan for the RDCP. These performance indicators measure the outputs of the program rather than the outcomes that would demonstrate whether program objectives have been met.

The measures that the department uses to report to NSW Treasury as part of its budgeting process have changed over time. Until June 2023, the department used two key output measures to determine the progress of the RDCP:

  • Number of premises covered by signed contracts to deliver upgraded internet connectivity.
  • Number of sites with signed contracts for new mobile coverage.

As noted, these are output measures and will not enable the department to determine whether the project is delivering its intended purpose. Since July 2023, the department has used two output measures:

  • Number of premises covered by signed contracts to deliver upgraded internet connectivity.
  • Contracted square kilometres for new and improved mobile coverage.

These four measures relate only to contracted coverage and do not provide a clear picture of ongoing progress with the construction and connection of new mobile and internet projects. Projects can have long lead times for a variety of reasons such as acquiring access to land, designing a solution and the time required to construct the solution. In addition, only measuring contracted coverage will not enable the department to determine whether these outputs are being delivered and will not reflect delays in those stages, nor will it enable the department to determine whether the towers are achieving their intended purpose. While there is value in measuring contracted coverage as an early lead indicator of performance, there is also value in reflecting the current state more accurately through measuring the progress of the construction of each project.

The department did not meet its original mobile coverage performance targets but met its Gig State program target

As noted above, the department had three metrics that it was using to measure the RDCP until June 2023. The department successfully achieved its Gig State program target but did not achieve its mobile coverage program targets. Exhibit 4 shows the results against targets for the RDCP measures. As can be seen, the result for square kilometres of improved mobile coverage delivered was significantly below the target.

Exhibit 4: Performance targets and results to June 2023.
MeasureTargetTarget dateResults
Square kilometres with improved mobile coverage in regional NSW36,00June 2023718
Number of premises covered by signed contracts to deliver upgraded internet connectivity2,500June 202313,330
Number of sites with signed contracts for new mobile coverage25June 202324*

* This comprises two towers funded through the ASP project and 22 towers co-funded through the Australian Government’s Mobile Black Spot Round 5A. This does not include five small towers for the Snowy Mountains Highway Safety project as the department has identified these as a temporary service.

Source: Audit Office analysis.

The department revised its performance measures after June 2023. This included revising output targets for the mobile and Gig state programs. The updated performance targets can be seen in Exhibit 5. The mobile coverage program performance measure was changed to measure the contracted square kilometres of new coverage rather than the actual square kilometres of new coverage. At the same time, the target value increased from 36,000 square kilometres to 60,000 square kilometres. The target value for the Gig State program was also updated compared to the 2023–24 target.

Exhibit 5: Revised 2023–24 performance targets.
MeasureTargetTarget date
Contracted square kilometres for new and improved mobile coverage60,000December 2028
Number of premises covered by signed contracts to deliver upgraded internet connectivity15,000December 2025

Source: Department of Regional NSW.

The department had nearly achieved its December 2025 target for contracted upgrades to internet connectivity by June 2023. As can be seen in Exhibit 4, 13,330 premises were covered by signed contracts to deliver upgraded internet connectivity as at June 2023.

In early 2023, the department estimated that it would have 12,279 square kilometres of new or improved mobile coverage delivered by December 2025. The department advised that it is likely to deliver on this forecast as early as December 2024, through its co-funding of two ASP locations and 22 locations under the Commonwealth’s Mobile Back Spot Program 5A.

There is uncertainty around whether the data the department is using is reliable to measure its performance

The department is collecting or planning to collect data from grant recipients to determine whether they are delivering the intended projects to the required quality. The funding deeds contain obligations on the quality and extent of the services to be provided by grant recipients and require that the contracted organisations report to the department on the construction and the extent of coverage (new ground covered for the mobile towers and number of premises connected for internet coverage). This aligns with the output measures set out above. The department is not collecting information that it could use to inform outcome measurement as part of its grant funding deeds with each grant recipient.

Grant recipients provide the department with the data that it has requested in line with the terms of the funding deeds. This information is collected through a regular schedule of status reporting. These status reports include information on progress with internet or mobile coverage, including the number of premises that will be able to connect to a service.

Information on the availability of fixed fibre connections to premises should be reliable, as with the Wamboin, Bywong and Sutton project. However, data on the availability and quality of fixed wireless internet connectivity and mobile coverage is likely to vary with terrain. While the department is collecting this information, it currently has no plans or a formal process to undertake validation testing following each project completion. This means that the department will not be able to provide assurance that the information collected is accurate.

The department has not updated the expected benefits of the program despite significant changes in scope

In September 2021, following a review of the Gig State program, the department prepared an addendum to the original Gig State business case to change the program from capital expenditure to operational expenditure, and set out a range of other changes. The department’s addendum to the business case noted that the approach to delivering benefits would remain the same, and it did not revisit the benefits realisation register nor attempt to recalculate expected benefits. Given the significant scope changes in the business case addendum, it is likely that there would have been an impact on expected benefits that would justify recalculating the program benefits.

This was not the only time where significant changes in the Gig State program’s operations did not result in an updated benefits realisation register. As noted in the introduction, the RDCP budget was reduced in the 2023 budget, and the remaining budget was extended out to 2028. As discussed above, the change in budget coincided with the department’s decision to discontinue the LEO satellite pilot, which was anticipated to deliver 40% of the financial benefits of the program. The change in budget profile for the program has likely led to a change in the benefits profile of the program, however the department has not updated its program assumptions in line with this change.

The department has documented key lessons learned from its funding rounds to date

Documenting lessons learned from early delivery of any given program is important, particularly pilot programs, to ensure that these can be incorporated into future program development. The department has documented lessons learned across the two programs of the RDCP, including the early grant rounds.

For its Gig State program, the department documented lessons learned in relation to the management of grants, industry engagement, the grant guidelines, the assessment of grants, and the time that the grants went to market. These lessons include reinforcing positive experiences, such as releasing a list of preferred locations to applicants, which the department believes served to encourage funds to be directed to those areas. The department also identified potential improvements, including how it communicated with industry and the data that it would request from future applicants. There have been no grant programs run through the Gig State program since these lessons were documented so it is not yet clear whether the department will implement changes as a result of these lessons learned.

As noted above, the mobile coverage ASP pilot program was delivered across two phases: the first phase involved working with industry to determine potential technical solutions, and the second phase was a grant program to deliver the preferred solutions. The department commissioned a lessons learned report of the first phase of the ASP pilot program with the intention of using this to inform the mobile coverage ASP main program business case development. The lessons learned report and the mobile coverage ASP main program business case were both completed in the same month, however, meaning that lessons could not be fully incorporated into that business case. The department has also identified additional lessons learned specifically in relation to the grant process. There have been no grant programs run through the mobile coverage ASP main program since these lessons were documented so it is not yet clear whether the department will implement changes as a result of these lessons learned.

In addition, the department has conducted an internal audit on the governance of the RDCP. The internal audit had largely positive findings about the governance structures and the grant guidelines. The internal audit did not make findings on the governance issues outlined above, such as not having finalised terms of reference. However, the internal audit did note that not all probity advice had been documented and some had been provided verbally, which increased the risk of grant processes not being undertaken with integrity.

The department has planned evaluations for all grant programs within the RDCP

The department has a draft evaluation plan for the RDCP that includes evaluations for each program to validate whether they have achieved their objectives, as well as finalised evaluation plans for each of the programs. Both process and outcome evaluations are planned. Process evaluations ensure that planned processes were followed and that lessons are learned for future grant programs. The department is planning process evaluations for when all funding deeds have been signed and outcome evaluations are planned for after project delivery is largely complete.

The sub-programs have not yet reached the point where the department will undertake outcome evaluations. The department has indicated that the outcome evaluations will be undertaken when each project has been delivered, which means that while it will determine whether the project has achieved its objectives, it will not be measuring outcomes on an ongoing basis to determine whether changes are needed for the program to meet its objectives. The funding deeds with grant recipients make it clear that the department will undertake an evaluation and may collect relevant information for this purpose. While the department should be able to collect information, the limitations in data collection noted above may need to be resolved to ensure that required data is available.

Appendix one – Response from agency

Appendix two – About the audit

Appendix three – Performance auditing

 

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

 

Parliamentary reference - Report number #397 released 27 June 2024.

Published

Actions for Safeguarding the rights of Aboriginal children in the child protection system

Safeguarding the rights of Aboriginal children in the child protection system

Community Services
Compliance
Internal controls and governance
Management and administration
Project management
Regulation
Risk
Service delivery
Shared services and collaboration

About this report

The Department of Communities and Justice (DCJ) is responsible for safeguarding the rights of Aboriginal children, families, and communities when they encounter the child protection system. These rights are known as the Aboriginal and Torres Strait Islander Principles (the Principles), which are set out in legislation.

DCJ provides early intervention, prevention and out of home care services and also subcontracts non-government organisations to provide these services.

This audit assessed whether DCJ, and five funded non-government organisations that provide out of home care services, are effectively safeguarding the rights of Aboriginal children in the child protection system.

Findings

DCJ cannot demonstrate its compliance with the Principles. DCJ has not embedded the Principles in its governance, accountability arrangements, policy and day-to-day casework practice.

Insufficient governance and accountability arrangements have contributed to DCJ's failure to deliver on Aboriginal strategies and reforms in the last five years.

DCJ has not developed holistic family preservation models based on Aboriginal ways of healing.

DCJ is aware that its structured decision-making tools, used to make significant casework decisions, adversely affect Aboriginal children and their families. However, DCJ continues to use the tools.

DCJ has no quality assurance mechanisms over its child protection system and casework practice.

As system steward, DCJ has not provided non-government organisations with means to satisfy the Principles.

Recommendations

The audit recommends that DCJ:

  • establish governance and accountability arrangements that provide oversight of the safeguards and outcomes for Aboriginal children and families
  • develop and implement a quality assurance framework to ensure compliance with safeguards for Aboriginal children at all points in the child protection system
  • fulfil its commitment to develop and implement a healing framework for child protection services
  • commission family preservation services consistent with the principles of self-determination and participation set out in the Principles.

In this report, the term Aboriginal people is used to describe Aboriginal and Torres Strait Islander peoples. The Audit Office of NSW acknowledges the diversity of traditional Nations and Aboriginal language groups across the state of New South Wales.

The Department of Communities and Justice (DCJ) is responsible for the administration of the child protection system in NSW.

Aboriginal children and their families' rights in the child protection system are contained in the Children and Young Persons (Care and Protection) Act 1998 and the United Nations Conventions on the Rights of the Child and the Declaration on the Rights of Indigenous Peoples. These rights are also binding on DCJ funded non-government organisations (NGOs) through the administration of service contracts.

In 2022–23, DCJ spent $3.1 billion on child protection and out of home care services. This includes $1.9 billion on out of home care services, $800 million on child protection services and $405 million on early and intensive family preservation services.

DCJ subcontracts various early intervention, prevention programs and out of home care services to NGOs. However, DCJ is responsible, as system steward, for the effectiveness of the entire child protection system.

This audit assessed whether DCJ and five of its funded NGOs are effectively safeguarding the rights of Aboriginal children in the child protection system. The audit period was June 2018 to June 2023 (five years). In this report, children and young people under 18 are described together as children.

We addressed the audit objective by answering three questions:

  1. Does DCJ and its funded non-government organisations have established governance and accountability arrangements to understand and track performance in safeguarding the rights of Aboriginal children in the child protection system?
  2. Does DCJ and its funded non-government organisations have effective policies, practices, systems, and resources to support and enable staff to safeguard the rights of Aboriginal children in the child protection system?
  3. Does DCJ and its funded non-government organisations have effective monitoring and quality assurance systems to ensure that the outcomes for Aboriginal children in the child protection system are consistent with their legislative rights and their human rights?

This audit was conducted concurrently with the Oversight of the child protection system performance audit.

The child protection system aims to protect children and young people from the risks of abuse, neglect and harm. This report refers to several parts of the child protection system including:

  • Helpline: DCJ receives and triages reports about children suspected to be at risk of significant harm
  • Investigation of reports (mostly performed at community service centres): DCJ determines if reports meet the suspected risk of significant harm threshold and the subsequent assessment and investigation of suspected risk of significant harm reports
  • Case work: where risk of significant harm has been substantiated, DCJ provides and procures services to prevent a child’s entry into the child protection system
  • Entry into care decisions: DCJ determines when a child enters out of home care
  • Out of home care services: where a child cannot safely remain at home, DCJ or a contract service provider, place the child in foster care, kinship care, temporary care arrangements or residential care.

DCJ is not monitoring or reporting on safeguards for the rights of Aboriginal children 

Decisions and actions that affect families and children in contact with the child protection system are often made within the context of complex circumstances. They are also deeply impactful on children and their families and can have lifelong implications in areas such as mental health and wellbeing, social inclusion and the likelihood for descendants to also be in contact with the child protection system. Legislative safeguards exist to ensure that the rights of children are paramount.

DCJ governance arrangements are not informed by, and do not reflect, legislative safeguards for the rights of Aboriginal children. Such safeguards include the Convention on the Rights of the Child or the Declaration on the Rights of Indigenous Peoples and the Aboriginal and Torres Strait Islander Principles (the Principles) contained in sections 11 to 13 of the Children and Young Persons (Care and Protection) Act 1998.

DCJ has not established mechanisms to:

  • address the reasons, including those arising from its own process deficiencies, that Aboriginal children are disproportionately reported at suspected Risk of Significant Harm, seen by caseworkers and enter statutory out of home care
  • assess and hold its funded non-government organisations (NGO) accountable for the quality and outcomes of family preservation services that aim to prevent Aboriginal children entering out of home care
  • hold departmental districts and NGOs accountable for outcomes for Aboriginal children in out of home care.

Department districts are instead held accountable against nine key performance indicators at Quarterly Business Review Meetings. The performance indicators reflect activity in the child protection and out of home care system. None are disaggregated by Aboriginality, and no indicators require districts to demonstrate casework outcomes for Aboriginal children and families.

DCJ has not developed effective accountability mechanisms for its staff to safeguard the rights of Aboriginal children in the child protection system

DCJ does not have formal accountability mechanisms for any of its staff to safeguard the rights of Aboriginal children. Because of this, DCJ does not have a framework to address staff non-compliance with safeguards for Aboriginal children and their families.

DCJ does not collect data to demonstrate adherence to the Principles or consistently collect feedback from the Aboriginal community to understand its performance. Without Aboriginal outcomes focused data and feedback from Aboriginal stakeholders, DCJ cannot understand its performance or hold its staff accountable for complying with the Principles.

DCJ advises that it plans to introduce a new performance framework that will require senior executives to demonstrate their performance with respect to Aboriginal children in the child protection system. DCJ has not nominated when the framework will come into effect.

DCJ has made negligible progress in implementing key recommendations, strategies and reforms designed to improve outcomes for Aboriginal children and their families

DCJ has not delivered on any Aboriginal specific child protection reform strategy and made negligible progress in implementing key recommendations from the Family is Culture report.

Exhibit 5 identifies major Aboriginal specific reforms to address longstanding issues that impact Aboriginal children and their families. These reviews attempted to reorient the system toward preventing children from entering care and focused on improving outcomes for Aboriginal children in contact with the child protection and out of home care system.

Exhibit 5: Major Aboriginal specific reforms

The Aboriginal Outcomes Strategy 2017–2021, Target 2: reduce the long-term and continued over-representation of Aboriginal children in out of home care

In February 2023, the NSW Ombudsman reported ‘DCJ effectively abandoned the [Aboriginal Outcomes Strategy] at some point, without either reporting on what it had or had not achieved and without announcing it had been abandoned’. DCJ in reply to the NSW Ombudsman’s report noted that a machinery of government change in 2019 had impeded continuity of the Aboriginal Outcomes Strategy and that without clear governance, projects to address the over-representation of Aboriginal children in out of home care ‘continued but were disconnected from each other’.

Family is Culture report 2019: recommendation implementation

The Family is Culture report is the first Aboriginal led review on the experiences of Aboriginal children, young people and their families in the child protection system. The report made 126 systemic recommendations to the NSW Government in addition to over 3,000 recommendations based on individual case studies developed to inform the report.

DCJ released progress updates on the implementation of the recommendations in November 2020, May and November 2021 and February 2024.

In four years, only 12 of the 105 systemic recommendations accepted by the NSW Government and for which DCJ is responsible have been implemented. DCJ reports that it has implemented all individual recommendations about the cohort of Aboriginal children identified during the Family is Culture report.

Implementing the Aboriginal Case Management Policy

In 2018, DCJ commissioned AbSec to design the Aboriginal Case Management Policy, to translate the Aboriginal and Torres Strait Islander Principles into practice. Published in 2019, the Aboriginal Case Management Policy is yet to be implemented anywhere in the state.

Transition of case management of Aboriginal children to Aboriginal Community Controlled Organisations

In 2012, the NSW Government committed to transferring case management of all Aboriginal children and young people in out of home care to Aboriginal Community Controlled Organisations (ACCOs) within ten years. DCJ did not achieve this.

However, in September 2022 DCJ inserted an obligation into the Service Level Agreements of NGOs to the transition of Aboriginal children in out of home care to ACCOs. Currently, ACCOs manage approximately 20% of Aboriginal children in out of home care.

In the 2022–23 financial year, DCJ recorded 25 transfers of case management responsibility for Aboriginal children and young people from non-ACCOs to ACCOs across the entire sector. At 30 June 2023, there were 6,563 Aboriginal children in out of home care. Around half of these children were case managed by DCJ. To achieve the renewed commitment, DCJ will need to oversee the transfer of almost 500 Aboriginal children each year. In July 2023, DCJ estimated that at the current pace it will take 57 years to transition the case management of Aboriginal children to ACCOs.

DCJ’s organisational structure and governance arrangements are not enabling the system reform needed to meet the NSW Government’s commitment to Closing the Gap Target 12

The NSW Government is a signatory to the National Agreement on Closing the Gap 2021-2031. The objective of the Agreement ‘is to overcome the entrenched inequality faced by Aboriginal and Torres Strait Islander people so that their life outcomes are equal to all Australians’. The agreement commits the NSW Government to ‘mobilise all avenues and opportunities available, to meet the objectives’.

DCJ established a temporary Deputy Secretary Transforming Aboriginal Outcomes (TAO) role and associated unit in November 2021 to lead its Closing the Gap targets, which includes Target 12 (to reduce the proportion of Aboriginal children in out of home care by 45% by 2031). The TAO unit does not have decision-making powers over policy, commissioning of DCJ funded services or operational decisions. Instead DCJ has nominated a series of 18 disparate projects to achieve Target 12, which are monitored by TAO.

DCJ districts make significant child protection decisions that would likely contribute to achieving Target 12, including whether Aboriginal children enter out of home care and whether Aboriginal children currently in out of home care are restored to their families. However, there are no targets, measures or data to hold districts accountable to demonstrate progress in these key areas which would likely contribute to achieving Target 12.

Although senior executives meet regularly, the meetings are not used to drive the structural reform needed to achieve Target 12. DCJ is not on track to achieve Target 12.

Aboriginal children are over-represented in the child protection system. Approximately 6,500 Aboriginal children were in out of home care as at 30 June 2023, making up 45% of the out of home care population. By comparison, around seven per cent of children in NSW are Aboriginal. Aboriginal children are three times more likely than non-Aboriginal children to be reported at risk of significant harm and four times more likely to be allocated to a community service centre for a caseworker to undertake a face-to-face safety assessment. One in eight Aboriginal children seen by caseworkers enters out of home care.

DCJ does not have a quality assurance framework in child protection to safeguard the rights of Aboriginal children

DCJ has no quality assurance framework over systems and processes prior to the removal of a child into out of home care. Without such a framework, DCJ cannot be assured of its compliance with legislative safeguards afforded to Aboriginal children.

In late 2022, DCJ engaged a consultant to examine Aboriginal quality assurance for the child protection system. In July 2023, the consultant report highlighted deficient quality assurance systems and concerns with cultural capacity of staff to support Aboriginal families and children. DCJ has not indicated how or when it plans to address this deficiency.

DCJ does not have assurance that out of home care services are safeguarding the rights of every Aboriginal child in out of home care

The Office of the Children’s Guardian accredits out of home care providers, including DCJ and its funded NGOs, to a minimum standard set out in the Child Safe Standards for Permanent Care. As a result, DCJ and NGOs can demonstrate a range of internal quality controls and processes for children in out of home care to support the Office of the Children’s Guardian accreditation process.

However, the Office of the Children’s Guardian cannot provide qualitative assurance that DCJ and the NGOs have adhered to safeguards for each of the approximately 6,500 Aboriginal children in statutory out of home care at any given time. For example, the Office of the Children’s Guardian looks at whether a cultural plan exists for an Aboriginal child, but generally does not provide feedback for agencies to improve cultural plans.

DCJ, as the system steward, has a duty of care to ensure that it, and all NGOs it contracts with, have quality assurance processes to demonstrate compliance with safeguards for every Aboriginal child that is placed in out of home care. DCJ needs to do more than the minimum requirements of Office of the Children’s Guardian accreditation to gain assurance, commensurate with the risk of poor compliance and practice set out in this report, that it is adequately safeguarding the rights of every Aboriginal child in out of home care.

DCJ contracts NGOs to provide out of home care services through Service Level Agreements, aligned with the Principles in the Children and Young Persons (Care and Protection) Act 1998. This audit assessed whether NGOs are effectively safeguarding the rights of Aboriginal children in out of home care.

Five NGOs were selected as auditees for this performance audit. Selection of the providers was based on criteria which included:

  • a mix of faith- and non-faith-based entities
  • Aboriginal and non-Aboriginal entities
  • number of children in care
  • funding
  • location
  • service model.

Collectively, the NGOs selected for this audit were contracted to provide 2,600 foster care places in the 2021–22 financial year. This equated to one third of the total number of contracted foster care places in NSW in 2021–22. The two Aboriginal Community Controlled NGOs selected case managed about 20% of Aboriginal children in out of home care who were contracted out to NGOs.

Appendix one – Response from entities

Appendix two – The Aboriginal and Torres Strait Islander Principles (extract from the Children and Young Persons (Care and Protection) Act 1998

Appendix three – Data tables

Appendix four – About the audit

Appendix five – 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 #395 - released 6 June 2024.

Published

Actions for Workers compensation claims management

Workers compensation claims management

Treasury
Finance
Management and administration
Regulation

What this report is about

Workers compensation schemes in NSW provide compulsory workplace injury insurance. The effective management of workers compensation is important to ensure injured workers are provided with prompt support to ensure timely, safe and sustainable return to work.

Insurance and Care NSW (icare) manages workers compensation insurance. The State Insurance Regulatory Authority (SIRA) regulates workers compensation schemes. NSW Treasury has a stewardship role but does not directly manage the schemes.

This audit assessed the effectiveness and economy of icare’s management of workers compensation claims, and the effectiveness of SIRA’s oversight of workers compensation claims.

Findings

icare is implementing major reforms to its approach to workers compensation claims management - but it is yet to demonstrate if these changes are the most effective or economical way to improve outcomes.

icare’s planning and assurance processes for its reforms have not adequately assessed existing claims models or analysed other reform options.

icare's activities have not focused enough on its core responsibilities of improving return to work and maintaining financial sustainability.

SIRA has improved the effectiveness of its workers compensation regulatory activities in recent years. Prior to 2019, SIRA was mostly focussed on developing regulatory frameworks and was less active in its supervision of workers compensation schemes.

NSW Treasury's role in relation to workers compensation has been unclear, which has limited its support for performance improvements.

Recommendations

icare should:

  • Ensure that its annual Statement of Business Intent clearly sets out its approach to achieving its legislative objectives.
  • Monitor and evaluate its workers compensation scheme reforms.
  • Develop a quality assurance program to ensure insurance claim payments are accurate.

NSW Treasury should:

  • Work with relevant agencies to improve public sector workers compensation scheme outcomes.
  • Engage with the icare Board to ensure icare's management is in line with relevant NSW Treasury policies.

SIRA should:

  • Address identified gaps in its fraud investigation.
  • Develop a co-ordinated research strategy.

Workers compensation schemes in New South Wales provide workplace injury insurance for around 4.7 million workers. The effective management of workers compensation is important to ensure injured workers are appropriately supported and provided with prompt treatment to ensure timely, safe and sustainable return to work. There were around 110,000 injured workers compensation claims in 2022–23.

The two main workers compensation schemes in NSW are the Nominal Insurer (NI), which is for the private sector and is funded by premiums paid by employers, and the Treasury Managed Fund (TMF) which covers public sector workers and is funded by the NSW Government.

Insurance and Care NSW (icare) is responsible for managing the provision of workers compensation insurance, as well as several other insurance schemes. The State Insurance Regulatory Authority (SIRA) is responsible for regulating workers compensation and other insurance schemes. NSW Treasury has an oversight and monitoring role but does not directly manage or regulate workers compensation schemes.

icare outsources the management of workers compensation claims to several external insurance agents, which it refers to as claims service providers (CSPs). Tasks completed by CSPs include registering and assessing workers compensation claims, managing payments to injured workers, and liaising with injured workers, employers, and medical providers to support injury management and return to work.

The objective of this audit was to assess the effectiveness and economy of icare’s management of workers compensation claims, and the effectiveness of SIRA’s oversight of workers compensation claims. To address this objective, the audit considered whether icare’s reforms to its workers compensation claims management models are effective and economical, and whether there is an effective performance and accountability framework for the NI and TMF.

icare did not assess its existing claims management model or conduct a comprehensive options analysis assessing alternative claims management models before selecting its new claims management model for the Nominal Insurer

In 2021, icare decided to change the claims management model for the Nominal Insurer (NI) from a single outsourced claims service provider (CSP) to a model using multiple CSPs. icare did not conduct a detailed analysis of options before deciding on its new claims management model for the NI. icare did not complete a business case or undertake analysis of costs and benefits of the chosen model compared to other options, such as in-house provision of services by icare, a hybrid delivery model, or remaining with a single-provider model with improved support and performance incentives.

icare completed a procurement strategy which acknowledged a potential alternative model based on icare delivering claims management services. However, there was no detailed analysis or costing of this or other models for comparison with the outsourced model that had been chosen. The in-house provision option was not recommended because it was stated that ‘competition between external service providers can drive better performance than what icare could achieve’. The 2019 Independent Review Report on the NI recommended that icare use additional providers to reduce the pressure on its single provider. It was appropriate for icare to consider this recommendation when developing its new claims model, but it does not remove the need for icare to conduct its own detailed analysis to support decision making on major projects.

The absence of a business case or other similar detailed analysis reduces icare’s accountability for improved outcomes. It also means the stated benefits and costs of icare’s claims services model have not been fully tested. Introducing competition and performance-based payments to CSPs might improve return to work and financial sustainability outcomes but could create perverse incentives or increase the risk of CSPs withdrawing from contracts. A business case would have also provided information that could have been used to inform an evaluation framework for the new claims services model, including interim measures to help assess whether intended benefits are on track.

A business case is the primary document to outline the case for change and analysis of alternative options, as well as the costs, benefits and financial viability of the proposal. icare’s procurement policy does not require the development of a business case, but the NSW Procurement Strategy and NSW Treasury Business Case Guidelines require agencies to demonstrate value for money by submitting a business case to NSW Treasury for investment proposals over $10 million. At the point when icare sought approval from the icare Board to commence the procurement process, the maximum total contract value for the engagement of the six providers was estimated at between $3.7 billion and $6.4 billion over ten years.

icare conducted a comprehensive procurement process to select CSPs for its new NI claims management model

The procurement process for new providers for the NI involved an open market process that included extensive engagement with potential CSPs. This allowed icare to improve its understanding of the capacity and capability of providers and work collaboratively to refine the details of its claims management model.

icare developed a detailed procurement strategy that outlined the objectives of the new model, expected costs, services sought, governance framework, and an evaluation plan. icare provided regular updates to the icare Board on the progress of the procurement process and sought approval for key decisions about the changes being made.

icare met its planned timeframe for having contracts with multiple CSPs in place by 1 January 2023. icare’s contracts provide it with flexibility to adjust the performance measures after three years if required. The contracts also require 12 months’ notice from the CSP if they wish to withdraw from the contract. This helps icare to manage the risk of a reduction in capacity to manage claims if an existing CSP withdraws.

icare is implementing a new remuneration structure for CSPs which aims to provide better financial incentives to improve performance

The icare Board approved the introduction of a multiple provider model as part of its NI Improvement Program in December 2021. As a part of planning for the change, icare developed a different remuneration structure for the new CSP contracts that aim to create stronger incentives for innovation to improve performance. The previous remuneration model for providers involved a guaranteed fee that was set at 110% of the estimated cost of providing the service and had no financial penalties if CSPs did not meet performance targets. The new remuneration model splits the fees paid to CSPs into three categories:

  1. a base fee, a guaranteed fixed fee which covers 95% of a benchmarked cost agreed by icare and CSPs (this was the estimated cost of providing the service in an efficient way)
  2. a quality fee, which may be positive (up to ten per cent of the benchmarked cost) or negative (up to five per cent) depending on the CSP’s performance against the quality measures specified in the contract. These are mostly related to compliance with claims management processes such as timeliness, accuracy, and record keeping
  3. an outcome fee up to 50% of the benchmarked cost depending on the CSP’s performance against the outcome measures specified in the contract. These relate to the key performance measures in the system such as return to work rates, claim payments made, and medical costs. The outcomes fee can only be earned if the CSP achieves acceptable performance in the quality measures.

This remuneration model aims to provide CSPs with financial incentives to improve performance. Setting the 'base fee' at slightly below the expected cost of providing the service should mean that CSPs need to meet their quality measures to ensure they cover costs and would need to exceed performance targets in order to increase its profit margin. The success of this model will depend on factors including the appropriateness of the base fee and performance targets, and the behaviour of CSPs. These changes are not yet fully implemented and icare is taking a staged approach to the transition of new CSPs, so it is too early to judge their effectiveness.

icare’s new remuneration structure will increase payments to CSPs for the NI without initially requiring improved performance

The new provider model is expected to cost up to $100 million more per year compared to icare’s previous, single provider model. This fee increase depends on the extent to which CSPs achieve its outcome targets. For example, if all CSPs improve their performance to a level where they meet all of their performance targets, the full $100 million would be paid to CSPs. A lower amount would be paid if some CSPs did not achieve outcome targets. icare’s modelling indicates that the extra costs in payments to CSPs would be offset by reductions in payments to injured workers as a result of improvements in return to work rates.

For at least the first year of the new model, icare has committed to paying a proportion of the outcome fees to CSPs even if they do not achieve their performance targets. This is intended to support CSPs to invest in their systems with the goal of achieving better longer-term performance. However, it means that icare will initially pay higher fees for similar or potentially lower performance.

icare lowered the return to work rate targets in 2023 compared to 2022 to account for the impact of the transition to the new multiple provider claims management model. Exhibit 9 shows the differences between the targets in 2021–22 and 2022–23.

Exhibit 9: Return to work rate targets for the NI, 2021–22 and 2022–23
 Business Plan FY22 (%)Business Plan FY23 (%)Change
Return to work targets

4-week: 70.0%

13-week: 85.0%

26-week: 87.8%

52-week: 89.8%

 

4-week: 65.4%

13-week: 77.5%

26-week: 82.1%

52-week: 85.6%

4-week: -4.6%

13-week: -7.5%

26-week: -5.7%

52-week: -4.2%

Source: icare planning documents (unpublished).

CSP remuneration has increased from around $251 million in 2018–19 to almost $379 million in 2022–23, an increase of more than 50%. CSP remuneration has increased in each financial year during this period (Exhibit 10).

icare’s focus for reforming the TMF is not based on addressing key strategic challenges for the scheme

icare initiated a ‘TMF transformation program’ in 2022. The business case for the TMF transformation program did not include an assessment of the key strategic challenges for the TMF or describe how the transformation would improve return to work rates. Instead, it focused predominantly on the implementation of a single IT platform for managing workers compensation claims. While a single IT platform may be an important technological enabler for claims management, it does not address the underlying strategic issues that contributed to a decline in claims management performance and increase in costs in the TMF.

icare’s analysis indicates that the implementation of the new IT system will cause a short-term decline in return to work rates for the TMF. Reducing performance in return to work rates, even if only temporarily, can have a long-term impact on outcomes for affected workers and for scheme costs. icare’s internal modelling indicates that if the early stages of a claim are not managed well, claimants are much more likely to have a long-term claim.

The primary purpose of the workers compensation scheme is to optimise return to work outcomes for injured workers and to maintain the financial sustainability of the schemes. Previous reviews have stated that icare should apply a return to work focus for all its activities because this is the outcome on which it is judged by Parliament, workers, employers and the community.

icare has commenced a procurement process for the TMF without conducting detailed analysis of its claims management model

In December 2023, icare completed a procurement strategy for approval by the icare Board to guide its procurement of CSPs for the TMF. The TMF procurement strategy refers to the broader improvement objectives for the TMF, which include improving return to work performance and increasing capability to manage psychological injury claims. It contains a brief analysis of an in-house claims management model compared to an out-sourced approach. However, it does not include detailed analysis of options for its claims management model. This analysis contained a similar amount of detail as the procurement strategy for the NI (see Chapter 2). It did not include any evaluation of the outsourced model that icare has used previously and did not assess options for hybrid models that use a mixture of in-house and outsourced services. icare has had the same claims management model for the TMF, using the same three CSPs prior to its establishment in 2015. icare inherited contractual arrangements with three CSPs that had commenced in 2010. Its most recent procurement process for CSPs took place in 2019. Before commencing this procurement, icare did not evaluate the effectiveness of the arrangements that were in place from 2010 to 2019 or analyse alternative options for claims management models.

icare plans to draw on the work done for the NI procurement of CSPs in 2022 by using clauses in the NI contracts to extend them to cover TMF work. icare has also commenced an open expression of interest process to engage with other potential CSPs for the TMF.

The TMF procurement strategy sets out options for a revised performance and remuneration framework for CSPs in the TMF. This is based on the work done for the NI procurement and has the same goal of providing stronger financial incentives for CSPs to improve their claims management performance.

icare’s analysis estimates that these changes will lead to savings because the new remuneration model will improve CSP performance, which will reduce overall scheme costs. However, the estimates presented in the TMF procurement strategy, which was presented to the icare Board for approval, do not have supporting analysis or completed modelling of costs. A key gap is the details used to estimate the actual costs for CSPs to deliver the services, which underpins the payment amounts under the revised remuneration framework. The strategy also does not include analysis of risks, such as impacts to return to work rates because of the transition to a new model. Without these details, icare cannot demonstrate that its planned approach is likely to deliver value for money.

Fees paid to CSPs for the TMF have increased significantly in recent years despite previous forecasts of reductions in fees paid and improvements in performance

icare’s payments to CSPs managing TMF claims has increased by around 30% in the last five years, rising from around $90 million in 2018–19 to around $125 million in 2022–23. This increase in payments to CSPs occurred during a period when return to work performance declined by two percentage points and the total payments for workers compensation claims increased by around 60%. The number of claims received also increased significantly in this time, as noted in Chapter 1.

Some of icare’s reform activities aim to improve return to work and financial sustainability

One of the stated goals of icare’s NI improvement program is ‘getting injured workers back to work sooner’ and the improvement program includes implementing a new claims management model for the NI (discussed in Chapter 2). Alongside this program, icare has made other changes that aim to improve the day-to-day claims management processes. In recent years icare has begun working to clarify roles and responsibilities for the claims management process. This has included consultation with CSPs and producing written documents that specify which issues should be handled by CSPs and which should be referred to icare.

icare has also developed a Professional Standards Framework that aims to provide a consistent set of standards that case managers are expected to adhere to. This framework sets out minimum standards and capability expected of CSP staff. It is a contractual requirement for NI providers to comply with the framework through its recruitment and training for staff. The framework is intended to also apply to the TMF but is not yet included in TMF provider contracts. Since 2021, icare has also provided training material to CSPs focussing on key aspects of claims management. Training covers topics that have previously been identified as areas of weakness, such as the calculation of weekly payments, initial contact, and injury management.

icare’s accountability for achieving scheme outcomes is not clear enough

While the practical changes discussed have the potential to help improve claims management performance, icare’s acceptance of overall accountability for scheme outcomes remains unclear. In 2021, icare considered several ‘business models’ that would guide its overall approach to reforming its workers compensation claims models. It decided to adopt what it described as a ‘platform’ model, which positioned icare as a facilitator and focused on self-direction and choice for employers and employees. Among the models that it chose not to adopt was a ‘scheme administrator’ model, which was characterised by transparency and clear accountability for performance.

This underlying approach can be seen in icare’s reforms to the claims management model for the NI. Some elements of the reforms target improvements in return to work outcomes, such as the introduction of performance-based payments to CSPs (discussed in Chapter 2). However, icare described the goal of the reforms as creating a competitive market of CSPs that would provide choice to employers, which indicates icare taking accountability for implementing system changes but not for the achievement of outcomes. icare’s plans for reforms to the TMF are similarly focused on icare’s accountability for providing support systems for workers compensation schemes, rather than accepting responsibility for ensuring the key outcomes are achieved.

The management of workers compensation schemes is a complex task. There are external factors outside icare’s control that influence the key performance measures of return to work and scheme financial viability. However, as the provider of workers compensation schemes, icare is primarily accountable for improving return to work rates for the NI and TMF and its strategies and activities should be focused accordingly. icare’s most recent corporate strategy documents described its current phase of its organisational strategy as ‘increase focus on those we serve’. This is a positive change from the previous year when the same phase was described as ‘simplify for improved outcomes’.

icare has committed significant resources to internal organisational improvement programs

icare has committed significant resources to an organisational improvement program in recent years. The program responds to the recommendations of previous external reviews (summarised in Chapter 1). These reviews made a combined total of 107 recommendations. Of these, 98 related to ‘enterprise improvement’, covering internal processes such as governance, procurement and risk management. The focus of the recommendations on internal processes reflects the terms of reference for these reviews. As a result, icare’s improvement program has a focus on internal organisational change, rather than a broader strategic assessment of the key challenges to the performance of workers compensation schemes, such as the rise in psychological injury claims.

The program has been overseen by an external advisor and quarterly reports have been published that outline progress, with the first report published in December 2021 and the most recent in August 2023. Accountability for implementing recommendations of external reviews is important. However, the strong focus on internal organisational projects has contributed to increases in icare’s operating expenses without fully addressing the strategic challenges to the key legislative objectives of workers compensation schemes – optimising return to work outcomes and ensuring financial sustainability.

icare’s employee and other operating expenses have increased significantly during a period when workers compensation scheme performance has not improved

According to its annual financial reports, icare’s total employee expenses have increased significantly in recent years. The total number of employees at icare increased from 1,431 in 2020–21 to 1,756 in 2022–23, an increase of 23%. icare’s budget for 2023–24 includes a further increase in staff numbers to 1,800.

There has been a corresponding increase in icare’s employee expenses, with staff costs increasing by 29%, from $214 million in 2020–21 to $276 million in 2022–23. icare did not take on any new functions during this period and the performance of the NI and TMF did not improve, as described in Chapter 1. Over the past three years icare has added the highest number of new employee positions in the ‘digital and transformation’ area. Additional staff positions have also been created in corporate areas including people and culture and risk and governance. Many of these positions relate to icare’s improvement program.

icare’s other operating expenses have also increased in recent years, rising from $699 million in 2020–21 to $814 million in 2022–23. The majority of icare’s other operating expenses are fees paid to CSPs. However, icare has also spent a significant amount on contractors, contingent workers, and consultants in recent years, despite also increasing its permanent staff numbers. Some of these contractor and consultant expenses related to icare’s improvement program discussed above. Over the last three years, icare spent an average of more than $100 million per year on hired labour, comprised of:

  • $60 million per year on contractors
  • $35 million per year on contingent workers
  • $8 million per year on consultants.

icare completed a review of its corporate expenses in September 2023 and reported the results of this review to the icare Board. icare’s review stated that it had reduced its expenses by a total of $88 million from 2019–20 to 2021–22. This included a reported decrease of $40 million in spending on contractors and contingent workers, which is in contrast to its annual financial reporting data which shows an increase of $25 million during this period. icare’s expenses review used management reporting data which categorises expenses differently to the way expenses are categorised in annual financial statements. For example, a large proportion of expenditure on contractors and contingent workers was categorised as project expenditure in icare’s management reporting. While this may be appropriate for management reporting purposes, it resulted in icare reporting lower expenditure on contractors and contingent workers in its expenses review compared to its annual reporting.

The number of icare senior executives in the top pay band for the NSW public service increased from two in 2021–22 to eight in 2022–23. The average remuneration of icare’s senior executives in 2022–23 was $652,000. This is more than double the average remuneration for the two senior executives that were in the highest pay band at the former WorkCover Authority, icare’s predecessor agency, in its last year of operation in 2014–15. It is also approximately double the average remuneration for senior executives at icare’s equivalent entities in comparable jurisdictions. The average remuneration for the ten senior executives at WorkSafe Queensland in 2022–23 was $285,000 and the average remuneration for the 11 senior executives at WorkSafe Victoria was $276,000.

icare spent at least $470 million on projects that were intended to improve the operations of the workers compensation schemes between 2016–17 and 2019–20. This includes the implementation of a single provider claims management model and the introduction of a new IT platform but does not include the cost of contractors and consultants who worked on these projects. Previous external reviews of icare found that these projects did not achieve their objectives and contributed to a deterioration in performance against the key legislative objectives for workers compensation of return to work and financial sustainability. icare spent another $45 million on moving back to a multiple provider model for the NI from 2023.

icare’s reporting on the performance of workers compensation schemes has not provided a clear indication of performance in its core areas of responsibility

icare’s public reporting has not provided transparency in the key areas of return to work and financial sustainability of workers compensation schemes. Prior to 2019–20, icare did not report publicly on its return to work rate targets in the NI. icare did not report on a TMF return to work target until 2022–23. icare’s four most recent annual reports have included an ‘enterprise performance scorecard’. In 2021–22 this scorecard had 11 measures, with only four that related to insurance scheme performance (return to work rate in the NI, net results in NI, net results in TMF and investments). The scorecard had seven measures that related to icare’s internal processes in that year, such as staff engagement scores, risk management, and internal audit. In 2022–23, the scorecard included five measures that related to insurance scheme performance. However, the measure relating to return to work performance for the NI had changed from the previous years. As a part of its reforms to the NI, icare plans to publish more information about workers compensation scheme outcomes on its website. It commenced this reporting in December 2023.

The key document outlining icare’s strategic approach to managing its operations is the Statement of Business Intent (SBI). The measure icare has used for reporting on return to work targets for the NI in its SBI has changed in each of the last four years. Exhibit 13 shows icare’s internal reporting on NI return to work targets since 2020–21. The frequent changes to the way icare has reported on its key performance measures make it difficult to track its performance over time.

Exhibit 13: Return to work measures used for reporting in icare’s Statement of Business Intent (SBI), 2020–21 to 2023–24
Financial yearReporting measure for return to work in SBI
2020–21Return to work rate measured at 26 weeks after claim made
2021–22Return to work rate measured at 4, 13, 26 and 52 weeks after claim mad
2022–23Return to work rate measured at 13 weeks after claim made
2023–24Return to work rate measured as ‘working rate’ (using a different methodology)

SIRA has recently updated its strategic framework to improve the effectiveness of its regulatory activities

One of SIRA's principal legislative objectives is to provide effective supervision of the workers compensation system. SIRA updated its strategic framework in 2021. The strategy outlines guiding considerations across four ‘pillars’ of SIRA’s regulatory work: scheme design, licensing, supervision, and enforcement.

SIRA has increased its focus on supporting improvements to return to work outcomes in recent years. It commissioned a research paper to inform SIRA's system-wide strategy to improve return to work rates. This paper provides a summary of the current evidence relating to factors most likely to support better return to work outcomes. This research has been used to inform SIRA's strategies and plans. For example:

  • SIRA has a return to work action plan which outlines ten actions aimed at supporting improvements in return to work rates. Actions include reviewing insurers’ return to work practices in 2022, developing a return to work standard of practice, and targeting compliance work to employers identified as higher risk.
  • SIRA advises it is currently developing a ‘Recover Through Work Strategy’ which expected to replace its action plan. The draft strategy covers research, promotion and education activities related to early intervention, psychological injuries, and additional data and insights relating to return to work.
  • SIRA developed a mental health recovery and support action plan in 2021 based on research it had commissioned. 

SIRA has used regulatory instruments including written directions and letters of censure to icare when it has identified issues that require remediation, as noted in Chapter 2. SIRA’s ability to regulate the workers compensation scheme is limited by the fact that it cannot impose licence conditions on the NI or other entities, which limits its ability to escalate its regulatory responses if needed.

A previous review of the legislative arrangements for workers compensation recommended that SIRA should be given additional powers to ensure it can fully perform its regulatory functions for workers schemes. The review also found the roles and responsibilities between icare and SIRA were unclear in some areas. For example, workers compensation legislation allocates operational functions to SIRA which has created duplication and inefficiencies as noted in this chapter. The review recommended government consider amending legislation to state clearly the powers and functions of each entity. Both issues are yet to be addressed.

SIRA was mostly focussed on developing regulatory guidelines and frameworks in the years after it was established

SIRA was created in late 2015 and was tasked with regulating multiple insurance schemes and establishing operational frameworks to supervise each insurance scheme within its remit. In the initial years of SIRA’s establishment, SIRA developed guidelines and standards around the management of workers compensation. For example, SIRA’s first Standards of Practice was issued in 2018 and contained broad claims management principles to guide insurer conduct and support the achievement of scheme legislative objectives. SIRA also first published an Insurer Supervision Model in 2017 which outlined SIRA’s approach to monitoring and supervising the performance across workers compensation insurers. The model contained compliance and performance indicators to help SIRA identify and address risks in the areas of conduct, claims management and financial sustainability. SIRA advises this supervision model assisted it to identify a significant decline in the performance of the NI in 2018, which led SIRA to commission its first independent review of the NI in 2018–19.

SIRA has become more active in its regulation of the NI but only recently started actively supervising the TMF

SIRA increased its monitoring and supervision of the NI following the findings of the 2019 review, with SIRA commencing quarterly compliance and performance audit of claims management of the NI from July 2020. SIRA’s reviews of the NI had a strong focus on compliance with specific legislative requirements, in response to concerns about a lack of capability among claims managers at the time. Some of SIRA's more recent reviews of the NI have selected a strategic focus area, such as compliance with the ‘early intervention’ requirements of claims management. This theme was selected based on research evidence indicating that the management of a claim in the first four weeks has a significant impact on return to work outcomes. SIRA advises that future audits will use a risk-based approach and focus on areas in which low compliance has been identified and there is evidence that the compliance requirement is based on better outcomes, such as injury management planning.

SIRA has issued two penalty notices as a result of its increased oversight on the NI:

  • The penalty notice issued on 6 September 2019 totalled $132,000. The penalties were imposed for icare’s failure in 24 instances to commence weekly workers compensation payments within seven days of initial notification of the injury to the insurer.
  • The penalty notice issued on 22 January 2020 totalled $82,500. The penalties were issued for icare’s failure in ten instances to ensure employer’s premium rate does not increase by more than 30% from the previous policy year, as required in SIRA’s premium guidelines. icare’s failure to comply with the capping requirement led to impacted policy holders paying an additional premium totalling over $700,000.

SIRA began regularly reporting to government on NI financial sustainability in 2016–17, with its first report provided to government in August 2018. The 2016–17 report noted generally that a new claims model had been implemented from January 2018 which may impact claims experience and make future treatment and costs more complicated. However, the report did not provide further details of these risks, such as potential impacts on the key areas of return to work or related cost impacts due to the transition. SIRA’s annual reports from the years up to and including 2018–19 did not draw attention to any performance concerns for the NI or the TMF and did not provide detailed information on SIRA’s supervision activities for the schemes. The reports focused mostly on other areas of SIRA’s responsibility, particularly the implementation of reforms to the compulsory third party insurance scheme during 2017.

In January 2020, SIRA commenced investigations into the management of three Corrective Services NSW (CSNSW) claims in the TMF following reports it received around claims mismanagement. The report outlined several actions, including that SIRA undertake a broader review of the compliance and performance of the TMF and a larger audit of CSNSW workers compensation claims with a focus on psychological injuries. In August 2022, SIRA commenced a review of 100 CSNSW claims to assess the compliance of these claims against legislative and regulatory requirements. During the audit, SIRA advised these reviews led to SIRA developing the evidence base for undertaking its broader review of the TMF in 2023. The 2023 TMF review has a focus on managing psychological injury claims.

The audit did not see evidence of SIRA taking a strategic approach to the regulation of the TMF in earlier years despite the outcomes of SIRA’s initial CSNSW investigations, deteriorating return to work performance, increasing costs, and the emerging strategic risk of the rise in psychological injury claims. Given these issues, a more active regulatory presence from SIRA would have been justified.

Any decline in return to work rates, even if only temporary, can have a long-term impact on outcomes for affected workers and for scheme costs. For example, research indicates that injured workers who are not working for a longer period become progressively less likely to ever return to work and are more likely to develop a secondary psychological injury associated with their initial injury. As a result, the poor performance of workers compensation schemes in previous years is having an ongoing impact on scheme performance today.

SIRA began focussing on improving compliance of employers with workers compensation obligations from 2020, but did not have a strategy or active program prior to this

In 2020, SIRA created an Employer Supervision and Return to Work Directorate as part of a broader organisational restructure. The Directorate was created to strengthen the focus and regulatory approach for employers and support the development of an employer supervision strategy and framework. The strategy and framework for employers were finalised in 2022. These are consistent with its organisation-wide regulatory framework and outlines SIRA’s approach to planning and conducting regulatory activities in identified areas of highest risk.

In December 2021, SIRA also established an inspectorate to undertake employer education activities and conduct reviews of employer compliance with workers compensation obligations, in addition to those conducted by SafeWork NSW. Prior to this, SIRA did not have a dedicated employer supervision and compliance strategy or function, although it did provide educational resources for employers. It relied on SafeWork inspectors to conduct workplace inspections on its behalf, which were guided by SIRA’s modelling work.

SIRA has legislative powers to enter workplaces to gather evidence, conduct audits and reviews, and impose penalties for non-compliance. SIRA targets its employer inspections primarily through a predictive data analysis tool, with a smaller number of inspections in response to complaints or referrals. The predictive tool assesses new workers compensation claims made and identifies those that are at higher risk of a poor return to work outcome, based on factors including the type of claim and employer or industry.

SIRA has not allocated sufficient resources to investigate and prosecute fraud

SIRA has a legislative responsibility to assist in measures to deter and detect fraud within workers compensation schemes. In February 2023, SIRA engaged an internal review to assess its capability and structure in enforcement and prosecution in all schemes it oversees, including the Compulsory Third Party scheme and the Home Building Compensation Fund. The review found there was a backlog of high-risk fraud referrals. This could indicate that cases of fraud in the workers compensation system may have gone undetected or unaddressed in recent years. The review recommended SIRA expand its investigations team to reduce the backlog of matters and ensure all icare referrals are investigated.

During the audit, SIRA advised that while it has not fully responded to these recommendations yet, it has engaged additional resources for the employer investigations team and will consider additional resourcing in 2024–25. SIRA also advised it had taken other actions to reduce fraud risks, including initiating regular meetings with icare to discuss new fraud referrals and working with icare on a Memorandum of Understanding to strengthen fraud investigations and prosecutions. However, these actions are unlikely to address the issues relating to resourcing that were identified in the review.

Some of SIRA's research and pilot programs duplicate or overlap with those of icare

SIRA has a legislative function to 'to initiate and encourage research to identify efficient and effective strategies for the prevention and management of work injury and for the rehabilitation of injured workers'. In 2019, SIRA commissioned a review of its research strategy on workers compensation and other insurance schemes which it oversees. The review found, among other things, additional work was needed to coordinate SIRA's research program to avoid duplication. The review recommended SIRA improve collaboration with icare, SafeWork and other stakeholders and develop a model for knowledge translation to ensure evidence informs practice.

SIRA and icare's research and pilot programs still overlap in several areas, especially workplace mental health-related research. For example:

  • icare has a ‘Front of Mind’ program that is focussed on developing and testing mental health platforms, like development of apps and education programs. SIRA has a 'Recovery Boost' program which provides grants to universities and private service providers to research and develop programs related to mental health.
  • icare has also developed a 'Design for Care' program in partnership with Curtin University to research work design impacting mental health. Similarly, SIRA has funded various research projects on workplace mental health, including Monash University's work-connected interventions for psychological injuries, and Black Dog Institute's two-year research fellowship on recovery after psychological injury.
  • icare has reported it would be developing a mental health strategy and action plan in 2022–23. SIRA has also developed action plans and strategies on mental health.

SIRA revised its research strategy in response to the review's findings and recommendations. SIRA's Research Strategy 2022–25 outlines its research objectives, actions, and measures of success. Actions include working with stakeholders to co-design research projects and working with stakeholders to prioritise research based on level of impact. Measures of success include creating opportunities for CSPs and other stakeholders to engage with SIRA's programs and increasing the number of research partnerships targeting personal injury evidence gaps.

NSW Treasury’s role in overseeing icare is not clearly defined, limiting its ability to support performance improvements in workers compensation

NSW Treasury does not have a legislated role in the management of workers compensation. icare is directly accountable to the icare Board and the icare Board is accountable to the responsible minister for icare achieving its statutory objectives. The TMF is funded by the NSW Government and has a direct impact on the NSW budget, so NSW Treasury has a role in advising the Treasurer on the performance and operations of the TMF. NSW Treasury also supports the minister responsible for icare, so has a role in advising the responsible minister in relation to icare's management of the NI. This includes reviewing and advising the minister on icare’s annual Statement of Business Intent, which icare must submit to the responsible minister and the Treasurer.

NSW Treasury has monitored icare’s financial and operational performance and has reported regularly on this to the responsible Minister and the Treasurer. However, NSW Treasury has not taken action to address issues that it is aware of. For example, when reviewing icare’s Statement of Business Intent (SBI) in 2022–23, NSW Treasury stated that it had concerns about the performance and financial sustainability of workers compensation schemes. Its response was to advise the responsible minister and the Treasurer to note its concern about these issues. In this review, NSW Treasury also advised that icare had not achieved its own forecasts from previous years for improvements to the financial position of the NI but did not propose any action in response to this. Similarly, NSW Treasury noted in another ministerial brief that icare made changes to its targets for return to work rates in 2020–21 that only required performance to be maintained or improve marginally. It expressed concern that this represented an acceptance of ongoing performance at lower than historical levels but did not propose any actions. NSW Treasury’s lack of specific responses to these issues reflects its limited powers to influence icare’s actions.

Recent changes to icare’s governing legislation allow the Treasurer or the Secretary of NSW Treasury to require icare to provide information relating to its activities. This may help NSW Treasury to be more active in its oversight of icare’s key decisions and activities. In November 2023, icare’s responsible minister announced that NSW Treasury will conduct a review of icare focusing on its operational costs.

This audit has identified several gaps in icare’s management of workers compensation schemes. For example, icare proceeded with changes to its claims management model for the NI that involve a multi-billion dollar procurement process without completing detailed options or benefit-cost analysis, as discussed in Chapter 2. icare has also focused significant resources and attention on internal corporate improvement activities that do not directly contribute to the achievement of the key legislative objectives of workers compensation schemes. Both of these issues have led to significant increases in icare’s costs without improved return to work outcomes in recent years. Stronger engagement from NSW Treasury with the icare Board could help improve icare's performance by providing advice and challenge in areas in which icare has consistently under-performed.

Appendix one – Responses from audited agencies

Appendix two – About the audit

Appendix three – Performance auditing

 

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

 

Parliamentary reference - Report number #393 - released 2 April 2024

Published

Actions for Regulation insights

Regulation insights

Environment
Finance
Health
Local Government
Whole of Government
Compliance
Cyber security
Internal controls and governance
Management and administration
Procurement
Regulation
Risk

What this report is about

In this report, we present findings and recommendations relevant to regulation from selected reports between 2018 and 2024.

This analysis includes performance audits, compliance audits and the outcomes of financial audits.

Effective regulation is necessary to ensure compliance with the law as well as to promote positive social and economic outcomes and minimise risks with certain activities.

The report is a resource for public sector leaders. It provides insights into the challenges and opportunities for more effective regulation.

Audit findings

The analysis of findings and recommendations is structured around four key themes related to effective regulation:

  • governance and accountability
  • processes and procedures
  • data and information management
  • support and guidance.

The report draws from this analysis to present insights for agencies to promote effective regulation. It also includes relevant examples from recent audit reports.

In this report, we also draw out insights for agencies that provide a public sector stewardship role.

The report highlights the need for agencies to communicate a clear regulatory approach. It also emphasises the need to have a consistent regulatory approach, supported by robust information about risks and accompanied with timely and proportionate responses.

The report highlights the need to provide relevant support to regulated parties to facilitate compliance and the importance of transparency through reporting of meaningful regulatory information.

Image
Picture of Margaret Crawford Auditor-General for New South Wales in a copper with teal specks dress with black cardigan.

I am pleased to present this report, Regulation insights. This report highlights themes and generates insights about effective regulation from the last six years of audit.

Effective regulation is necessary to ensure compliance with the law. Effective regulation also promotes social, economic, and environmental outcomes, and minimises risks or negative impacts associated with certain activities. But regulation can be challenging and costly for governments to implement. It can also involve costs and impact on the regulated parties, including other public sector and private entities, and individuals. As such, effective regulation needs to be administered efficiently, and with integrity.

Having a clearly articulated and communicated regulatory approach is essential to achieving this outcome, particularly when this promotes voluntary compliance and sets performance standards that are informed by community expectations. A consistent approach to exercising regulatory powers is important: it should be supported by robust information about regulatory risks and issues, and accompanied with timely, proportionate responses. Providing relevant support to the regulated parties and coordinating activities to facilitate compliance and performance can generate efficiencies.

Finally, transparency matters. It matters so that government has oversight of and can be held accountable for its leadership of public sector compliance, and in regulating the activities of third parties. Transparency also matters because it can provide insights into the effective exercise of government power. To achieve this, meaningful regulatory information needs to be reported.

While these issues are most pertinent for government agencies that exercise traditional regulatory functions, they are also relevant to lead government agencies that provide a stewardship role in promoting compliance and performance by other government agencies in relation to particular areas of risk.

Over the past six years, our audit work has found many common and repeat performance gaps, creating risks, inefficiencies, and limiting outcomes of regulatory activities. In considering these gaps, this report provides public sector leaders with insights into the challenges and opportunities they may encounter when aiming for more effective regulation, including the good governance of regulatory activities. This includes insights for lead agencies that provide a public sector stewardship role. Through applying these insights and maximising regulatory effectiveness, unintended impacts on the people and sectors government serves and protects can be avoided or at the very least minimised.

 

Margaret Crawford PSM
Auditor-General for NSW

This report brings together key findings and recommendations relevant to regulation from selected performance and compliance audits between 2018 and early 2024 (19 in total), and from two reports that summarise results of financial audits during the same period. It aims to provide insights into the challenges and opportunities the public sector may encounter when aiming to enhance regulatory effectiveness.

The report is structured in two sections, each setting out insights from relevant audits and providing summaries as illustrative examples.

Section 3 is focused on insights from audits of agencies that administer regulatory powers and functions over other entities or activities (typically known as 'regulators'). The powers and functions of regulators are defined in law, and often relate to issuing approvals (e.g., licensing) for certain activities, and/or monitoring allowable activities within certain limits. Regulators often have compliance and enforcement powers that can be exercised in particular circumstances, such as when a regulated entity has not complied with relevant requirements.

Agencies may be primarily established as regulators or perform regulatory activities alongside other functions. Depending on the context, the regulated activity may relate to other state agencies, local government entities, non-government entities or individuals.

Section 4 summarises insights from a selection of audits of agencies that provide a stewardship role in promoting compliance by and performance of other state agencies and local government entities in relation to specific regulations or policies. These policies may or may not be mandatory and, unlike a more traditional regulator, the coordinating agency may not have enforcement powers to ensure compliance.

These policies, and accompanying guidelines and frameworks, are typically issued by ‘central agencies’ such as the Premier's Department that have a public sector stewardship role. They can also be issued by agencies with a leadership role in particular policy areas ('lead agencies'). While individual agencies and local government entities implementing these policies are responsible for their own compliance and performance, lead and central agencies have an oversight role including by promoting accountability and coordinating activities towards achieving compliance and performance outcomes across the public sector.

Readers are encouraged to view the full reports for further information. Links to versions published on our website are provided throughout this document, and a full list is in Appendix one. An overview of the rationale for selecting these audits and the approach to developing this report is in Appendix two.

The status of agencies' responses to audit recommendations

Findings from the audits referred to in this report were current at the time each respective report was published. In many cases, agencies accepted audit recommendations, as reflected in the letters from agency heads that are included in the appendix of each audit report.

The Public Accounts Committee of the NSW Parliament has a role in reporting on and ensuring that agencies respond appropriately to audit recommendations. Readers are encouraged to review the Public Accounts Committee's inquiries on agencies' implementation of audit recommendations, which can be found on the Committee's website.

Published

Actions for Effectiveness of SafeWork NSW in exercising its compliance functions

Effectiveness of SafeWork NSW in exercising its compliance functions

Finance
Industry
Health
Compliance
Internal controls and governance
Management and administration
Procurement
Project management
Regulation
Risk

What this report is about 

This report assesses how effectively SafeWork NSW, a part of the Department of Customer Service (DCS), has performed its regulatory compliance functions for work health and safety in New South Wales. 

The report includes a case study examining SafeWork NSW's management of a project to develop a real-time monitoring device for airborne silica in workplaces. 

Findings 

There is limited transparency about SafeWork NSW's effectiveness as a regulator. The limited performance information that is available is either subsumed within DCS reporting (or other sources) and is focused on activity, not outcomes. 

As a work health and safety (WHS) regulator, SafeWork NSW lacks an effective strategic and data-driven approach to respond to emerging WHS risks. 

It was slow to respond to the risk of respirable crystalline silica in manufactured stone. 

SafeWork NSW is constrained by an information management system that is over 20 years old and has passed its effective useful life. 

While it has invested effort into ensuring consistent regulatory decisions, SafeWork NSW needs to maintain a focus on this objective, including by ensuring that there is a comprehensive approach to quality assurance. 

SafeWork NSW's engagement of a commercial partner to develop a real-time silica monitoring device did not comply with key procurement obligations. 

There was ineffective governance and process to address important concerns about the accuracy of the real-time silica monitoring device. 

As such, SafeWork NSW did not adequately manage potential WHS risks. 

Recommendations 

The report recommended that DCS should: 

  • ensure there is an independent investigation into the procurement of the research partner for the real-time silica detector 
  • embed a formal process to review and set its annual regulatory priorities 
  • publish a consolidated performance report 
  • set long-term priorities, including for workforce planning and technology uplift 
  • improve its use of data, and start work to replace its existing complaints handling system 
  • review its risk culture and its risk management framework 
  • review the quality assurance measures that support consistent regulatory decisions

SafeWork NSW is the work health and safety regulator in New South Wales. It was established by the State Insurance and Care Governance Act 2015.

As the regulator, SafeWork NSW is responsible for, among other things, enforcing compliance with the Work Health and Safety Act 2011 (the WHS Act) and the Work Health and Safety Regulation 2017. The regulator’s full functions are set out in section 152 of the WHS Act.

SafeWork NSW’s operations are guided by seven regulatory priorities for 2023, which contribute to three strategic outcomes:

  • Workers understand their rights and responsibilities.
  • Employers ensure that work is healthy and safe, with no advantage for cutting corners.
  • Regulation is fair and efficient.

This audit assesses the effectiveness of SafeWork NSW in monitoring and enforcing compliance with the WHS Act, through the examination of three lines of inquiry:

  1. Does SafeWork NSW have evidence-based processes to set its objectives and priorities for monitoring and enforcing compliance?
  2. How effectively does SafeWork NSW measure and report its performance in monitoring and enforcing compliance against the WHS Act?
  3. Are SafeWork NSW's policies and procedures for monitoring and enforcing compliance applied consistency across different sectors?

As SafeWork NSW is part of the NSW Department of Customer Service (DCS), the department is the auditee. Prior to 2019, SafeWork NSW was located in the former Department of Finance, Services and Innovation. Unless otherwise stated, any reference to SafeWork NSW should be read as including the broader department in which it sits.

This chapter considers whether SafeWork NSW has evidence-based processes to set its objectives and priorities, including how it takes into account operational feedback and expertise. It also includes how existing and emerging risks are assessed as part of the priority-setting process, and how planning and prioritisation takes into account resourcing, including workforce skills and capacity.

SafeWork NSW's operating model is now based on annual regulatory priorities, rather than longer-term priorities

From 2016 to 2022, SafeWork NSW worked under a six-year Work Health and Safety Roadmap (‘the Roadmap’). The Roadmap was revised in August 2018 and included the following statements:

The WHS Roadmap for NSW, along with the BRD Strategic Plan, provides a clear line of sight between our strategic objectives and the activities that will allow us to deliver our overall outcomes.

This Roadmap spans 2016-2022 but it will be refreshed and released every two years to ensure it stays relevant.

 

In addition to the Roadmap, SafeWork NSW operated under its 2019–20 Strategic Business Plan.

After SafeWork NSW was moved into DCS, the Roadmap was subject to a mid-term evaluation by ARTD Consultants in 2020. SafeWork NSW management subsequently accepted all nine recommendations of that mid-term evaluation, which included the following:

  • Strengthen business intelligence data systems to allow managers and inspectors to access to real-time data on safety incidents and workers compensation claim data (Rec 5).
  • Improve evidence available to assess Roadmap outcomes in 2022 (Rec 9).

In 2023, SafeWork NSW replaced its six-year Roadmap with a model of setting annual regulatory priorities. Seven regulatory priorities were set for 2023. These priorities were:

  •  gig economy – increase safety and WHS compliance in the sector, particularly food delivery riders and health care
  • safety around moving plant – reduce workplace safety incidents, particularly forklifts
  • seasonal workplaces – increase WHS compliance to support itinerant workers, particularly in the agricultural sector and those working with amusement devices
  • psychological safety – reduce the prevalence of psychological injury at workplaces, with a focus on mental health and well being
  • respect at work – reduce the incidence of bullying, sexual harassment, and customer aggression in the workplace, particularly in make dominated sectors and healthcare
  • exposure to harmful substances – reduce the incidence of worker exposure to dangerous substances in the workplace, particularly silica and dangerous chemicals
  • falls – reduce the incidence of falls from heights with a particular focus on construction.

These priorities are intended 'to deliver on three strategic outcomes’:

  • Workers understand their rights and responsibilities.
  • Employers ensure that work is healthy and safe, with no advantage for cutting corners.
  • Regulation is efficient and fair.

As SafeWork NSW works to deliver on these outcomes, the focus is on priority or vulnerable groups of workers – these being younger workers, workers from culturally and linguistically diverse backgrounds (especially newly arrived workers), and Aboriginal people.

Shorter-term priorities are intended to enable SafeWork NSW to be more responsive to work health and safety risks and were developed in consultation with operational staff

The adoption of shorter-term priority-setting is intended to enable a more agile approach to regulation that, according to DCS, is better able to adapt to changes in risk profiles and industries. It was put to the audit by some interviewees that the six-year plan was less able to respond to rapid changes in the economy that may lead to quickly emerging work health safety risks. An example commonly cited was the significant increase in gig economy workers, including in areas such as food delivery workers and personal care workers. It was put to the audit that this example highlighted new WHS risks unique to those emerging workplaces.

According to DCS, in addition to being more agile and responsive to macro changes in the workforce, the annual priorities are intended to enhance accountability by creating a more timely and contemporaneous link between activities and outcomes. The more immediate nature of annual priorities is also designed to provide a more immediate and tangible link to SafeWork NSW’s activities and ensure better accountability for delivery.

The annual priorities are intended to complement SafeWork NSW’s commitments under the national Australian Work Health and Safety Strategy 2023-33. This strategy sets a high-level vision and goal for Australia’s work health and safety regulators, including to address agreed persistent challenges, such as psychosocial risks, vulnerable workers, and ensuring that small businesses are adequately supported to meet their work health and safety obligations.

The process for developing regulatory priorities for 2023 involved internal consultation with SafeWork NSW executive directors, directors, managers, inspectors, project leads, as well as consultation with external stakeholders and experts. There is evidence that SafeWork NSW considered the feedback it received, including from its inspectors.

SafeWork NSW staff identified potential risks that SafeWork NSW will need to manage as the process for developing regulatory priorities continues to develop

The audit team interviewed almost all SafeWork NSW executive directors, directors, and team managers, particularly those performing regulatory functions. These interviews revealed a strong level of commitment to the purpose and functions of SafeWork NSW, as well as a shared desire to see the organisation fulfil its potential.

In regard to the annual priorities, senior executives and the majority of team managers we interviewed supported the adoption of annual priorities and expressed confidence that establishing annual priorities would improve the effectiveness of SafeWork NSW in delivering its compliance functions. It was noted by SafeWork NSW that the shift towards regulatory priorities 'brings us to a level of maturity mirroring the approach of regulators such as ASIC and the ACCC'.

While most staff interviewed during this audit welcomed the sharper focus and greater flexibility afforded by shorter-term priorities, others identified a range of risks. Some experienced people managers in SafeWork NSW expressed significant doubts about the pursuit of annual regulatory priorities. Risks identified during audit interviews included:

  • That the short-term focus had prevented SafeWork NSW from establishing a longer-term goal or vision.
  • That the annual priorities were simplistic and lacked sufficient detail to engage the regulator, industry, and the community.
  • That short-term priorities would make it difficult to meaningfully measure and report progress, especially for activities and initiatives that may take longer to achieve demonstratable change.
  • That the process of considering the next annual priorities may need to commence well before initiatives for the current year have been completed (or even commenced), hindering how effectively lessons can be incorporated into future planning.
  • That frequent changes in regulatory priorities may make it difficult to ensure that the SafeWork NSW workforce has appropriate capability and capacity, particularly for potentially complex emerging threats such as artificial intelligence in workplaces.

In response to these risks, SafeWork NSW has noted that:

  • SafeWork NSW has a separate vision in addition to the regulatory priorities. This is 'healthy, safe and productive working lives'.
  • A review process will occur to understand what went well and what did not from the first year of regulatory priorities before finalising priorities for 2024.
  • Planning will improve over time as the process reoccurs, and lessons learned will be linked to future priorities.

The inability to achieve full ‘buy-in’ from experienced people managers in SafeWork NSW suggests that change management, including consultative and communication processes, has not been completely successful. SafeWork NSW advised that this initiative was a significant shift for all its staff and in particular middle management. Given this, the leadership of SafeWork NSW should prioritise investment in effective change management processes, especially if the annual regulatory priorities are anticipated to change in 2024.

Importantly, the SafeWork NSW leadership team should undertake strategic planning to ensure that a meaningful set of longer-term priorities underpin their investment decision-making on organisational fundamentals, such as a capable and sustainable workforce and fit-for purpose technology systems. Without this, there is a real risk that the regulator's business needs and priorities will be overtaken by the priorities of a much bigger department.

SafeWork NSW consulted with external stakeholders in determining its 2023 annual regulatory priorities

SafeWork NSW developed a discussion paper in 2022 for external stakeholders as a precursor to consultation on its 2023 annual priorities. This discussion paper outlined an intent by SafeWork NSW to develop a new strategy that would prioritise activities that were the biggest points of leverage to drive material change and were the biggest risks and most important trends affecting WHS in NSW.

SafeWork NSW considered expert feedback and expertise in the development of its regulatory priorities through this process. A summary document detailing the rationale for its regulatory priorities provides evidence that feedback from external stakeholders, such as unions and industry groups, were taken into account.

SafeWork NSW has not established a formal process for determining its regulatory priorities for 2024 and beyond

SafeWork NSW has an indicative timeline for preparing its 2024 priorities which provides that the priorities will not be settled until March 2024 and will be based on the results of the previous year’s priorities to December 2023. However, no ongoing process for determining annual priorities in each future year was settled at the time of writing this report. Some priorities might be expected to remain relatively constant, especially persistent challenges such as preventing falls from heights. However, if the annual priorities model is to meet the expectation of being agile, then new and emerging priorities will need to be identified, understood, scoped, and responded to with relatively short notice.

Elements of the 2023 regulatory priorities will overlap with any new or revised priorities, such as the monitoring and evaluation framework, and the three-year Construction Services Blueprint. SafeWork NSW explains that these longer-term initiatives are 'intended to support the delivery of priorities that are likely to run over many years, providing more granular detail on specific drivers of harm, regulatory responses and targets'.

SafeWork NSW does not effectively use data to inform its priority-setting or assessment of risk, despite adopting the recommendations from the 2020 mid-term Roadmap evaluation

SafeWork NSW states that it chose its regulatory priorities in 2023 based on the following factors - potential for serious harm or death, new or emerging risks, and increases in the frequency of an issue. An emerging issue is where:

A hazard and/or risk to health and safety relating to a new or existing product, process or service was not previously known or fully realised and SafeWork NSW intervenes to address the workplace health and safety risks for example, guidance material, training, regulatory change. 

SafeWork NSW has a substantial data repository, with over 20 years of case and activity data contained in its Workplace Services Management System (WSMS). However, SafeWork NSW does not effectively interrogate this data to provide an evidence base for its regulatory functions.

SafeWork NSW has only recently established a data governance committee. SafeWork NSW also advised that a data science function was created within the Centre for Work Health and Safety during 2023, repurposing existing resources and supported by a business intelligence working group comprising of inspector representatives from operational directorates.

While this data science function is newly created, SafeWork NSW does not have a strategic business intelligence function that is both recognised and understood across each directorate and team, and the ability of its technology infrastructure to deliver sophisticated strategic and operational data intelligence has been limited.

As a result of this lack of central coordination and capability, directorates have sought to develop their own data analysis capability, with inconsistent, fragmented and potentially duplicative results. The audit did find specific (albeit isolated) examples of data being used to inform decision-making, though these efforts were disparate and uncoordinated at the directorate level.

SafeWork NSW said that data is used to inform leadership discussions at the quarterly SafeWork NSW Leadership Meetings, and monthly operational executive meetings. The audit did not review the agenda papers for these meetings.

At the 2020–21 NSW Parliament Budget Estimates Committee hearing, SafeWork NSW stated that it:

…used predictive analytics and machine learning to generate a WHS rating system leveraging a large dataset to aid decision-making. The WHS rating supports an evidence-based approach to identifying high risk workplaces and provides additional data-based evidence to assist in decision-making'. 

SafeWork NSW has started to use artificial intelligence to interrogate historical compliance data to rate the risk of different employers. However, this is used inconsistently across SafeWork NSW and there is limited evidence about its effectiveness. A similar tool does not exist for industry or product-related trends or relationships that may assist SafeWork to proactively identify high-risk workplaces and issues.

Outdated technology and uncertainty in planning its replacement is limiting SafeWork NSW's ability to effectively use its data for analytics and insights

SafeWork NSW uses WSMS to manage work health and safety data. This system has been in place for over 20 years. It was noted in interviews conducted during this audit that this data system is at the end of its effective life.

Issues noted by users of WSMS include:

The lack of governance associated with data management of WSMS. There is no data custodian, and a formalised data quality assurance process does not exist. This means that data can be extracted from the system with no controls on the accuracy of the analysis.

Access to WSMS cannot be tracked (and is therefore not auditable).

  • Data quality is variable, depending on the quality of notes provided by inspectors (with individuals noting that these notes could be full of speculation), and inconsistent approaches to entering information into the system. At the same time, inspectors noted that entering information into the system can be an administrative burden due to duplication and time requirements.
  • Analysis cannot readily be undertaken on a geographic basis (for example, all high-risk employers within a particular region).
  • As WSMS does not track information about the directors of companies, it is unable to identify risks associated with 'phoenixing', where directors of wound-up businesses establish new entities, or other forms of related-entity risk. The audit team linked WSMS data with ASIC data to match company directors with company and notice data. This was done in order to understand the additional intelligence that could be used to inform risk-based decision-making. As an example, the audit found that there is a large number of companies that have not received notices from SafeWork NSW but may be at higher risk due to the conduct of their directors:
    • There were approximately 151,000 companies with directors that were also linked to at least one other company that had received at least one type of notice from SafeWork NSW.
    • There were approximately 24,500 companies with directors that were also linked to one or more companies that had cumulatively received over 100 notices from SafeWork NSW.
    • There were approximately 8,600 companies with directors that were also linked to one or more other companies that had cumulatively received over 400 notices from SafeWork NSW.

In addition to the feedback provided by WSMS users within SafeWork NSW, the audit team also found related data quality issues during the course of our own analysis, including:

  •  Industry analysis is more challenging to perform because specific industry data points and grouping details are not captured in WSMS.
  • There was no systematic method to identify all silica-related incidents. The search terms were not standardised and relied on judgement, for example: ‘silic’ (potentially capturing both ‘silica’ and ‘silicosis’) and ‘benchtop’, though SafeWork NSW advised that consultation with subject matter experts informed these searches. There is a high-risk of false positives and incomplete analysis without time intensive manual review of each identified case. WSMS was not readily able to provide data on silica-related complaints without workarounds and manual file review (which proved unreliable) and requiring significant effort from data staff in both the Audit Office and SafeWork NSW.
  • Test data is captured in production systems, rather than in test systems. These records do not have a unique identifier and are difficult to identify and isolate for business intelligence analysis.
  • Data validations are not enforced (for example, on Australian Business Number, Australian Company Number columns). Instead, the data entry fields allow for incorrect details to be captured or left blank without explanation from the staff entering the data.

SafeWork NSW provided advice to the audit team that an upgrade of WSMS was planned as part of the broader e-regulation program across DCS (that is, the single digital platform for all 28 business regulators). However, this upgrade is now uncertain as there is no funding for SafeWork NSW to be onboarded to the new platform. This means that for the foreseeable future SafeWork NSW will be constrained by the limitations inherent to WSMS.

SafeWork NSW took around eight years to actively and sufficiently respond to the emerging risk of respirable crystalline silica in manufactured stone

Silicosis is a progressive, occupational lung disease resulting from inhalation of respirable crystalline silica (RCS). Silicosis is one of the oldest known occupational diseases, particularly affecting industries like mining. In Australia, silicosis has been a known cause of death and disability for over 100 years. This disease is preventable through appropriate workplace practices in a hierarchy of controls, which includes the use of correct personal protective equipment.

The use of manufactured stone for applications such as kitchen benchtops became popular in Australia in the early 2000s. Other substances that contain silica, such as rock, stone, clay, gravel, concrete and brick, may contain between 2% and 40% silica. In contrast, manufactured stone contains up to 95% silica. Workers exposed to respirable crystalline silica from manufactured stone are more likely to develop severe silicosis (and other serious lung diseases), and more quickly, than workers exposed to silica from other sources.

In 2010, international research was published that pointed to the specific heightened risk posed by the high silica content of manufactured stone used primarily for kitchen countertops and bathroom fixtures. This was confirmed by subsequent research published in 2012, which concluded that, in regard to a documented outbreak of silicosis among manufactured stone workers in Israel:

This silicosis outbreak is important because of the worldwide use of this and similar high-silica-content, artificial stone products. Further cases are likely to occur unless effective preventive measures are undertaken and existing safety practices are enforced. 

This research was relevant to Australia as the sample of workers was derived from the same Israeli-based manufacturer and exporter of manufactured stone that supplies the majority of the product used in Australia.

The first identified group of related workers who contracted silicosis in NSW was reported in literature in 2015. Further cases have been reported in the media since 2015. These included examples of relatively young workers developing silicosis, presumptively from inhaling silica dust derived from manufactured stone.

In 2017, SafeWork NSW listed RCS as one of the top ten priority chemicals in its 2017–2022 Hazardous Chemicals and Materials Exposures Baseline and Reduction Strategy (dated October 2017).

A legislatively-mandated case finding study conducted by SafeWork NSW in 20213 reported that screening conducted by icare between 2017–18 and 2019–20 found an average of 29 cases per year of silicosis among workers in the manufactured stone industry.4 Despite the relatively small size of this workforce, this was three times the number of cases of all workers engaged in all other at-risk industries.

While the heightened risk posed by respirable crystalline silica in manufactured stone was first published in research in 2010 and detected in cases from 2015, SafeWork NSW’s first substantial practical response commenced in 2018–19.

From July 2018, SafeWork NSW convened a Manufactured Stone Industry Taskforce, including representatives from industry, unions, health, education and other government agencies. During the term of this taskforce (which ended at 30 June 2019), SafeWork NSW conducted 523 visits to 246 manufactured stone sites. These inspections resulted in 656 improvement notices being issued, along with 43 prohibition notices (this included matters not related to silica). Prior to this, the extent of SafeWork NSW’s active response to the emerging risk was to conduct a limited inspection program of six work sites in May 2017 (one site) and August 2017 (five sites). The results of these six workplace visits were incorporated into a research project report that was finalised in August 2018.

In the period from 2012 to 2018, SafeWork NSW also received complaints about silica-related matters, including matters not related to manufactured stone. These are detailed in Exhibit 1 below. The number of complaints was a relatively small proportion of all complaints received, though the number increased after 2018. This increase may be a result of increased community and industry awareness through media reporting and SafeWork NSW’s proactive audit work.5 The majority of these complaints did not result in further regulatory action by SafeWork NSW beyond preliminary inquiries and, in some cases, site visits. The right-hand column of the below table shows key events leading up to and shortly after SafeWork NSW’s first regulatory interventions.

Exhibit 1: Silica-related complaints made to SafeWork NSW, 2012–2023
YearNumberSilica-related activity and events
201255International published research reiterates 2010 findings of a link between manufactured stone and silicosis.
201352 
201455 
201538First NSW case series linked to manufactured stone industry.
201654Youngest known case of silicosis in NSW admitted to hospital.
201770Crystalline silica listed as the second priority chemical (out of 10 priority chemicals) by SafeWork NSW. Media reporting on the ABC.
2018104SafeWork NSW commences proactive work. Manufactured Stone Industry Taskforce commenced. Media reporting on the ABC, The Project and Daily Mail on silicosis.
2019173NSW Parliamentary Dust Diseases Review.
Probable first Australian death from silicosis caused by manufactured stone.
2020210Silicosis becomes notifiable, fines introduced, workplace exposure standard halved.
2021174Respirable crystalline silica exposure in the NSW manufactured stone industry case finding study undertaken.
Media reporting by The Project and ABC 7.30 Report.
2022193 
2023*381 
TOTAL1559 

*         2023 data are to 30 November 2023.
Note: Complaints received by SafeWork NSW where the issue description includes ‘silic*’ or ‘benchtop’. This will include silica derived from sources other than manufactured stone, including relating to those products listed in the Safe Work Australia 2020 national guide.
Source: Audit Office analysis of WSMS data.

High-profile media reporting in 2018, 2021, and early 2023 appeared to provide impetus to SafeWork NSW’s regulatory actions. SafeWork NSW subsequently conducted further rounds of proactive compliance, education and awareness activities among identified workplaces. This work increasingly targeted high-risk workplaces. Since 2018–19, SafeWork NSW has conducted three rounds of workplace inspections that have progressively focused on the highest risk workplaces. This program has adopted a strategic and evidence-based approach.

Since October 2019, 17 matters were progressed to further investigation with a view to prosecution. Five silica-related matters have been filed in court for prosecution. Three of these matters were still in court at the time of this audit, and two matters have been finalised.

In 2020, NSW introduced a range of legislative reforms including:

  • Banning the practice of dry cutting engineered stone containing crystalline silica. Maximum penalty of $30,000 for a body corporate and $6,000 for an individual, with on-the-spot fines for uncontrolled dry processing of engineered stone.
  • Halving the Workplace Exposure Standard from 0.1mg/m3 to 0.05 mg/m3 (ahead of the national deadline to implement it).
  • Silicosis becoming a notifiable disease requiring clinicians to report each case of silicosis diagnosed in NSW. Those notifications are shared with SafeWork NSW to manage a NSW Dust Disease Register. An annual report is tabled in Parliament and published on the NSW Government website www.nsw.gov.au (NSW Silica Dashboard) alongside some information on compliance activities.
  • On 27 October 2020, silicosis became a notifiable disease requiring clinicians to report each case of silicosis diagnosed in NSW. Those notifications are shared with SafeWork NSW to manage a NSW Dust Disease Register. In August 2021, SafeWork NSW published the first NSW Dust Disease Register Annual Report, detailing diagnosed cases of silicosis, asbestosis, and mesothelioma in NSW during 2020–21 and the Case Finding Study Report on silica exposure in the Manufactured Stone Industry. The Annual Report is tabled in Parliament and published on the NSW Government website www.nsw.gov.au (NSW Silica Dashboard) alongside some information on compliance activities.

Also in 2020, SafeWork NSW released the NSW Dust Strategy 2020-2022, which identified silica as one of three focus areas for the regulator.

In February 2022, New South Wales introduced the NSW Code of Practice – Managing the risks of respirable crystalline silica from engineered stone in the workplace, based on the National Model Code that was finalised in late 2021. The Code provides practical information on how to manage health and safety risks associated with respirable crystalline silica from engineered stone in the workplace.

Silica continues to be a priority for SafeWork NSW in 2023 under the SafeWork NSW regulatory priority: Exposure to harmful substances - Reduce the incidence of worker exposure to dangerous substances in the workplace, particularly silica and dangerous chemicals.

The online NSW Silica Dashboard provides members of the public with information on SafeWork NSW’s silica workplace visit program that commenced in 2018 through to 30 September 2023.

Organisational silos within SafeWork NSW contribute to inconsistent regulatory decision-making, duplication of effort, and inefficient practices

There is evidence indicating that SafeWork NSW works in silos, with limited communication, collaboration, and awareness of activities across functions.

We note the finding made by the South Australian Independent Commission Against Corruption in reviewing SafeWork SA:

A failure to ensure adequate and appropriate communication within an agency can result in duplication of effort, inconsistent approaches to the same function and the creation of unique risks. 

The existence of silos was evidenced by the audit team through:

  • The inconsistent application of policies and procedures. For example, performance management practices differ between directorates and individual teams. This is further discussed in Chapter 4.
  • How data is used across SafeWork NSW. While there are pockets of effective data analysis, they often seem to operate in isolation from each other, resulting in duplication and a failure to achieve economies of scale and the benefits of synergies.
  • Limited feedback loops across SafeWork NSW. SafeWork NSW does not have an overarching continuous improvement framework, and communication surrounding decision-making is limited. For example, where the Investigations and Emergency Response team decide to discontinue an investigation, there is no requirement to inform the referring inspector that this has occurred, or the rationale behind the decision.

Similar findings on the existence of silos, and the need to improve teamwork and collaboration, have been made by SafeWork NSW in internal reviews undertaken as part of restructuring activities.

This audit also found broader issues of concern regarding organisational structure. SafeWork NSW staff frequently expressed reservations about the effectiveness of the current structure and compared it unfavourably to the regulator’s previous form. In particular, some SafeWork NSW staff said that the existing structure:

  • reduced SafeWork NSW’s profile as the regulator for work health and safety in NSW
  • confused lines of accountability for senior strategic leadership
  • diluted the regulator’s focus and the cohesion of the staff.

The Independent Review of SafeWork NSW being conducted by Mr Robert McDougall KC is examining organisational structural issues. In the interim, the decision has been made by DCS that SafeWork NSW will transition out of the Better Regulation Division of DCS from 1 December 2023, to become a standalone division within DCS.

Organisational restructuring and any uncertainty that it involves in the short- to medium-term could impact on the SafeWork NSW's progress in achieving desired policy outcomes, especially if the change management process is not effective.

The lack of a strategic approach to data and intelligence by SafeWork NSW hampers effective targeting and prioritisation of proactive compliance activity

Effective proactive compliance work is an important part of an effective regulatory approach. For SafeWork NSW, these activities range from dedicated state-wide programs over extended periods through to specific, localised ‘blitzes’ of targeted workplaces. These activities are performed alongside 'reactive compliance activities' such as responding to incidents, complaints, or requests by ‘persons conducting a business or undertaking’ (PCBUs) for education and awareness-building activities.

In accordance with Safe Work Australia’s National Compliance and Enforcement Policy, proactive compliance activities are intended to be:


…conducted in line with the activities of assessed highest risk and the strategic enforcement priorities.
 

SafeWork NSW’s proactive compliance activity is intended to be based on:

  • SafeWork NSW’s annual regulatory priorities
  • data and insights on high-risk harms, industries or businesses
  • the identification of new or emerging risks
  • targeted programs focused on reducing the greatest harms.

As discussed earlier in this section, SafeWork NSW does not effectively use data to inform priorities or to assess risk.

While managers at SafeWork NSW referred to an overall target for proactive work (it was commonly suggested that between 60% and 70% of regulatory activities should be proactive), we were informed by the Head of SafeWork NSW (and Deputy Secretary of the Better Regulation Division) that there was no specific target.

In practice, there is significant variation in the mix of proactive and reactive compliance activities between directorates and teams, with some teams doing either largely proactive or largely reactive activities. This can depend on the nature of the industry sectors and geographic areas in which they function, and the extent of teams’ non-discretionary reactive workload.

Planning, implementing and evaluating proactive compliance work is inconsistently done across SafeWork NSW, making it hard to assess whether resources are being used effectively

The audit team found widely differing approaches to how directorates and even individual teams within the same directorate used evidence to identify and target risk areas for proactive work programs, such as blitzes. While there was evidence that data was used to inform how activities would be targeted, this was not consistent. For example, some teams draw on intelligence generated by dedicated interventions staff in their directorates, while others rely entirely on opportunistically identifying potential worksites for proactive work by driving or walking past sites. The audit found examples of effective use of data and intelligence to plan proactive activities.

There is also no consistent approach to planning, implementing, or evaluating proactive compliance work across SafeWork NSW. Even within the same directorate, there can be significant differences in approach. Some of these differences can be explained by the different types of matters and circumstances that apply to PCBUs across different industries. However, inconsistencies extended to fundamental aspects of proactive compliance work such as:

  • the rigour of evidence and intelligence by which priorities are determined and targeted, which was partly reflected by directorates having different levels of internal data capability
  • the degree of project management capability and resourcing, including where some directorates have dedicated specialist project management skills, while others rely on inspectors to perform project management
  • the extent to which different directorates and teams had a clear approach to how programs would be evaluated, beyond simply measuring activity, something which appears undermined by the absence of an evaluation framework
  • whether the strategic intent of programs and blitz activities are to drive meaningful behavioural change or just, as some interviewees expressed it, to ‘make sure they tick some boxes.’

These material differences and lack of consistency in approaches to proactive compliance makes it difficult to assess whether these activities are effective and efficient regulatory interventions. While there was strong support for proactive compliance activity among both managers and inspectors (indeed, most thought that there should be more proactive activity), there were relatively few who could provide an evidence base to justify the significant staff resources that they consume.

The Centre for Work Health and Safety has a function to improve data, research, and evidence to support risk identification

The Centre for Work Health and Safety (CWHS), a functional unit within SafeWork NSW, was established in December 2017 under the WHS Roadmap 2016-2022. Among other things, it has an insights and analytics function. Its establishment was driven by the recognition that SafeWork NSW was not effectively using data and evidence to support its decision-making and activities.

Two pieces of work undertaken by the CWHS are intended to provide SafeWork NSW with greater capability in identifying and addressing risk in both strategic and operational contexts.

First, the WHS Radar project is intended to deliver ‘…regular and actionable insights about WHS in an Australian context.’ Conducted twice a year, the WHS Radar synthesises information about work health and safety by drawing on five sources of evidence:

  • existing data, including incidents, worker’s compensation, ABS, and prosecutions
  • analysis of grey literature (non-peer reviewed sources, such as government reports, some conference papers, and reports from academic, business and industry bodies)
  • social media listening
  • nationwide survey of WHS inspectors and experts
  • nationwide survey of Australian workers across all industries.

The WHS Radar is intended to reduce the extent to which SafeWork NSW is dependent on lag data, by actively collecting more contemporaneous data from multiple sources. The first WHS Radar report was released publicly in April 2023.

A second piece of work delivered by the CWHS is the WHS Risk Rating tool for a PCBU.6 This tool attributes a rating to many businesses in NSW based on assessment of their future risk of non-compliance with WHS legislation. The WHS Risk Rating is intended to:

  • support existing SafeWork NSW Triage decision-making
  • support IDMP decision-making
  • select high-risk profiles during blitz operations
  • proactively screen and target high-risk profiles.

While some managers in SafeWork NSW did use the WHS Risk Rating tool, others were less confident in its value, expressing doubts about the accuracy and completeness of the data, or were not aware of it at all. These inconsistent views between different managers and directors, between those who use the WHS Risk Rating tool and those who do not use it or do not even have awareness about it, suggests that its purpose and functionalities have not been fully communicated to the wider inspectorate.

The governance of the CWHS, and particularly its relationship to SafeWork NSW, is somewhat unclear. While the Centre sits under the Executive Director, Regulatory Engagement, it identifies on its website as ‘A division of the Department of Customer Service’. Structurally, it is equivalent to a directorate under the Regulatory Engagement business area of SafeWork NSW, rather than a division of the department.

SafeWork NSW's inspectors are its core asset, and its ability to recruit, train and retain inspectors is key to fully performing its functions and meeting the internationally recognised benchmark

SafeWork NSW is funded to fully operate with up to 370 inspectors, though with 352 inspectors at August 2023 it has not recruited to full capacity.

Staff retention within the inspectorate has been a historic strength of the regulator. However, there has been a recent increase in inspector turnover. SafeWork NSW notes that from 2020 to 2022 attrition rates doubled from 5.3% to 10.6% within the inspectorate, which – due to the average age of its workers – was anticipated. Nearly one-third of inspectors were 56 years or older in the 2021–22 financial year. SafeWork NSW also experienced a general increase in resignations since the COVID-19 pandemic.

Increased recruitment activity is intended to mitigate the impact of ongoing attrition due to retirement. However, given the training requirements for new inspectors, there is a significant lag time between recruitment and the utility of inspectors in the field to progress regulatory priorities. SafeWork NSW notes however that inspectors receive authorisations to use their powers throughout the 12-month training period, with individuals assessed at a number of stages based on individual competence.

Where there have been capacity limitations, there have been localised responses such as the sharing of inspectors between teams, or the change in resourcing profile of investigations where instead of one inspector working on a case, a case is assigned to a team.

The International Labour Organization sets a benchmark of one labour inspector per 10,000 workers in industrial market economies. This benchmark is considered the number of inspectors deemed sufficient to ensure the effective discharge of the duties of the inspectorate. In October 2022, SafeWork NSW reported at the Parliamentary Budget Estimates Committee hearings that recruiting the full contingent of 370 inspectors would have meant that there was one SafeWork NSW inspector for every 10,000 workers, allowing it to meet this benchmark.

SafeWork NSW provided advice to the audit team that forecast increases in the number of workers and workplaces in New South Wales will result in 471 inspectors being required to meet the International Labour Organization benchmark by 2027.

SafeWork NSW inspectors can take up to two years to be considered ready to be fully utilised, due to training requirements and variations in their experience

Once recruitment is completed and new inspectors commence employment, they will start the New Inspector Training Program (NITP). The NITP is a 12-month comprehensive training program which prepares new Inspectors to perform the duties required of an Inspector within SafeWork NSW as well as providing training and assessment required for the PSP50116 Diploma of Government (Workplace Inspection) qualification. Inspectors will be fully trained after 12 months.

They will be issued with their instrument of appointment (authorities) to use their powers throughout the 12 month course. However it was noted throughout interviews with the inspectorate that it can take up to two years for new inspectors to be deployed in the field on their own and confidently making decisions. SafeWork NSW notes that the level of mentoring and support provided to individual inspectors, and access to a variety of experiences to build a range of skills contributes to variations in new inspectors building their confidence.

SafeWork NSW also provides:

  • a structured framework for new inspector onboarding and capacity-building, including in May 2023 formalising requirements for accompanied field visits, and delivering the NITP, delivered by the SafeWork NSW Registered Training Organisation (RTO) and utilising experienced inspectors from across the directorate to deliver training across the 12-month period
  • a SafeWork NSW Inspectorate and Manager Continuing Professional Development Program Policy
  • formal processes for Inspectorate Continuing Professional Development and Manager Continuing Professional Development, including recognition of prior learning through credit transfer from other registered training organisations
  • a formalised procedure for inspectors to progress to senior inspector and principal inspector.

While it was beyond the scope of this audit to assess the effectiveness of this training and capability development framework, it was recognised by interviewees that the commitment of time and resources provided by SafeWork NSW to training inspectors was significant. This underscores the importance of ensuring the effective use of inspectors.

There are inconsistent expectations around the responsibilities of SafeWork NSW inspectors and managers for identifying new and emerging issues

Inspectors may apply to the Inspector Progression Panel of SafeWork NSW to progress from Inspector to the level of Senior Inspector, or Senior Inspector to the level of Principal Inspector. In addition to the overarching requirements of the (Department of Customer Service – SafeWork NSW Inspectors 2007) Reviewed Award, this process is governed by a formal written procedure.

This procedure sets out that in considering applications for progression, the panel should take into account whether the applicant has fulfilled the responsibilities of their current role. The procedure specifies that inspectors and principal inspectors are accountable to:

Identify trends and emerging issues and provide advice to inform decision making.’ 

It is unclear why inspectors and principal inspectors have this responsibility, but not the intermediate level of senior inspectors. It is also unclear whether people managers, such as team managers, directors, and executive directors, also have similar formal obligations to proactively identify emerging issues.

Moreover, as senior inspectors are not accountable for identifying trends and emerging issues, inspectors are not assessed against this accountability when seeking progression to the senior inspector level. In contrast, when seeking progression from senior inspector to principal inspector, the applicant is required to provide evidence of how they meet this accountability, even though it is not an accountability specified for senior inspectors.

The accuracy of SafeWork NSW’s workforce planning is uncertain

Workload capacity is managed at the directorate level, with a forecasting report on the capacity across all teams discussed quarterly at the SafeWork NSW Leadership Group. Inspectors do not fill out timesheets, instead, this is based on time estimates for specific activities undertaken by inspectors. Directorates are also responsible for leading or supporting work against specific regulatory priorities, requiring directorates to discuss workforce capacity as part of planning proactive work.

SafeWork NSW has a 'workload management treatment model' that provides operation guidance once certain thresholds are reached within this forecasting report. These mechanisms include the reallocation of resources within the directorate at 125% of capacity reached, sharing and reallocation of work between equivalent portfolios at 150% of capacity reached, and cross directorate sharing of work and resources as well as the cessation or deference of work at 175% of capacity reached.

The actual allocation of inspectors to individual directorates is determined at the executive level when vacancies arise, with SafeWork NSW noting that 'consideration is given to the demand for regulatory services (current and expected future) across all teams to determine which directorate and office location a replacement position should be allocated'.

Audit interviews identified some concern that the calculations the forecasting reports are based on were not accurate, overestimated time, and that the data was used inconsistently and as a method to 'grab for resources'. While this audit did not examine SafeWork NSW's forecasting methodology in detail, a sample of the workforce forecasting report for April to June 2023 showed average capacity ranging from 9% to 390%, which may indicate under-utilised or over-utilised teams, or under or overweighted activities.

While there are mechanisms in place to review operational capacity, longer-term strategic workforce planning does not seem to form part of these review processes.

As part of developing its regulatory priorities, SafeWork NSW released a discussion paper that noted broader trends affecting workplaces and communities that it regulates, for example the rise in mental health issues in the workplace, automation, and the return of regional on-shore manufacturing. SafeWork NSW has a SafeWork Inspectorate and Manager Continuing Professional Development Program Policy, however this policy was only finalised in July 2023.


3 This study, conducted by a third-party, stemmed from a recommendation made by the NSW Parliament’s 2019 Dust Disease Review to amend the WHS Act to require SafeWork NSW to ensure that a case finding study was carried out:

  • to investigate respirable crystalline silica exposure in the manufactured stone industry, and

  • to gather information to improve the identification and assessment of workers at risk of exposure.

The purpose of this recommendation was to ‘to improve the identification and assessment of workers at risk of exposure.

4 The authors of this case finding study identified significant data limitations, which meant that it was not possible to estimate with confidence the complete number of workers potentially affected by silicosis.

5 Because of the lag period between when a worker is exposed to risky work practices and when they may develop silicosis, complaint data is not necessarily a useful tool to identify the emerging risk, especially where awareness of the risk is low. Unlike with risks that pose a more immediate and direct harm – such as falling off an insecure elevated platform - individuals may be less conscious to complain about a risk where the potential injury is not immediately visible.

6 A person conducting a business or undertaking has the primary duty of care for work health and safety.

 

This chapter considers how effectively SafeWork NSW measures and reports its performance in monitoring and enforcing compliance with the WHS Act. This includes whether it has meaningful performance measures, whether its performance is transparent to all stakeholders, and whether it uses performance information to support continuous improvement and quality assurance.

Performance measurement and reporting are essential to demonstrating a regulator's effectiveness

The Audit Office’s 2022 Audit Insights 2018–22 report noted that:

Defining measurable outcomes, tracking and reporting performance are core to delivering system stewardship, and to ensure effective and economical use of public funds.’ 

The same report also observed that government activity should:

…be supported by performance frameworks that provide structure for agencies to set performance targets, assess performance gaps, measure outcomes achieved, and benefits realised, capture lessons learned, and implement continuous improvement. 

Relatedly, the Organisation for Economic Co-Operation and Development has said that it is important for regulators to be aware of the impacts of their regulatory actions and decisions, and that this:

…helps drive improvements and enhance systems and processes internally. It also demonstrates the effectiveness of the regulator to whom it is accountable and helps to build confidence in the regulatory system. 

SafeWork NSW reports its activities and performance against certain KPIs, along with equivalent regulators in other Australian jurisdictions

Safe Work Australia, the national policy body for work health and safety, collects, analyses and publishes data across jurisdictions. SafeWork NSW provides data on regulatory activities such as the volume of proactive and reactive regulatory work, and performance measures such as injuries and fatalities. This is contained in the Safe Work Australia Comparative Performance Monitoring – Work Health and Safety Performance, and Work Health and Safety Compliance and Enforcement Activities reports.

The data published by Safe Work Australia provides comparative and longitudinal performance data relating to workplace injuries, fatalities, and compliance activities. This is ‘lag’ data, often 12 months or more in arrears. SafeWork NSW notes that due to the currency of data, it is not useful for planning purposes.

The ability to directly compare jurisdictional activities to form a view on the effectiveness of each regulator is limited, due to differences in how each work health and safety regulator works and the scope of their powers and responsibilities. For example, unlike in other states and territories, SafeWork NSW is not responsible for claims management or return to work matters.

Data reported by SafeWork NSW to Safe Work Australia indicates that, while fatalities have decreased, SafeWork NSW may not have had meaningful impact on the rates of serious injuries and disease claims since 2016–17

The data provided to Safe Work Australia shows that SafeWork NSW has presided over a period where there has been an increase in the incident rate of serious injury and disease claims in New South Wales. While SafeWork NSW is not responsible for workers compensation, the payment of workers compensation necessitates that a workplace injury has occurred.

The audit team has not seen evidence that SafeWork NSW has interrogated the root cause data trends since 2016–17 (discussed below). While the causes of workplace injury are often complex and multifaceted, the data suggests that SafeWork NSW may not be having a meaningful impact on reducing rates of serious injuries, but the poor data quality means that we cannot be sure. It was beyond the scope of this audit to specifically examine serious injuries and disease claims, or the root cause(s) for the upward trend.

An extract of one performance indicator is shown in Exhibit 2 below. It shows serious injury and disease claim data from 2012–13 through to 2020–21 (where 2020–21p stands for preliminary data). The 2015–16 financial year is highlighted to indicate the establishment phase of SafeWork NSW.

 

This chapter considers selected policies and procedures that SafeWork NSW has implemented to ensure that it performs its compliance functions in a manner that is consistent with regulatory good practice. This includes that regulatory decisions are fair, consistent, predictable, transparent and in accordance with any laws or government policy. This extends to how complaints and incidents are initially triaged, the decisions inspectors make in response to complaints or incidents, and decisions made about whether a matter is referred to investigation for possible prosecution.

SafeWork NSW has made significant efforts to promote consistency in regulatory decision-making

A core element of an effective compliance regime is that the regulator’s behaviour and decision-making should be consistent and predictable. This encourages trust and confidence in the regulator, while promoting clarity and certainty among regulated entities.

SafeWork NSW faces particular challenges to achieving consistency in regulatory outcomes without fettering the legislative decision-making authority of individual inspectors. The audit was made aware of cases where stakeholders could not understand the rationale by which decisions were made, including in matters raised in Parliamentary Budget Estimates Committee hearings.

The reasons for the lack of consistency, whether perceived or actual, includes such matters as:

  • the unique circumstances that may apply to individual risks, hazards, or incidents
  • the wide variation in characteristics of PCBUs, including in regard to matters that might affect their culpability for non-compliance, such as their size or compliance history
  • varying levels of experience across inspectors
  • potential differences between individual inspectors in risk appetite, regulatory posture and attitudes to varying regulatory interventions.

These complexities have received heightened attention by SafeWork NSW since the 2020 findings of the NSW Ombudsman’s inquiry into SafeWork NSW and the Blue Mountains City Council. Among other things, in this inquiry the Ombudsman found that:

  • only inspectors had the authority to form a ‘reasonable belief’ that non-compliance with the WHS Act or regulation had occurred
  • where an inspector forms a ‘reasonable belief’ of non-compliance, then they must issue a regulatory notice
  • instances had occurred where inspectors had issued notices without forming the necessary ‘reasonable belief’ that valid grounds existed for those notices
  • inspectors had issued notices without forming their own requisite ‘reasonable belief’ because they had been directed to issue notices by management.

Notwithstanding these challenges, SafeWork NSW was able to demonstrate that it has implemented measures aimed at promoting consistency in regulatory decision-making. These measures include:

  • extensive guidance in exercising discretionary decision-making
  • inspector practice notes
  • directorate and team level discussions intended to promote consistency in decision-making.

These measures are primarily focused at encouraging consistency in the application of the law prospectively. There was less evidence that decisions were consistently, formally, and robustly reviewed retrospectively, such as by:

  • peer review
  • internal audit or quality assurance of decisions
  • managerial coaching and mentoring.

The audit found varying practices and processes across SafeWork NSW teams and directorates for these sorts of retrospective and reflexive learning processes. Some managers and directors were able to describe regular review activities, either through one-on-one case reviews with individual inspectors, or through team meetings, though the evidence was that these activities were not consistent across regulatory decision-making areas of SafeWork NSW.

Such retrospective mechanisms would not be aimed at varying decisions already made, but at contributing to standardising how inspectors make future decisions by promoting consistency through setting precedents for responding to substantively similar matters.

Staff performance management is inconsistent across SafeWork NSW, which may hinder consistent practices, behaviours and outcomes

The use of organisational performance management and planning systems can be an important tool for promoting consistent behaviours, understandings and outcomes.
This audit included a survey of all members of the inspectorate, excluding team managers. Approximately 60% the inspectorate responded to the survey. The survey of found that:

  • 36% said that they did not have an annual performance agreement – almost one in every two inspectors (46%) in the two metropolitan focused directorates said they did not have performance agreements that set out what was required of them
  • the Investigation and Emergency Response directorate had a comparatively higher rate of reported performance agreements in place (80%) than all the other directorates that comprised SafeWork NSW (57%) – the reasons for this were not examined by the survey.

Findings from a survey of the inspectorate highlight the role of discretion in decision-making, and how these factors can be inconsistently applied

The survey conducted by the audit also asked inspectors about how different factors might affect their decision to issue a penalty notice for a breach of the WHS Act (excluding the most serious categories of matters that would ordinarily be immediately referred to full investigation and possible prosecution).

The discretionary factors that were included in the survey included:

  • a sample taken from SafeWork NSW's written procedure for issuing penalty notices (shown in Exhibit 5 below)
  • a small number that had been raised with the audit team by SafeWork NSW staff during interviews, namely: current regulatory priorities, media or political interest, and the size of the PCBU (specifically, whether or not a hypothetical PCBU was a small, family-owned business).
Exhibit 5: Discretionary factors when issuing a penalty notice

Factors that are considered relevant to the exercise of discretion to issue a penalty notice are:

  1. The seriousness of the risk and the actual or potential consequences or harm.
  2. The extent of any injury or illness (penalties must not be issued for a fatality or serious injury which may lead to a full investigation or prosecution unless in accordance with this procedure).
  3. The duty holder’s safety and compliance history, e.g., a repeat offender or there is a likelihood of the offence being repeated.
  4. The prevalence of the offence in the jurisdiction and industry impact.
  5. The culpability of the duty holder, that is, how far below acceptable standards the conduct falls and the extent to which the duty holder contributed to the risk.
  6. Whether the duty holder was authorised to undertake certain types of work, e.g., work requiring a licence, registration, permit or other authority (however described) as required by the regulations.
  7. Prior notice of the risk or offence (e.g., direct to the duty holder or through codes of practice, educational material, safety alerts, guidance sheets, campaigns or priority interventions etc).
  8. Whether the circumstances warrant the application of an administrative sanction at a lesser scale than an enforceable undertaking or prosecution (in addition to remedial action in the form of an improvement or prohibition notice).
  9. Any mitigating or aggravating circumstances including efforts undertaken by the duty holder to control risks and the duty holder’s co-operation and willingness to address the issue.

Source: SafeWork NSW, Penalty Notice Procedure.

Inspectors were asked whether a range of selected factors were in general more, less, or not at all likely to influence their decision to issue a penalty notice.

As shown in Exhibit 6 below, the survey found that the most common response to most of the factors was that they made it neither more nor less likely that an inspector would issue a penalty notice in response to non-compliance. In some cases, this is probably to be expected.

For example, whether or not a non-compliant PCBU is a NSW government agency should probably not affect whether it is issued with a penalty notice. This was the case for 80% of respondents (though notably, 20% of inspectors responded that it would affect their decision, including 3% who responded that they would be much more likely to issue a penalty notice).

Other variations seem less intuitive to explain. This is particularly the case when a factor is written in policy or procedures. For example, 44% of inspectors responded that their decision would not be affected by whether or not the PCBU had prior notice of the risk, even though prior notice is prescribed in the SafeWork NSW procedure as a factor that should be taken into account (see item 7 of Exhibit 5).

The role played by SafeWork NSW regulatory priorities is also uncertain. On the one hand, 62% of inspectors said that they would be more (39%) or much more (23%) likely to issue a penalty if the non-compliance related to a regulatory priority, while 38% said it would have no impact.

The survey also found noticeable variations in responses between directorates regarding when penalty notices would be more or less likely to be issued. This included in regard to:

  • whether a non-compliant PCBU was a small business or not
  • the role of PCBU culpability
  • whether non-compliance related to a matter of media or political interest.

This chapter presents a case study that arose during the course of this audit. The case study demonstrates issues discussed in earlier chapters of this report, particularly in relation to the management of risk and the proper application of policies and procedures to ensure SafeWork NSW’s effectiveness as a regulator.

About the case study

The case study concerns the activities of the Department of Customer Service and SafeWork NSW, the latter of which is located within the department. Neither the case study nor this performance audit generally examined the activities of the commercial partner (including any related companies) referenced in the case study, including Trolex Ltd (UK), Trolex Nome Australia Pty Ltd., or Trolex Sensors Pty Ltd. No findings have been made, either express or implied, in relation to the commercial partner.

The case study was based on a review of evidentiary documents, primarily in the form of emails sourced from SafeWork NSW. To avoid compromising other processes, interviews were not held.

SafeWork NSW’s respirable crystalline silica real-time detection project

As discussed earlier, silicosis is a progressive, occupational lung disease resulting from inhalation of respirable crystalline silica. In recent years, there has been high profile attention to respirable crystalline silica exposure from manufactured stone products (such as kitchen benchtops), though these risks had been published in international research since at least 2010. Unlike asbestos, respirable crystalline silica from manufactured stone can lead to the development of silicosis and other lung diseases after relatively short exposure and latency periods, resulting in relatively young workers developing serious diseases.

From 2016 to 2022, SafeWork NSW’s Work Health and Safety Roadmap included a target to reduce workplace exposure to priority hazardous chemicals and materials by 30%. This focus was retained in SafeWork NSW's regulatory priorities for 2023, which included the aim of reducing the incidence of worker exposure to harmful substances such as silica.

In 2018, SafeWork NSW commenced a project to fund a ‘research partner’ to develop a device that would detect in real-time the presence of respirable crystalline silica in workplaces. This project was led by the Centre for Work Health and Safety within SafeWork NSW.

Following a selection process, Trolex, a private company from the United Kingdom, was selected as the research partner. Trolex developed a device intended to meet the objective of the project. This device is called the Air XS and sells for approximately $18,500 AUD. The Air XS device was launched on 7 April 2022. The first-generation of the Air XS devices are no longer on the market, however up to 60 second-generation devices are currently in use across Australia.

In December 2022, this research project won the DCS Secretary’s Award for Excellence in Digital Innovation and was also one of the department’s nominees for a Premier’s Award in 2022.

As part of understanding SafeWork NSW’s response to the work health and safety risks of respirable crystalline silica from manufactured stone products, the audit examined this research project to procure a 'research partner' to develop a respirable crystalline silica real-time detection device. The findings of this examination are set out below.

SafeWork NSW’s processes were ineffective in responding to and mitigating risk and in ensuring compliance

As detailed below, our examination of this project found significant governance failings in SafeWork NSW, including the absence of key documentation, which created risks relating to whether the project would deliver its objective and whether it complied with procurement requirements. Concerns about whether the Air XS device would satisfy project objectives were not properly addressed.

We also found non-compliance with mandatory procurement policies. The failure to ensure compliance with procurement requirements leaves open the risk that value for money was not achieved, or that the procurement was not fair, transparent, consistent with promoting competition, or free from corruption or maladministration.

As a result of the Audit Office raising these issues with the Head of SafeWork NSW, the regulator undertook to enter into discussions with the CSIRO to conduct further testing of the real-time RCS detection device.

Concerns were raised by staff about the accuracy of the Air XS devices, though these concerns were not escalated beyond Director-level staff

Both before and after the launch of the Air XS device, concerns were raised by technical staff within SafeWork NSW about the accuracy of the devices and the rigour with which they had been tested during development.

It should be noted that the manufacturer, in correspondence with SafeWork NSW, defended the accuracy of the Air XS devices. It was beyond the scope of the audit to reconcile apparently conflicting technical assessments. Rather, the audit examined how SafeWork NSW managed the potential project delivery risk when these material concerns were raised.

Toward the end of 2021, concerns first emerged about the accuracy of the Air XS devices in emails between staff in the Regulatory Engagement business area of SafeWork NSW. These emails outlined concerns that the Air XS devices were not sufficiently accurate in detecting respirable crystalline silica. These views were derived from testing performed outside of any technical assurance process. At the time, these concerns were not shared with executive-level staff, including with any relevant Directors.

By the end of March 2022, the Centre for Work Health and Safety had requested and received from Trolex testing reports on the Air XS device. Two technical staff in the Testing Services directorate of SafeWork NSW were asked to review the testing reports. They were given five days to conduct these reviews.

On 5 April 2022, two days before the product was launched, one of the technical staff emailed the Director, Testing Services, advising that each of the two technical staff had independently prepared assessments and that their conclusions were ‘…not what DCS will want to hear’.

The internal assessment reports were subsequently provided to the Director, Testing Services, and to the Centre for Work Health and Safety. One of the reports stated that the product was not ‘market ready’ and that further testing was required. The audit did not find evidence that these conclusions were escalated to the Executive Director, Regulatory Engagement.

On 6 April 2022, the research project manager was advised by a staff member in the Centre for Work Health and Safety that an independent expert’s report (commissioned by the Centre for Work Health and Safety) concluded that ‘…there isn’t enough data to assess the validity of the device’.

Despite these concerns, the product launch occurred on 7 April 2022.

The audit found that concerns were again documented on at least two occasions after the product was launched. First, in September 2022, a senior technical staff member in the Centre for Work Health and Safety expressed concerns to colleagues, including the Director, Testing Services, that the staff member was uncomfortable promoting the Air XS without further testing being conducted.

Secondly, in May 2023, an internal test report prepared within the Testing Services business unit highlighted specific concerns about the accuracy of a first-generation Air XS device. This internal test report was provided to the Director, Testing Services, and was conducted with at least the knowledge of the Director, Research and Evaluation.

In both cases (September 2022 and May 2023), there are gaps in the evidence concerning how widely these internal concerns were shared. The audit found no evidence of:

  • any material response by SafeWork NSW management to address the concerns that had been raised
  • any assessment of risks posed to SafeWork NSW and other stakeholders
  • any escalation of the concerns to the relevant Executive Director or to the Head of SafeWork NSW.

This apparent lack of management action was despite the potential risks to the work health and safety of workers who may have relied on the Air XS, and to the reputation of the regulator.

Some SafeWork NSW staff were hesitant to raise concerns about the Air XS device

Some staff reported to us that they did not raise these risks with their managers due to concerns that to do so might affect their employment. In the Auditor-General’s 2018 audit report Managing risks in the NSW public sector: risk culture and capability, it was noted that:

Effective risk management is essential to good governance, and supports staff at all levels to make informed judgements and decisions. 

The report also observed that it is now widely accepted that organisational culture is a key element of risk management because it influences how people recognise and engage with risk. This includes ensuring that agencies have a culture of open communication so that all employees feel comfortable speaking openly about risks.

In this case, SafeWork NSW lacked the risk processes and culture to encourage all staff to identify, raise, escalate, and respond to risk appropriately. While the department does have a mechanism (via dedicated phone and email contacts) for staff to report integrity concerns, this mechanism was not used.

Concerns about the Air XS device were also raised by an external user of the device, though there is no evidence that these concerns were substantively addressed

On 21 August 2023, a senior manager from an external user emailed staff in SafeWork NSW’s Testing Services Directorate to advise that they had told the local distributor that they no longer wished to conduct further testing, nor purchase any Air XS devices. The senior manager stated that:

…the claim that the Air XS Silica monitor ‘delivers highly accurate, continuous, real-time silica detection’ could not be validated by the distributor despite many requests and efforts in the field to test the monitors and validate the data. 

The senior manager further stated that they were:

…disappointed that SafeWork NSW promotes the monitors with no evidence, known and/or held by them, that the monitors deliver the promoted monitor outcomes. 

The audit found no evidence that these concerns were meaningfully addressed by SafeWork NSW.

The process of procuring a ‘research partner’ to develop the Air XS device was flawed, in that there was non-compliance with procurement obligations and inadequate record keeping

The cost of procuring the Air XS research partner increased from an initial estimated cost of $200,000 when the request for tender was issued in May 2019 to $1.34 million when the final contract was executed in August 2019.

The audit found non-compliance in the process undertaken by the CWHS to procure the research partner. This non-compliance related to the requirements of the applicable departmental procurement manual, as well as with DCS financial delegations, and with the tender evaluation plan prepared for the process.

Examples of non-compliance and other poor practices are outlined below.

  • The Director, Research and Evaluation, was a voting member of the evaluation committee and also signed the acceptance letter for the successful proposal. This contravened the department’s procurement requirement that an approving delegate may not also evaluate tender responses. At the time, the estimated cost of the engagement was $200,000 and was therefore within the Director’s financial delegation.
  • The evaluation of the submitted tenders included an assessment provided by a designated non-voting member of the tender evaluation committee who had a declared conflict of interest.
  • One member of the tender evaluation committee lodged a strong objection to the preferred provider. SafeWork NSW could not provide documentation about how this objection was addressed.
  • When the final cost of the engagement increased to $1.34 million by August 2019, the Director, Research and Evaluation, no longer had the necessary delegation to approve the engagement of Trolex. Under the delegations issued by the DCS Secretary on 29 August 2019, the approval of an Executive Director was required for contracts valued between $500,000 and $2 million.
  • The scoring in the tender evaluation committee’s (unsigned) evaluation report did not comply with the approach set out in the tender evaluation plan. This was material as, had the tender evaluation plan been followed, two tenders would have been assessed as having the same successful score.
  • SafeWork NSW was unable to provide:
    • a signed and dated copy of an approval to issue the initial request for tender
    • a signed and dated copy of an approval for SafeWork NSW to enter into a formal agreement with Trolex
    • a final tender evaluation report signed by all members of the tender evaluation panel
    • evidence of any approval to increase the value of the contract from the $200,000 anticipated in the initial request for tender up to the $1.34 million final value of the contract.

Such non-compliance can contribute to the risk of maladministration in procurement activities, including by undermining probity and challenging whether value for money is achieved.

 

Appendix one – Response from agency

Appendix two – About the audit

Appendix Three – Performance auditing

 

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

 

Parliamentary reference - Report number #390 - released 27 February 2024

 

Published

Actions for Flood housing response

Flood housing response

Planning
Whole of Government
Community Services
Premier and Cabinet
Internal controls and governance
Management and administration
Procurement
Project management
Risk
Service delivery
Shared services and collaboration

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.

Extreme rainfall across eastern Australia in 2021 and 2022 led to a series of major flood events in New South Wales. In response, the NSW Government declared each of these events a natural disaster and made available a wide range of support for affected individuals and businesses. The flooding experienced by the State was widespread and its severity caused significant destruction in communities across the State. Some of the most significant damage occurred in the Northern Rivers and Central West regions of New South Wales.

Whilst areas of the Northern Rivers are prone to regular flooding, the scale of flooding in 2022 had not been experienced in the region before. On 28 February 2022, the Wilsons River in Lismore reached a height of 14.4 metres, approximately 2.3 metres higher than the previous record. A second flood occurred on 30 March 2022, with the river reaching 11.4 metres. The flooding in the region was extensive, affecting towns including Lismore, Coraki, Woodburn and Ballina. Between late February and early April 2022, 13 lives were lost in the Northern Rivers floods. In addition, 4,055 properties were deemed uninhabitable, and a further 10,849 properties were assessed as damaged. Approximately 4,000 people had to be evacuated from Lismore alone during this period, with thousands displaced from their homes across the region.

In the Central West, on 14 November 2022, the Lachlan River at Forbes peaked at 10.6 metres and was categorised as major flooding due to the inundation of extensive rural areas with properties, villages and towns isolated. On the same day in Eugowra, the Mandagery Creek peaked at 9.8 metres, passing the previous record of 9.6 metres in 1950. Flooding occurred in other areas of the Central West including Parkes, Molong, Cowra and Canowindra. Two lives were lost in the town of Eugowra with 80% of homes and businesses in the town damaged.

This audit assessed the following two areas of NSW Government support provided in response to these flood events:

  • Provision of emergency accommodation: short-term accommodation provided to displaced persons unable to return to their own home in an emergency situation.
  • Provision of temporary housing provided in the form of temporary pods and caravans.

The Department of Communities and Justice (DCJ) is responsible for the provision of emergency accommodation and other welfare services in response to a disaster event. With regards to temporary housing, the following agencies were involved in this audit:

  • Resilience NSW was the lead agency responsible for recovery and led the implementation of the temporary housing program under the oversight of the Chair, Housing Taskforce (HTF) from July 2022. On 16 December 2022, Resilience NSW was abolished, with some staff transferred to the NSW Police Force, Department of Premier and Cabinet (DPC) and DCJ. The remaining staff were transitioned to the newly established NSW Reconstruction Authority.
  • The Department of Planning and Environment (DPE) chaired the HTF until July 2022 and led the process for the identification and evaluation of temporary housing village sites. On 1 January 2024, DPE was abolished and the DPE functions discussed in this report now form part of the Department of Planning, Housing and Infrastructure.
  • NSW Public Works (NSWPW), a branch of the Department of Regional NSW (DRNSW) procured and managed the construction of the pods used in this program, and procured the caravans used as part of the temporary housing response.

The then DPC (now Premier’s Department (PD)) was responsible for whole-of-government policy advice, convening the Crisis Policy Committee of Cabinet, and whole-of-government communications.

This audit assessed how effectively the NSW Government provided emergency and temporary housing in response to the early 2022 Northern Rivers and late 2022 Central West flood events. We addressed this objective by examining whether the audited agencies:

  • effectively planned for the provision of emergency accommodation and temporary housing prior to the flood events
  • provided emergency accommodation and temporary housing to meet the needs of affected communities in response to the flood events
  • are effectively capturing lessons learned in relation to their provision of emergency accommodation and temporary housing as part of the flood response.

There is a State-level plan in place to guide the approach to emergency accommodation

The Welfare Services Functional Area Supporting Plan (WSFASP, the plan) is a supporting plan to the New South Wales Emergency Management Plan (EMPLAN). The plan outlines the responsibilities of the Department of Communities and Justice (DCJ) for the coordination and delivery of disaster welfare services in New South Wales. This includes the provision of emergency accommodation services. The plan in place during the flood events outlined the responsibilities of DCJ and the former Office of Emergency Management (OEM), some responsibilities of which have since transitioned to the NSW Reconstruction Authority (the Reconstruction Authority). The plan sets out a framework for government and non-government organisations to coordinate to provide key welfare services during an emergency, and outlines agreed roles and responsibilities. The plan outlines preparedness measures and arrangements for the provision of key welfare services during the response to and recovery from emergencies in New South Wales.

The plan details the organisations and key positions involved in welfare services, including their overall roles and responsibilities, and a basic structure for the delivery of disaster welfare services. For example, the plan states that both the former Department of Families and Communities Services and the not-for-profit Adventist Development and Relief Agency (ADRA) are responsible for emergency accommodation but does not clarify the detailed responsibilities associated with this role. These provide a State-wide, though not detailed, approach to emergency accommodation and welfare services in a disaster recovery context.

There was no plan in place to guide the temporary housing response, despite the NSW Government utilising this type of response in a previous emergency event

The State-level emergency planning documents do not contemplate the need for temporary housing as a government disaster response. Although there was a temporary housing response to the Black Summer bushfires in 2019–20, albeit on a smaller scale, no specific plans were in place to guide this response or the flood events in 2021–22. The NSW Government therefore had to develop its approach to addressing demand for temporary housing whilst responding to the flood emergency as it was occurring.

A partnership was established between the NSW Government and the Minderoo Foundation in 2020 to provide 100 pods to people whose homes were destroyed in the Black Summer bushfires. The initial rollout consisted of four-person pods, however the need for greater capacity was identified, with larger, family-sized pods developed for up to six people. The implementation of this program did not include formalising the work completed in documented plans for future use in response to other emergency events.

A plan that sets out how temporary housing should be used is in place in Queensland. The Queensland Government released a Temporary Emergency Accommodation (TEA) plan in 2021 which describes the arrangements, roles and responsibilities of key organisations critical to supporting displaced community members after the closure of an evacuation centre. The TEA plan outlines the five phases in the provision of accommodation support which includes temporary housing recovery. This demonstrates that a plan for the use of temporary accommodation would not be unprecedented.

Without plans in place to respond to all aspects of an emergency, decision makers are forced to be reactive in their decision making or to develop these plans while also responding to the events. In this specific instance, the government was forced to develop governance structures and perform tasks such as options analysis and site selection for temporary housing during the immediate aftermath of the flood events.

The Reconstruction Authority has acknowledged the need for a formalised plan for temporary housing responses and has started work to develop this in preparation for future flood events. It advised that the Housing Taskforce (HTF) has begun this work by performing assessments and reviews of high-risk areas and engaging with local councils and community groups. The Reconstruction Authority is also developing a Recovery Readiness Checklist, which will include preparedness for the provision of temporary housing in an emergency. Pre-event recovery planning specific to Local Government Areas (LGAs) is also underway, with the Reconstruction Authority developing tailored checklists which cover the provision of temporary housing. These tools will form part of the State's recovery response under the NSW Recovery Plan, which the Reconstruction Authority is currently in the process of updating. The Reconstruction Authority advises that this update will include identifying responsibilities in relation to the temporary housing response and recovery more broadly.

The WSFASP in place during the flood events had not been reviewed and updated in line with its planning requirements

Plans which outline the coordination and delivery of services in response to an emergency are imperative to ensure all required activities are completed, and the needs of affected communities are met. Plans also serve as a common reference point for decision making. Out of date plans can result in unclear roles and responsibilities, requiring agencies to make improvised decisions due to the urgent nature of emergency response. This creates a risk of key activities not being fulfilled and community needs going unmet.

The WSFASP in place during the flood response was last updated and endorsed by the State Emergency Management Committee (SEMC) in June 2018. As part of the planning requirements outlined in the plan, the State Welfare Services Functional Area Coordinator (WelFAC) is required to ensure the plan is reviewed every five years, or when relevant aspects require review following emergency operations or changes to legislation. The State WelFAC is an officer from DCJ responsible for the monitoring, support and coordination of disaster welfare services in New South Wales.

In 2020, a machinery of government change was implemented which established Resilience NSW as a public service executive agency and transferred persons employed in OEM to Resilience NSW. Despite these legislative changes, the plan had not been updated in line with its requirements to reflect these and subsequent changes, as OEM was still listed as one of the two agencies responsible for the coordination and delivery of disaster welfare services. Similarly, the plan had not been updated to reflect emergency operations changes with ADRA listed as the responsible coordinator for the provision of emergency accommodation services, despite no longer being responsible for this service.

The WSFASP has since been updated to reflect these changes and was endorsed by the SEMC in September 2023. The current WSFASP aligns with the welfare services responsibilities following the transfer of the welfare services functional area to DCJ in 2023. This includes the role of DCJ as the lead agency for the WSFASP, and DCJ and the Housing Contact Centre (HCC) within DCJ as the coordinator of emergency accommodation. The updated plan also provides an outline of the key welfare services that are delivered by the functional area, including emergency accommodation, personal support, essential food and grocery items, and transition from emergency accommodation. The outline provides a description of each service and the agency, team or non-government organisation responsible for coordinating the service.

Agencies did not have agency-level plans in place for implementing their responsibilities under State-level emergency accommodation and temporary housing plans

The State EMPLAN establishes a framework for sub plans, supporting plans and related policy instruments and guidelines. It states that a supporting plan should describe the support which is to be provided to the controlling or coordinating authority during emergency operations and be an action plan which describes how an agency or functional area is to be coordinated in order to fulfill the roles and responsibilities allocated. Without this more detailed guidance being in place, there is no common reference point for individuals within an agency to refer to when implementing the broader State-level plans, such as the WSFASP.

The WSFASP defines emergency accommodation and outlines the government and non-government organisations responsible for its provision. It does not provide a detailed description of the specific roles and responsibilities related to its provision. DCJ does not have an agency-level plan in place that specifies these in more detail, and did not have any standard operating procedures (SOPs) in place to guide the process of housing displaced persons in emergency accommodation.

The absence of SOPs to guide this process can increase the chance of inconsistent implementation of the WSFASP, with a reliance on the experience of staff to complete tasks to house people in emergency accommodation. For example, at the onset of an emergency, staff in the HCC contact local accommodation venues such as hotels and motels to determine availability in the area. They may also book blocks of rooms in preparation for housing displaced persons. At the time of the flood events, there was no documentation which detailed the process for DCJ staff to follow and these tasks were not recorded anywhere as requiring completion before a disaster occurred.

DCJ has advised that they have since developed internal processes which form part of the training program for Disaster Welfare staff. In addition to this, the HCC has developed a guide which steps out the various processes relating to the provision of emergency accommodation, as well as outlining the different roles and responsibilities within the HCC in relation to these processes.

As noted, there is no State-level plan in place to guide the temporary housing response. As a result, there is no framework to guide this process at an agency level for the Reconstruction Authority. The absence of both State and agency-level plans guiding the provision of temporary housing at the time of the flood events meant that agencies were required to develop a process to follow at the same time as responding to the flood events.

Appropriate governance structures were established quickly and changed as needed to reflect recovery needs

The State Recovery Committee (SRC) was activated following the 2019–20 bushfires and was still operating at the time of the 2022 floods. As part of this, the SRC had a terms of reference which included responsibilities of the SRC and a membership list. The responsibilities of the SRC in the terms of reference are to:

  • provide strategic direction in relation to disaster recovery
  • oversee reconstruction and recovery efforts in disaster impacted areas
  • provide senior leadership to facilitate whole-of-government coordination
  • monitor and report to the Premier, Deputy Premier and Cabinet on the progress of recovery efforts in disaster impacted areas.

Once the flood events commenced on 28 February 2022, the SRC increased its meeting frequency to every two days initially, for a total of 13 meetings in March. The SRC continued to meet at least twice a week from mid-April until the end of May, at which point it reduced gradually in frequency to weekly and then fortnightly. The SRC continued to meet throughout all of 2022 and 2023.

The SRC established a range of subcommittees to assist with recovery efforts. These subcommittees were operational from March 2022 onwards. Subcommittees had terms of reference setting out their role and were chaired by appropriate agencies with operational responsibilities that aligned with those roles. The Health and Wellbeing subcommittee was established as part of this and initially had responsibility for the provision of both emergency accommodation and temporary housing. This subcommittee was chaired by a relevant Senior Executive in DCJ.

As noted above, none of the whole-of-government plans prior to the flood events allocated responsibility to an agency or subcommittee for constructing and managing temporary housing. Although temporary housing had been utilised by the government previously in response to the 2019–20 bushfires, its provision had never been implemented on the scale required in response to the flood events.

In early March, the SRC created a new subcommittee: the Housing Taskforce (HTF). The HTF contained key staff from a wide variety of agencies, as well as other key stakeholders like local councils where appropriate, and was chaired by a Senior Executive from the Planning Branch of the Department of Planning and Environment (DPE). A terms of reference was quickly developed for the subcommittee. The HTF’s initial purpose included developing a strategy for identifying locations and pathways for temporary housing. This allowed the Health and Wellbeing subcommittee and the HTF to provide more focus on their particular areas of responsibility.

The SRC helped to manage issues but did not provide strategic risk management

Subcommittees regularly reported to the SRC throughout the flood response period. The SRC was able to manage issues with these programs as they arose, often by connecting relevant staff and providing a forum for these issues to be resolved across agencies. In this way, the SRC was able to manage issues, which aligns with its role in facilitating whole-of-government coordination.

Given that all relevant agencies were represented on the SRC, it was uniquely placed to provide strategic risk management across all aspects of the recovery effort including provision of accommodation and housing following the floods. This would fall within the SRC’s role of providing strategic direction in relation to disaster recovery. Strategic risk management involves addressing external risks, including those which may impact the government’s ability to achieve its objectives. The SRC did not undertake strategic risk management to proactively identify issues that could hinder the recovery effort, such as through developing risk registers and assigning mitigation strategies to agencies or specific individuals.

In regards to the flood temporary housing response, this may have included identifying and mitigating risks that could impact on the quantity of housing provided, risks to the overall flood recovery budget, and risks related to further flood events occurring that might hinder flood recovery. While the SRC did not consider this work during the flood response, Resilience NSW and the Reconstruction Authority both documented some whole-of-government risks to the delivery of the response to natural disasters as part of their enterprise risk management processes, including throughout 2022. However, this work was not undertaken specifically in relation to the unfolding flood events, but was instead done as part of the agency's regular review of its enterprise risks. Given that only one agency was involved in this risk identification, it was not a substitute for whole-of-government risk identification through the SRC.

The HTF did undertake some separate risk identification for the temporary housing response in the Northern Rivers, but not until October 2022. The HTF had been in operation since March 2022 without undertaking formal risk assessments to determine key risks to the provision of temporary housing that required mitigation. Some of the risks identified included expenditure on temporary housing exceeding its allocated budget, temporary housing sites failing to deliver agreed outcomes, and that there would be inappropriate or ineffective engagement with Aboriginal communities. This risk identification from the HTF was also reflected in Resilience NSW's and the Reconstruction Authority’s enterprise risk registers, where it is identified that there is a risk that the agencies do not effectively deliver on short and medium term housing.

The SRC provided oversight of the work of subcommittees

As noted above, one of the roles of the SRC is to oversee reconstruction and recovery efforts in disaster impacted areas. To fulfil this role of providing oversight, the SRC received updates on the activities of each subcommittee at each meeting.

In March 2022, each subcommittee developed a 100-Day Flood Action Plan that set out actions that would be completed in the first 30, 60 and 100 days. Each subcommittee was required to update its Flood Action Plan and report progress on implementation to the SRC every two weeks. The SRC received this regular reporting from each subcommittee, which included the status of each item, actions undertaken to date, and the next steps that each subcommittee was undertaking. This served to provide the SRC with oversight of the actions of each group to supplement the subcommittee updates with greater detail.

The quality of reporting from the HTF to the SRC reduced throughout August and September 2022. At this time the updates from the subcommittee included either only a verbal update or only statistical updates on the temporary housing response. This means that throughout this period, the SRC was providing only limited oversight of the temporary housing response. From October 2022, the HTF provided more detailed updates to the SRC, providing data on the temporary housing villages including the number of dwellings, estimated capacity and the status of each of the village sites (whether operational or estimated date of construction completion).

DCJ adapted its usual procedures to house a large number of people in emergency accommodation following the Northern Rivers flood event

The HCC, a branch within DCJ, is responsible for arranging emergency accommodation during a disaster, although this responsibility was not outlined in a specific emergency accommodation plan or procedure at the time of the flood events. Once a disaster is declared, the HCC is activated for a disaster welfare response. The team is required to estimate the number of people who will be displaced by the disaster and may seek emergency accommodation. The team is also required to contact local accommodation providers such as hotels, motels and caravan parks to determine vacancy information, as well as obtain information about the facilities such as wheelchair accessibility and pet-friendly rooms. The HCC team will then make direct contact with staff at evacuation centres and facilitate bookings based on the demand. A central internal database is utilised by the HCC, which enables them to see providers and book within the system.

In following these procedures, DCJ housed 788 people in the two weeks following the initial flood event by utilising the standard local accommodation providers. On 27 April 2022, 1,440 people were reported as staying at local accommodation providers as part of the emergency accommodation response. Exhibit 5 shows the number of people housed in emergency accommodation across the North Coast from March 2022 to early April 2023.

Governance structures continued to operate as previously established in response to the Central West flood event

The governance structures established in response to the 2019–20 bushfires and the flood event in the Northern Rivers mostly operated in the same capacity for the management of the Central West flood event. In October 2022, the meeting frequency for the SRC reduced to fortnightly, following the same structure with subcommittee updates discussed as part of the agenda. There was no increase in meeting frequency during or in the immediate aftermath of the response to the Central West flood event.

Resilience NSW continued to document whole-of-government risks to the delivery of the response to natural disasters during the response to the Central West flood event, and this work was continued by the Reconstruction Authority once established. Resilience NSW also continued to develop risk dashboard heatmaps each quarter, monitoring any changes in the residual risk rating of these risks, as well as outlining issues identified, and any new and emerging risks.

DCJ housed displaced persons in the Central West quickly, considering additional needs during the process

DCJ, through the HCC, advised that it followed its standard process outlined above for the provision of emergency accommodation during the Central West flood event. The evacuation order for Eugowra was made on 15 November 2022, and by 8 December 2022, DCJ had housed 93 people from the community in emergency accommodation. The HCC was able to utilise alternative accommodation such as rooms at Charles Sturt University to meet the increasing demand for emergency accommodation in the Central West.

Through the initial consultation process conducted with displaced persons at evacuation centres, the HCC was also able to consider their additional needs and meet these where possible. For example, companion animals were supported by Local Land Services and the Royal Society for the Prevention of Cruelty to Animals through the provision of boarding services. DCJ advised that local needs were also considered as part of the intake process. For example, displaced persons were accommodated as close to their hometown as possible. Those evacuated from Forbes were given priority for emergency accommodation in Forbes. This did impact evacuees from other towns. Ordinarily, those displaced in Eugowra would also be housed in Forbes, but due to limited accommodation options, they were evacuated to Orange instead. Other considerations made for displaced persons included level access and accessible rooms for those with disabilities, and baby care items, such as cots, where required.

The At-home Caravans program was implemented as immediate shelter for displaced persons awaiting pods on their property in the Central West

By 28 November 2022, Resilience NSW made the decision to activate the At-home Caravans program in the Central West, with applications from displaced persons being taken within a week after the flood event in Eugowra. Caravans were temporarily set up on private properties in Eugowra. Displaced persons are able to live in these caravans while waiting for a pod to be installed on their property. By 10 January 2023, 102 caravans had been delivered to the Central West and started to be located on private properties. At 30 May 2023, Resilience NSW had delivered 124 out of the 129 required caravans to properties. A plan was implemented to provide immediate shelter in the community through the caravans, organise medium-term housing in the form of pods, and support displaced persons to repair or rebuild their homes. Caravans were provided to households where properties required demolition, those that were damaged but reparable, and rental properties with owner’s consent.

Other options for immediate shelter were considered but not progressed. Placing caravans on site at showgrounds or caravan parks was considered, however a NSWPW assessment found that 95% of impacted homes could accommodate caravans on property. Caravans on property require less ongoing case management, site works and utilities. Private farm house rental accommodation was also considered, however extremely low availability of these in the area resulted in the decision to not progress this option.

Resilience NSW was able to meet the demand for housing in the Central West by placing temporary housing on people’s property

Resilience NSW conducted early analysis of potential temporary housing village sites in the aftermath of the floods in the Central West. However, after reviewing the situation in Eugowra and the relatively larger blocks, it was decided a more appropriate solution would be to place temporary pods on private property. Part of this decision was the impact a centralised village located in Eugowra would have on displaced persons from other affected towns. At 30 May 2023, 59 out of 100 pods had been installed on private properties. These pods replaced caravans initially installed on private properties, although at the time of the audit some disaster-affected persons were still living in caravans while they wait for pod installation on their property.

Resilience NSW was able to utilise the excess pods from the Northern Rivers to reduce the wait time for displaced persons to move into the pod from the caravan located on their property. Once their eligibility had been confirmed, the resident met with NSWPW and the builders contracted to install the pods. The resident confirmed where they would like the pod placed and the size needed. Applicants were then prioritised by Resilience NSW and pods installed in order of this prioritisation. NSWPW engaged the same third-party contractor used in the Northern Rivers construction to expedite the installation process.

Resilience NSW used measures to adapt the pods for suitable use in the Central West, as well as configuring them to meet mobility needs of residents. Cabonne Shire and Forbes Shire Councils required pods to be built at a height of 1.5 metres. The pods were therefore installed on scaffolding to raise their height. As the pods were designed and constructed for the Northern Rivers climate, insulation was installed on the base of the pods to ensure the inside temperature was appropriate for residents in the Central West. The raised height of the pods also impacted their accessibility, so the contractor was also engaged to install ramps instead of stairs where needed.

The first demobilisation of a pod occurred on 7 August 2023, after the resident’s home had been repaired and it was suitable for them to move back home. The Reconstruction Authority advised that as pods continue to be demobilised, they will be cleaned, any required repairs completed, and then moved onto the next property as needed. There was no long-term plan initially developed for the transition of tenants out of temporary housing, although the Reconstruction Authority has advised that the newly developed Temporary Housing Plan will include these considerations to inform processes at the end of the lease period. There has been consideration for returning the pods to the Northern Rivers once the work in the Central West is complete.

The Reconstruction Authority advised that due to the delays residents are facing in accessing trades and payment of insurance claims, the HTF is currently seeking the support of councils to extend the placement of pods beyond the two years that were initially planned.

There was no clear process in place to support displaced persons in emergency accommodation who were ineligible for temporary housing in the Central West

The WSFASP in place during the flood events did not outline a transition plan for displaced persons staying in emergency accommodation. Resilience NSW took over responsibility for the transition of displaced persons from emergency accommodation to temporary housing. It was not always possible to house rental tenants by placing a pod on the property they were occupying because they were unable to obtain landowner permission. It was necessary to find an alternative property to install these pods, usually on property owned by a family member. This was able to address most tenants’ issues.

It was unclear which agency was responsible for the support of renting households in the medium to long-term. The lack of a documented process for the provision of emergency accommodation created a gap in relation to the support for displaced persons. The WSFASP has since been updated to include provision for coordinated case management support to assist people in emergency accommodation with longer-term housing needs.

DCJ maintained a list of displaced persons who had been staying in emergency accommodation and were unable to exit without assistance. This list was provided to Resilience NSW weekly. Resilience NSW provided updates to DCJ on the status of those who were being transitioned into temporary housing, but no assistance was provided by Resilience NSW to those who were ineligible for temporary housing. DCJ was therefore required to provide case management to these people to assist in their transition to more stable housing.

Agencies learned and applied lessons from the Northern Rivers floods to the Central West flood event, but most have not formalised these for future consideration

Agencies involved in the provision of emergency accommodation and temporary housing learned key lessons from the Northern Rivers floods that could be applied in the Central West response. These lessons included the Reconstruction Authority rapidly standing up the At-home Caravans Program to provide immediate accommodation to displaced persons, and instigating a community reference group to provide feedback on the proposed housing response plan. These lessons learned were largely undocumented, with many staff being involved across both the Northern Rivers and Central West flood response, and able to directly apply lessons learned from their experience in the earlier response. It is good practice to formalise lessons learned to ensure that future responses may have access to contemporary information to learn from both positive and negative experiences in previous situations.

DCJ and Premier’s Department (PD) have not yet documented any lessons learned from their roles in the flood events. Some lessons were documented by Resilience NSW in April 2022 as part of a process to identify emerging insights. These lessons covered a broad range of activities, including findings relevant to the provision of temporary housing.

In June 2023, the Reconstruction Authority formally documented its own lessons learned from the provision of temporary housing. This includes identifying actions to avoid repeating some of the negative experiences, such as Aboriginal communities not being consulted at the appropriate time, and not having adequate program design processes in place for the temporary housing program. In addition, NSWPW has commissioned an evaluation of its work in the construction and provision of temporary housing, which includes a formal lessons learned component.

External reviews have also been conducted and have captured interim lessons learned, including the 2022 NSW Flood Inquiry and the ‘Response to major flooding across New South Wales in 2022’ Parliamentary Inquiry.

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

Agencies have commenced the process of evaluating their role in the provision of emergency accommodation and temporary housing. DCJ advised that an external evaluation would commence shortly and that it was in the process of engaging a consultancy firm to conduct this. NSWPW has also commenced an external review of its provision of temporary housing. DPE and PD have not commenced a review, although PD has established a new unit for strategic communications during disasters in response to the agency's involvement in crisis communications during the flood events. This unit has been developed to deliver overarching whole-of-government messaging during disaster events.

Similarly, the Reconstruction Authority advised that an evaluation was planned for the provision of temporary housing. In addition, Resilience NSW commissioned an evaluation of the use of the Minderoo Foundation pods in response to the 2019–20 bushfires. This review reported in November 2022, though it had limited consideration of the role of the Minderoo Foundation pods as a source of temporary housing in the Northern Rivers. This report made 19 recommendations to the Reconstruction Authority and the Minderoo Foundation, and found that the Minderoo pods had largely been delivered in line with the original intended objectives.

There is no State-wide process in place to capture lessons learned from all agencies involved in recovery

Each year, the SEMC conducts a State-wide lessons learned exercise, incorporating learnings from all of the emergency events in the previous year. This exercise has commenced for the 2022 emergency events, however at the time of the audit it was in draft and not yet formally endorsed by the SEMC.

The agencies involved in the State lessons learned process are agencies with emergency response responsibilities. The findings largely relate to these response activities, with very few lessons learned relating to recovery. Only a limited number of agencies are involved in this activity, and the 2022 review did not incorporate the views of a number of agencies that were involved in the recovery phase of the Northern Rivers and Central West flood events.

While it is important that lessons are learned from the response phase of an emergency, it is equally important that State-wide lessons are learned from the recovery phase to ensure that appropriate State-wide changes can be made, or positive experiences can be continued. There is currently no process in place to capture these lessons learned from the recovery phase from all agencies involved in the recovery phase.

Appendix one – Responses from entities

Appendix two – About the audit

Appendix three – Performance auditing

 

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

Published

Actions for Driver vehicle system

Driver vehicle system

Transport
Finance
Cyber security
Information technology
Internal controls and governance
Project management
Service delivery

What this report is about

Transport for NSW (TfNSW) uses the Driver vehicle System (DRIVES) to support its regulatory functions. The system covers over 6.2 million driver licences and over seven million vehicle registrations.

DRIVES first went live in 1991 and has been significantly extended and updated since, though is still based around the same core system. The system is at end of life but has become an important service for Service NSW and the NSW Police Force.

DRIVES now includes some services to other parts of government and non-government entities which have little or no connection to transport. There are 141 users of DRIVES in total, including commercial insurers, national regulators, and individual citizens.

This audit assessed whether TfNSW is effectively managing DRIVES and planning to transition it to a modernised system.

Audit findings

TfNSW has not effectively planned the replacement of DRIVES.

It is now working on its third business case for a replacement system but has failed to learn lessons from its past attempts.

In the meantime, TfNSW has not taken a strategic approach to managing DRIVES’ growth.

TfNSW has been slow to reduce the risk of misuse of personal information held in DRIVES. With its delivery partner Service NSW, TfNSW has also been slow to develop and implement automatic monitoring of access.

TfNSW uses recognised processes for managing most aspects of DRIVES, but has not kept the system consistently available for users. TfNSW has lacked accurate service availability information since June 2022, when it changed its technology support provider.

TfNSW needs to significantly prioritise cyber security improvements to DRIVES. TfNSW is seeking to lift DRIVES’ cyber defences, but it will not achieve its stated target safeguard level until December 2025.

Even then, one of the target safeguards will not be achieved in full until DRIVES is modernised.

Audit recommendations

TfNSW should:

  • implement a service management framework including insight into the views of DRIVES users, and ensuring users can influence the service
  • ensure it can accurately and cost effectively calculate when DRIVES is unavailable due to unplanned downtime
  • ensure implementation of a capability to automatically detect anomalous patterns of access to DRIVES
  • ensure that DRIVES has appropriate cyber security and resilience safeguards in place as a matter of priority
  • develop a clear statement of the future role in whole of government service delivery for the system
  • resolve key issues currently faced by the DRIVES replacement program including by:
    • clearly setting out a strategy and design for the replacement
    • preparing a specific business case for replacement.

The DRIver VEhicle System1 (often known as DRIVES) is the Transport for NSW (TfNSW) system which is used to manage over 6.2 million driver licences and over seven million vehicle registrations in New South Wales.

DRIVES first went live in 1991 and has been significantly extended and enhanced over the past 33 years. DRIVES is a significant NSW Government information system — containing personal information such as home addresses for most of the NSW adult population, sensitive health information such as medical conditions, and biometric data in photographs.

Service NSW, part of the Department of Customer Service, is the NSW Government's 'one stop shop' for services to NSW citizens and businesses. It uses DRIVES when it delivers many transport-related services to NSW citizens such as licence renewals and checks the identity information stored in DRIVES as part of other services delivered to NSW citizens, such as a 'working with children check'.

DRIVES supports TfNSW's regulatory functions and the collection of more than $5 billion in revenue annually for the NSW Government. The system is also used by many organisations outside of the NSW Government including commercial insurers and national regulators, as well as individual citizens who access DRIVES for services such as 'Renew my registration' or 'Book a driver knowledge test'.

TfNSW owns and manages DRIVES. It intends to replace DRIVES with a modernised system to improve its cost, performance, and security.

The objective of this performance audit was to assess whether TfNSW is effectively:

  • managing the current system, and 
  • planning to transition DRIVES to a modernised system.

The auditee is TfNSW. We have consulted with the Department of Customer Service as a key stakeholder during the audit process.

This part of the report considers whether Transport for NSW (TfNSW) is effectively managing the current system. It considers DRIVES’:

  • role in NSW Government service delivery
  • ease of use and appropriateness for a modern system
  • mechanisms to ensure the service is available for users.

This part of the report considers whether Transport for NSW (TfNSW) is effectively planning to transition DRIVES to a modernised system. It makes findings on the:

  •  effort to develop a business case to fund the replacement of DRIVES
  • issues which have contributed to the slow progress of the replacement program.