Reports
Actions for Treasury 2022
Treasury 2022
What the report is about
Results of the Treasury cluster agencies' financial statement audits for the year ended 30 June 2022.
The results of the audit of the NSW Government's consolidated Total State Sector Accounts (TSSA), which is prepared by NSW Treasury, are reported separately in our report on 'State Finances 2022'.
What we found
Unmodified audit opinions were issued on all 30 June 2022 general purpose financial statement audits.
Qualified audit opinions were issued on three of the 25 other engagements prepared by cluster agencies. These related to payments made from Special Deposit Accounts (SDA) that did not comply with the relevant legislation.
What the key issues were
Commercial agreements were signed between TAHE, the operators and Transport for NSW in June 2022, which reflected an expected rate of return of 2.5% on contributed equity. However, it remains critical that the government continue to provide sufficient funding to the operators so they can pay for access and use TAHE assets. These findings are reported in our report on 'State Finances 2022'.
Eight high-risk issues were raised in 2021–22, of which five relate to NSW Treasury.
A number of previously reported audit findings and recommendations with respect to icare continue to be ongoing issues. This includes the Workers Compensation Nominal Insurer continuing to hold less assets than the estimated present value of its future payment obligations, when measured in accordance with the accounting framework.
What we recommended
Our report on 'State Finances 2022' made several recommendations to improve NSW Treasury's processes.
In this report, we recommended icare should ensure:
- it has sufficient controls in place over claim payments, including an effective quality assurance program, to minimise claim payment errors
- that documentation to support PIAWE calculations is appropriately maintained, and that the minimum documentation requirements are set out in a policy.
This report provides Parliament and other users of the Treasury cluster’s financial statements with the results of our audits, analysis, conclusions and recommendations in the following areas:
- financial reporting
- audit observations.
Financial reporting is an important element of good governance. Confidence and transparency in public sector decision-making are enhanced when financial reporting is accurate and timely.
This chapter outlines our audit observations related to the financial reporting of agencies in the Treasury cluster (the cluster) for 2022.
Section highlights
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Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision making.
This chapter outlines our observations and insights from our financial statement audits of agencies in the Treasury cluster.
Section highlights
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Appendix one – Misstatements in financial statements submitted for audit
Appendix two – Early close procedures
Appendix three – Timeliness of financial reporting
Appendix four – Financial data
Appendix five – Acquittals and other opinions
Copyright notice
© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.
Actions for State Finances 2022
State Finances 2022
What the report is about
Results of the 2021–22 consolidated General Government Sector (GGS) and Total State Sector (TSS) financial statements audits.
What we found
The Independent Auditor’s Report on the 2021–22 GGS and TSS financial statements was modified with a limitation of scope and also contained an emphasis of matter.
The opinion in the TSS Independent Auditor’s Report was modified with a limitation of scope on certain balances consolidated in the TSS financial statements because the Catholic Metropolitan Cemeteries Trust (CMCT) denied access to its management, books and records for the purpose of conducting a financial audit.
The Independent Auditor’s Report also includes an emphasis of matter drawing attention to the significant uncertainties associated with the GGS’s equity investment in Transport Asset Holding Entity (TAHE). The significant uncertainty relates to key assumptions and estimates used to forecast a 2.5% return from GGS investments into TAHE that supports the accounting treatment as an equity injection, including:
- funding to support the Rail Operators to pay TAHE’s contracted and forecast access and licence fees up until 2045–46. The Rail Operators are dependent on funding from the GGS to pay access and licence fees. Forecast modelling notes a requirement of a further $10.2 billion in budget funding to pay TAHE to the end of the ten-year contract period in 2030–31, in addition to the $5.5 billion allocated in the forward estimates and up to $50.8 billion for the period 2032 to 2046
- a significant portion of the projected returns are earnt outside of the ten-year contract period and there is a risk that TAHE may not be able to recontract fees at levels consistent with current projections.
What we recommended
The report includes a number of recommendations including:
- continued monitoring that TAHE controls the reported assets ensuring the CMCT, Category 2 Statutory Land Managers (SLM) and Commons Trusts meet their statutory reporting obligations
- ensuring accounting and audit position papers are sufficiently consulted with key stakeholders and are concluded on a timely basis
- ensuring agencies support the timely conclusion of audits by bringing to the auditors' attention key Cabinet records and identifying references relating to accounting issues impacting the financial statements
- for Special Deposit Accounts (SDA) responsible managers should ensure amounts appropriated under any Act or law for payment into the account are appropriately recorded, ensuring payments from SDAs are allowable and made in accordance with Treasurer's delegations and standing authorisation.
Pursuant to section 52A of the Government Sector Audit Act 1983 I am pleased to present my Auditor-General’s Report on State Finances 2022.
Once again this year has presented considerable challenges for the state sector and my Office as we collectively grapple with uncertainties related to COVID-19 and the disruption of emergency events impacting New South Wales. In addition, there were many recommendations arising from last year’s audit to be addressed.
While there is more to do to ensure good financial stewardship of the State, resolution of matters was helped by constructive engagement with the NSW Treasury at the most senior levels. Personally I wish to thank the Treasurer and Secretary for their commitment to instilling integrity in financial management systems and processes. The support Treasury provided for recent amendments to the Government Sector Audit Act 1983 to provide ‘follow the dollar’ powers and other changes recommended by the Public Accounts Committee quadrennial review of my Office is also acknowledged.
Finally I want to thank the teams that contributed to this year’s audit of the Total State Accounts for their diligence, professionalism and commitment. I am very proud of your work.
Margaret Crawford
Auditor-General for New South Wales
The Independent Auditor's Report was qualified and also included an emphasis of matter
The audit opinion on the State's 2021–22 financial statements was modified. The delayed signing of the NSW Total State Sector Accounts (TSSA) by NSW Treasury was in order to resolve significant accounting issues that were material to the TSSA. The key areas requiring significant audit effort included reviewing the State's accounting for TCorp Investment Management (IM) Funds and responding to the risks related to the Catholic Metropolitan Cemeteries Trust (CMCT) denying access to its management and books and records, which is detailed in this Report.
NSW Treasury aimed to sign the TSSA by 19 October 2022. This was delayed by nearly six weeks and the TSSA audit opinion was subsequently signed on the statutory deadline imposed on the Treasurer for tabling of the TSSA in the Legislative Assembly of 30 November 2022.
The Independent Auditor’s Report was modified due to a limitation of scope on the balances consolidated in the TSSA relating to the CMCT
The opinion in the Independent Auditor’s Report was modified with a limitation of scope due to the inability to access management, books and records of a controlled entity, the CMCT.
This year, NSW Treasury, after reconsidering all facts and the perspectives of the CMCT, reconfirmed that the CMCT is a controlled entity of the State for financial reporting purposes. This means CMCT is a GSF agency under the provisions of the Government Sector Finance Act 2018 (GSF Act). As such NSW Treasury is required by Australian Accounting Standards to consolidate the CMCT into the Total State Sector Accounts (TSSA). The value of assets and liabilities of CMCT consolidated into the TSSA is $310.3 million and $15.1 million, respectively, and the loss of CMCT consolidated into the TSSA for the year is $2.4 million.
To date, CMCT has not met its statutory obligations to prepare financial statements under the GSF Act and give them to the Auditor-General. CMCT has not submitted its financial statements to the Auditor-General for audit as required despite repeated requests and has not provided access to its books and records for the purposes of a financial audit. The Secretary of the Department of Planning and Environment wrote to CMCT to request it work with, and offer full assistance to, the Auditor-General in the exercise of her duties.
NSW Treasury has met with and considered CMCT's perspectives. NSW Treasury’s position remains that CMCT is a controlled entity of the State for financial reporting purposes. Consequently, CMCT has not met its statutory obligations as a controlled entity to submit its financial statements for audit and provide access to its books and records. Therefore, the Audit Office was unable to obtain sufficient appropriate audit evidence about the carrying amount of assets and liabilities consolidated into the Total State Sector Accounts as at 30 June 2022 and of the amount of income and expenses for the year then ended. Accordingly a modified audit opinion was issued on the NSW Government's 2021–22 consolidated financial statements.
Section 3 of this report titled 'Limitation of Scope relating to CMCT' discusses this matter in further detail.
An emphasis of matter drawing attention to uncertainty relating to the General Government Sector's investment in the Transport Asset Holding Entity (TAHE) remains
The Independent Auditor’s Report also includes an emphasis of matter, drawing attention to the significant uncertainties associated with the General Government Sector's (GGS) equity investment in TAHE. The significant uncertainty relates to key assumptions used to forecast returns from investments into TAHE in order to support the recognition of the government's funding of TAHE as an equity injection.
At the time of signing the Independent Auditor's Report, there was significant uncertainty with regards to assumptions and estimates used to forecast a return from the GGS investment into TAHE, which supports the recognition of an equity injection. There is significant uncertainty relating to:
- the 2022–23 Budget committed $5.5 billion to fund TAHE's key customers, Sydney Trains and NSW Trains (the operators), to support their payment of access and licence fees agreed on 23 June 2022. However, this funding only extends out to the end of the forward estimates period in 2025–26, which falls short of the ten-year contractual periods to 2030–31 and the projected period to 2045–46 to achieve a 2.5% return from the government's equity investment. The government will need to fund the operators an additional $10.2 billion in Budget funding so that they can meet their contractual obligations to TAHE from 2026–27 to 2030–31, and a further projected funding of $50.8 billion from 2031 to 2046. This additional funding is not within the government's published Budget figures, leading to uncertainty on whether the government-funded operators can pay access and licence fees beyond the forward estimates period of 2025–26
- a significant portion of the projected returns are earnt outside the ten-year contract period (terminating 30 June 2031) and there is a risk that TAHE will not be able to recontract for access and licence fees at a level that is consistent with current projections. There is also a risk that funding for TAHE's key customers will not be sufficient to fund payment of access and licence fees at a level that is consistent with current projections.
The 'State Finances 2021' report made recommendations regarding the significant accounting issues relating to TAHE. The State's response to these recommendations are detailed in Section 4 of this report titled ‘Investment in the Transport Asset Holding Entity’. Other significant matters related to the TSSA audit are covered in Section 8 titled ‘Key audit findings’.
Other financial reporting matters
All government agencies were granted an extra week to submit financial statements for audit
A one-week extension provided agencies across the sector with additional time to resolve key accounting issues and submit financial statements for audit by 1 August 2022.
Further extensions were approved for the following seven agencies (ten in 2020–21):
- State Insurance Regulatory Authority (3 August 2022)
- Dams Safety NSW (8 August 2022)
- Jenolan Caves Reserve Trust (8 August 2022)
- Transport for NSW (8 August 2022)
- Department of Enterprise, Investment and Trade (22 August 2022)
- Transport Asset Holding Entity (22 August 2022)
- Department of Transport (26 August 2022).
Additional extensions provided agencies with more time to complete:
- asset valuations
- valuations of actuarially assessed liabilities.
An initial draft of the TSSA was provided to audit on 15 September 2022. This version was incomplete and excluded the impact of consolidating the State's TCorp IM funds under the correct Australian Accounting Standards. An additional three versions of the draft TSSA were provided to audit progressively to update the TCorp IM fund consolidated balances. The final complete version of the TSSA was submitted on 27 October 2022 which included all adjustments relating to the TCorp IM fund consolidation. Refer to section 8.1 for more details on the material restatements relating to the consolidation of the TCorp IM funds.
In 2021–22, agency financial statements presented for audit contained 20 errors exceeding $20 million (24 in 2020–21). The total value of these errors was $973 million, a decrease from the previous year ($6.6 billion in 2020–21).
The graph below shows the number of reported errors exceeding $20 million over the past five years in agencies’ financial statements presented for audit.
The errors resulted from:
- incorrect application of Australian Accounting Standards and NSW Treasury policies
- incorrect judgements and assumptions when valuing non-current physical assets and liabilities.
NSW Treasury concluded CMCT is a controlled entity of the State
In response to our recommendation in the ‘State Finances 2021’ report, NSW Treasury reconfirmed that the Catholic Metropolitan Cemeteries Trust (CMCT) is a controlled entity of the State. The Audit Office accepted the position of NSW Treasury.
The reaffirmation of this position means CMCT is a GSF agency under the provisions of the Government Sector Finance Act 2018 (GSF Act). Section 7.6 of the GSF Act places an obligation on CMCT to prepare financial statements and give them to the Auditor-General. Further, section 34 of the Government Sector Audit Act 1983 (the GSA Act) requires the Auditor-General to furnish an audit report on these financial statements.
To date, CMCT has not met its statutory obligations to prepare financial statements under the GSF Act and give them to the Auditor-General. CMCT has not submitted their financial statements to the Auditor-General for audit despite repeated requests and has not provided access to its books and records for the purposes of a financial audit. There was extensive correspondence between the Audit Office of NSW, CMCT, NSW Treasury and the Department of Planning and Environment in 2022 regarding this matter.
RecommendationNSW Treasury and the Department of Planning and Environment should ensure the Catholic Metropolitan Cemeteries Trust meets its statutory reporting obligations. |
In addition, on 10 December 2021, the then Minister for Water, Property and Housing wrote to the Auditor-General requesting a financial and performance audit be performed pursuant to section 27B(3)(c) of the GSA Act. The audit would cover the financial affairs of CMCT, including whether funds have been used for the proper purpose. The Audit Office of New South Wales has written to CMCT on a number of occasions to request the provision of documentation and access to management in order to conduct the performance audit. CMCT has not provided the Audit Office of New South Wales access to its management, books and records for the purpose of the required performance audit.
NSW Treasury has met with and considered CMCT's perspectives. NSW Treasury’s position remains that CMCT is a controlled entity of the State for financial reporting purposes. Consequently, CMCT did not meet its statutory obligations as a controlled entity to submit its financial statements for audit and provide access to its books and records.
The TSSA audit opinion included a limitation of scope
The opinion in the TSSA Independent Auditor’s Report was modified with a limitation of scope due to an inability to access management and the books and records of CMCT. This limitation was appropriately disclosed in Note 1 'Statement of Significant Accounting Policies' of the TSSA. The Statement of Compliance signed by the Secretary of Treasury and the Treasurer on 29 November 2022 was also updated to acknowledge the disclosure in Note 1 regarding CMCT.
The Audit Office was unable to obtain sufficient appropriate audit evidence about the carrying amount of assets and liabilities consolidated into the Total State Sector Accounts as at 30 June 2022 and of the amount of income and expenses for the year then ended. Accordingly a modified audit opinion was issued on the NSW Government's 2021–22 consolidated financial statements.
The process of information sharing by NSW Treasury continues to require improvement
In last year’s ‘State Finances 2021’ report an extreme risk management letter finding was reported for NSW Treasury to ensure it significantly improve its processes so that all relevant information is identified and shared with the Audit Office to support material transactions and balances of the State.
A number of events reconfirmed that NSW Treasury needs to continue improving its process with respect to information sharing with the Audit Office. Notably, NSW Treasury’s finance team had not demonstrated that all available information (on their systems) was considered by them when assessing the State’s control over CMCT.
Critical information relating to CMCT was in the possession of NSW Treasury since late October 2021 but not considered when reconfirming their accounting position on the State's control of CMCT this year. A further reconfirmation of the State's control over CMCT was needed by NSW Treasury to ensure this information was considered in their accounting assessment.
The above demonstrates that more effective consultation is required by NSW Treasury with key stakeholders to ensure all information relevant to forming an accounting position relating to the TSSA is captured. This will ensure new information is not identified late in the audit process and NSW Treasury considers all information when concluding on the accounting position of the State.
RecommendationNSW Treasury should ensure when drafting position papers and concluding on accounting issues impacting the State, these are provided to audit on a timely basis and reflect a complete and accurate understanding of the key public sector issues being considered. |
Last year's report highlighted that NSW Government actions avoided a qualified opinion in 2020–21 relating to the General Government Sector's $2.4 billion cash contribution to Transport Asset Holding Entity (TAHE). These actions included the NSW Government agreeing to provide additional future funding to TAHE's key government customers Sydney Trains and NSW Trains (the operators) to support increases in access and licence fees to be paid to TAHE.
The additional funding by the government was necessary to demonstrate that a reasonable expectation of a sufficient rate of return would be earned on its equity invested in TAHE. Last year, there was no government policy on what the minimum return should be on investments in other public sector entities, so the long-term inflation rate was used as a benchmark. A recommendation was made in last year's State Finances report that NSW Treasury establish a policy on the minimum expected return from its investments.
On 6 September 2022, NSW Treasury finalised its policy relating to the government’s returns on equity investments. The application of this policy is limited to State Owned Corporations and similar to the Commonwealth framework for commercial businesses, which requires the expected return be at least equal to the long-term inflation rate.
The government's commitment to additional funding was conveyed last year through revised shareholder expectations being published in the 2021–22 'NSW Budget-Half yearly Review' on 16 December 2021, increasing the expected returns on equity from 1.5% to the expected long-term inflation rate of 2.5%. On 18 December 2021, Transport for NSW (TfNSW) and the operators entered into a Heads of Agreement (HoA). This formed the basis of negotiations to revise the pricing within the existing ten-year contracts and deliver upon the shareholders’ expected return of 2.5% on contributed equity to be earned over the estimated weighted average remaining useful lives of TAHE's assets.
Further information on last year's audit of the government’s investment in TAHE can be found in our 'State Finances 2021' report.
Ten-year commercial agreements were signed between TAHE, operators and TfNSW
Last year's State Finances report recommended that NSW Treasury facilitate revised commercial agreements to reflect the access and licence fees detailed in the HoA. As these agreements were not executed by 30 June 2021, last year's audit opinion of the Total State Sector Accounts (TSSA) included an Emphasis of Matter drawing attention to the uncertainty that existed at balance date as these agreements were not finalised.
On 23 June 2022, commercial agreements were signed between TAHE, the operators and Transport for NSW through a deed of variation. The revised access and licence fees for the ten-year period 2021–22 to 2030–31 was $16.6 billion, which is $520 million less than the HoA fees of $17.1 billion.
Comparison | FY22 $m |
FY23 $m |
FY24 $m |
FY25 $m |
FY26 $m |
FY27 $m |
FY28 $m |
FY29 $m |
FY30 $m |
FY31 $m |
Total $m |
Revised commercial agreements | 641.1 | 911.8 | 1,298.1 | 1,585 | 1,807.3 | 1,921.8 | 1,992 | 2,065.4 | 2,139.1 | 2,252.8 | 16,614.4 |
HoA | 679.9 | 1,081.4 | 1,236 | 1,398.9 | 1,645.8 | 1,826.1 | 2,023.3 | 2,209.4 | 2,404.5 | 2,629.2 | 17,134.6 |
Difference | (38.8) | (169.6) | 62.1 | 186.1 | 161.5 | 95.7 | (31.3) | (144) | (265.4) | (376.4) | (520.2) |
TAHE's main customers principally rely on government funding to pay access and licence fees
Whilst TAHE has agreed ten-year access and licence fees of $16.6 billion with its two main customers Sydney Trains and NSW Trains, these two operators significantly rely on government funding when making these payments to TAHE. At 30 June 2022, TAHE's expected return of 2.5% is contingent upon the GGS funding the operators to support their payment of access and licence fees that have been agreed with TAHE for the ten-year contracted period and for non-contracted periods from 2031–32 to 2045–46.
The 2022–23 NSW Budget has allocated $5.5 billion to fund the operators, to support their payment of access and licence fees. However, this funding extends to the end of the forward estimates period in 2025–26, which falls short of the ten-year contractual period to 2030–2031 and the projected period to 2045–46 to achieve the 2.5% return.
2022–261 $b |
2027–20312 $b |
2032–46 $b |
Total $b |
|
Access and licence fees3 | 5.5 | 10.2 | 50.8 | 66.5 |
The government will need to fund the operators an additional $10.2 billion in budget funding to meet their contractual obligations to TAHE from 2026–27 to 2030–2031, and a further projected funding of $50.8 billion from 2032 to 2046. This is needed to ensure the government continues to demonstrate its expected return on investment of 2.5%. This additional funding is not within the government's published 2022–23 NSW Budget figures, leading to uncertainty on whether the government funded operators can pay access and licence fees beyond the forward estimate period of 2025–26.
Significant funding uncertainties remain
While the ten-year access and licence fee agreements were communicated to the NSW Government's Expenditure Review Committee, it is yet to be fully provided for in the government's budget figures. As TAHE's projections are highly dependent on the operators as its key customers, it remains critical that the government continue to provide sufficient funding to the operators so they can pay for access and use of TAHE assets. This means the significant funding uncertainties reported in last year's TSSA audit opinion remain for 2021–22.
The government has estimated $37.9 billion in returns (equivalent to 2.5% on contributed equity) is to be earned from its investment in TAHE over the period from 1 July 2022 to 30 June 2046. As previously reported, TAHE derives most of its revenue from access and licence fee agreements from the operators, who in turn are both funded by grants through TfNSW from the GGS. More than 95% of these returns are estimated to be earned outside of the ten-year contract period (terminating 30 June 2031).
2022–261 $b |
2027–20312 $b |
2032–46 $b |
Total $b |
|
Returns to GGS | 1.8 | 4.7 | 31.5 | 37.9 |
There remains risk that:
- TAHE will not be able to recontract for access and licence fees at a level that is consistent with current projections
- future governments' funding to TAHE's key customers will not be sufficient to fund payment of access and licence fees at a level that is consistent with current projections
- TAHE will be unable to grow its non-government revenues.
This significant funding uncertainty was also reported in last year's TSSA audit opinion and will remain for 2021–22.
In 2021–22, TAHE and NSW Treasury prepared further modelling to support the Government's intent to earn a 2.5% return inclusive of recovering the holding (revaluation) loss of $20.3 billion on its investment in TAHE
Last year's State Finances report highlighted that NSW Treasury, with TAHE, should prepare robust projections and business plans to support the expected returns forecast beyond FY2031.
This year TAHE engaged an expert to help develop a model demonstrating the government's expected returns from its investment in TAHE. The model mathematically forecasts that returns of 2.5% will be achieved by 2046 and this will include recovery of the revaluation losses of $20.3 billion relating to 2020–21.
The current model includes some key assumptions:
- The main source of revenue is the access and licence fees expected from the two public rail operators (Sydney Trains and NSW Trains) contributing to more than 80% of TAHE's projected revenue. The rail operators are largely funded by the government when paying access and licence fees to TAHE.
- For the first ten years, the access and licence fees are based on the signed agreements between TAHE and the public rail operators.
- Beyond the ten-year contracted period, the model assumes existing contractual terms for access and licence fees will continue unchanged allowing for an annual rise for inflation (2.5% per annum), and increased fees to enable a 7.62% return for renewed assets.
- The capital expenditure included in the model is only the amounts approved by the Expenditure Review Committee (ERC) as part of the ten-year forecast. The model beyond ten years includes expected investment in renewed and replacement assets but excludes any forecasts relating to growth capex that is not approved by the ERC, and any related depreciation expenses for growth capex.
While management has developed a 35-year long term financial model to support the returns, we note this will need to be refined over the next few years. Furthermore, these are forecasted figures and we have not seen sufficient evidence of whether this reflects reality (that is, the achievement of dividends representing a return on equity) as it is still very early. Therefore, this will remain a high-risk matter until we have seen sufficient evidence of reality to the forecasted figures.
There is negative net impact on the budget after 2024–25 and this will grow in the future
There are some key points to highlight with this modelling and these are best conveyed with the graph below. This graph shows total cash injections made by the GGS since the government first announced the creation of TAHE as a for-profit entity in the 2015–16 NSW Budget. It also conveys the forecast returns from TAHE to the GGS and the level of funding operators will need from the GGS to pay TAHE's access and licence fees over the 30-year period. These cash flows are key inputs used in the modelling which calculates a 2.5% return from TAHE inclusive of recovering the holding (revaluation) loss of $20.3 billion.
The government continues to respond to the impact of the COVID-19 pandemic on New South Wales through its economic stimulus measures
The COVID-19 pandemic continued to significantly impact the State’s finances, reducing revenue and increasing expenses especially in sectors directly responsible for responding to the COVID-19 pandemic, such as Health. In October 2021, the government announced through the 'COVID-19 Economic Recovery Strategy' an additional $2.8 billion in economic stimulus and response measures following the conclusion of the three-month lockdown due to the Delta COVID-19 outbreak. Measures included:
- $739 million in household and social support, including housing support for Aboriginal communities and survivors of domestic violence, and vouchers to thank parents for their efforts to support learning from home
- $500 million to consumers and businesses including expansion of the 'Dine & Discover' and 'Stay & Rediscover' voucher programs
- $495 million in education support addressing learning gaps for children and helping schools prepare for future learning disruptions
- $487 million in combined funding for tourism, events, sports, and recreation throughout New South Wales
- $130 million to fund mental health services for individuals whose mental health was impacted by the pandemic.
The 2021–22 financial year included $21.9 billion for pandemic response and economic stimulus measures. Of this, $17.9 billion was spent in 2021–22 while a further $1 billion of the budgeted amount from 2021–22 was carried forward into 2022–23. The graph below shows the total allocation and spend by cluster for 2022 compared to target spend.
There were 14 natural disaster declarations including four severe weather events in 2021–22
Natural disasters such as bushfires, storms, floods, and other adverse weather events can have a significant impact on the State's finances. Costs associated with natural disasters include direct response costs such as clean-up and recovery, temporary accommodation, and as well as financial assistance provided to impacted communities such as recovery and business support grants.
The NSW Government can make a natural disaster declaration allowing eligible individuals and communities from impacted Local Government Areas access to a range of special financial assistance measures.
In 2021–22, there were 14 natural disaster declarations announced comparable to 14 in the previous year. These natural disaster declarations largely related to storms and floods throughout the State. In 2021–22, there was a larger number of 'severe weather' events declared, with four in 2021–22 (nil in 2020–21).
Natural disaster expenses increased 143% to $1.4 billion in 2021–22, up from $569 million last year
Over 2021–22, the budgeted cost for declared natural disasters was $1.9 billion ($725 million in 2020–21). Actual expenditure by the State on disaster response increased by $815 million to $1.4 billion. The graph below shows the total allocation and spend by cluster for 2022 compared to their budget spend.
Deficit of $15.3 billion compared with a budgeted deficit of $8.6 billion
The outcomes of the government’s overall activity and policies are reflected in its net operating balance (budget result). This is the difference between the cost of general government service delivery and the revenue earned to fund these sectors.
The General Government Sector, which comprises 196 entities, generally provides goods and services funded centrally by the State.
In addition to the 196 entities within the General Government Sector, a further 85 government controlled businesses are included within the consolidated Total State Sector financial statements. These businesses generally provide goods and services, such as water, electricity and financial services for which consumers pay for directly, and form part of the PNFC (31) and PFC (54) sectors.
The budget result for the 2021–22 financial year was a deficit of $15.3 billion compared to an original forecast of a budget deficit of $8.6 billion.
Revenues increased $16.1 billion to $106.7 billion
The State’s total revenues increased $16.1 billion to $106.7 billion, an increase of 17.8% compared to the previous year. Total revenue growth in 2020–21 was 5.1%. The State's increase in revenue was mostly from $9.2 billion in grants and subsidies and $4.6 billion in taxation.
Taxation revenue increased by 13.3%
Taxation revenue increased by $4.6 billion, mainly due to the net of:
- $4.9 billion higher stamp duties collected from property sales driven by growth in property transaction volumes and prices during 2021–22. This was growth was experienced across residential and commercial property markets
- $296 million lower gambling and betting taxes compared to 2020–21. Decrease was primarily attributed to the ongoing effects of COVID-19 restrictions and venue closures within the first half of 2021–22.
Stamp duties of $16.6 billion remains the largest source of taxation revenue, $7.7 billion higher than payroll tax of $8.9 billion, the second-largest source of taxation revenue.
Assets grew by $53 billion to $571 billion
The State’s assets include physical assets such as land, buildings and infrastructure, and financial assets such as cash, and other financial instruments and equity investments. The value of total assets increased by $53.2 billion or 10.3% to $571 billion. The increase was largely due to increases in the carrying value of land, buildings and infrastructure systems.
Valuing the State’s physical assets
State’s physical assets valued at $437 billion
The value of the State’s physical assets increased by $46.8 billion to $437 billion in 2021–22 ($724 million increase in 2020–21). The State’s physical assets include land and buildings ($198 billion), infrastructure systems ($221 billion), and plant and equipment ($18 billion).
The movement in physical asset values between years includes additions, disposals, depreciation and valuation adjustments. Other movements include assets reclassified to held for sale and other opening balance adjustments.
Appendix one – Prescribed entities
Appendix three – TSS sectors and entities
Copyright notice
© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.
Actions for Transport and Infrastructure 2022
Transport and Infrastructure 2022
What the report is about
Result of the Transport and Infrastructure cluster agencies' financial statement audits for the year ended 30 June 2022.
What we found
Unmodified audit opinions were issued for all Transport and Infrastructure cluster agencies' financial statements.
An 'other matter' paragraph was included in TAHE's Independent Auditor's Report for its 30 June 2022 financial statements which draws attention to Transport and Asset Holding Entity's (TAHE) reliance on government-funded customers.
We included an ‘emphasis of matter’ paragraph in the Independent Auditor’s Report for State Transit Authority of New South Wales’ (the authority) 30 June 2022 financial statements, which draws attention to the financial statements being prepared on a liquidation basis as the authority’s principal activities ceased operations on 3 April 2022.
What the key issues were
The 2021–22 audits identified five high-risk findings:
- detailed business modelling to support returns from TAHE
- valuation of assets at TAHE
- control of assets at TAHE
- accounting and valuation of tree assets at Centennial Park and Moore Park Trust and Parramatta Park Trust.
Access and licence fees - TAHE
Revised commercial agreements were signed between TAHE, the operators and Transport for NSW on 23 June 2022 to reflect increased access and licence fees detailed in the 18 December 2021 Heads of Agreement.
TAHE’s ability to generate the expected return of 2.5% based on the current modelling is heavily reliant on the government funding the public rail operators (TAHE's customers).
There are risks that:
- TAHE will not be able to recontract for access and licence fees at a level that is consistent with current projections
- future governments' funding to TAHE's key customers will not be sufficient to fund payment of access and licence fees at a level that is consistent with current projections
- TAHE will be unable to grow its non-government revenues.
Valuation of assets - TAHE
Although TAHE's selected valuation of assets falls within an acceptable range, there remains a significant gap between what has been assessed as an acceptable range and TAHE's range.
What we recommended
Control of assets - TAHE
While we accepted TAHE’s position on control for the current year, NSW Treasury and TAHE should continue to monitor the risk that control of TAHE assets could change in future reporting periods. TAHE must continue to demonstrate control of its assets or the current accounting presentation would need to be reconsidered.
This report provides Parliament and other users of the Transport and Infrastructure cluster’s financial statements with the results of our audits, analysis, conclusions and recommendations in the following areas:
- financial reporting
- audit observations.
Financial reporting is an important element of good governance. Confidence and transparency in public sector decision-making are enhanced when financial reporting is accurate and timely.
This chapter outlines our audit observations related to the financial reporting of agencies in the Transport and Infrastructure cluster (the cluster) for 2022.
Section highlights
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Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision-making.
This chapter outlines our observations and insights from our financial statement audits of agencies in the cluster.
Section highlights
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Appendix one – Misstatements in financial statements submitted for audit
Appendix two – Early close procedures
Appendix three – Timeliness of financial reporting
Appendix four – Financial data
Copyright notice
© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.
Actions for Internal controls and governance 2022
Internal controls and governance 2022
What the report is about
This report analyses the internal controls and governance of the 25 largest agencies in the NSW public sector, excluding state-owned corporations and public financial corporations, for the year ended 30 June 2022.
What we found
Internal control trends
The proportion of control deficiencies identified as high-risk this year increased to 8.2% (5.9% in 2020–21). Sixteen of the 23 high-risk findings related to financial controls while seven related to IT controls.
Repeat findings of control deficiencies now represent 48% of all findings (47% in 2020–21).
Information technology
There continues to be a high number of deficiencies relating to IT general controls, particularly around user access reviews, which affected 56% of agencies.
Cyber security
Agencies' self-assessed maturity levels against the NSW Cyber Security Policy mandatory requirements are lower than target levels. Overall, maturity levels against the Australian Cyber Security Centre's Essential Eight controls have not improved since last year.
Management of cyber risks relating to third party IT service providers should be improved. IT service providers may pose risks to the agency if the provider's cyber security controls have weaknesses.
Consultants and contractors
Agencies risk over-reliance on the same consultants and contractors. A quarter of agencies have re-engaged the same contractor over the past five years.
Employment screening Twenty-four per cent of agencies have not complied with the employment screening requirements of the Government Sector Employment Act 2013 with regard to citizenship or residency. Screening and induction practices for non-permanent workers are often less stringent than for permanent employees. This can pose increased risks to an entity of not detecting applicants with false credentials or a history of corrupt conduct.
Contract management
Half of all agencies' procurement contract registers are incomplete, which is non-compliant with the Government Information (Public Access) Act 2009.
What we recommended
Agencies should:
- prioritise actions to address repeat control deficiencies
- prioritise improvements to their cyber security and resilience
- reinforce mandatory cyber training to all staff and improve completion rates
- ensure that contractor engagements that have been renewed over multiple years are periodically reassessed against the market.
Internal controls are processes, policies and procedures that help agencies to:
- operate effectively and efficiently
- produce reliable financial reports
- comply with laws and regulations
- support ethical government.
This chapter outlines the overall trends for agency controls and governance issues, including the number of audit findings, the degree of risk those deficiencies pose to the agency, and a summary of the most common deficiencies we found across agencies. The rest of this report presents this year's controls and governance findings in more detail.
For consistency and comparability, we have adjusted the 2021 results to incorporate additional audit findings that were reported after the date of the 'Internal controls and governance 2021' report. Therefore, the 2021 figures will not necessarily align with those reported in our 2021 report.
This section also covers how agencies have complied with TD 21-04 during 2021–22.
Section highlightsWe identified 23 high-risk findings, compared to 20 last year, with ten repeated from last year. Sixteen of the 23 findings related to financial controls and seven related to IT controls.
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This chapter outlines our audit observations, conclusions and recommendations arising from our review of agency controls to manage key financial systems.
Section highlights
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This chapter outlines our audit observations, conclusions and recommendations arising from our review of agencies' cyber security planning and governance arrangements.
Section highlights
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This chapter outlines our audit observations, conclusions and recommendations arising from our review of agencies' practices in engaging external experts, such as consultants and contractors.
Section highlights
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This chapter outlines our audit observations, conclusions and recommendations arising from our review of agencies' employment screening practices.
Section highlights
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This chapter outlines our audit observations, conclusions and recommendations arising from our review of agencies' contract management processes.
Section highlights
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Actions for Enterprise, Investment and Trade 2022
Enterprise, Investment and Trade 2022
What the report is about
Result of the Enterprise, Investment and Trade cluster agencies' financial statement audits for the year ended 30 June 2022.
What we found
The Machinery of Government changes within the Enterprise, Investment and Trade cluster resulted in the creation of the Department of Enterprise, Investment and Trade and the transfer of $1.0 billion of net assets into the new department.
Unmodified audit opinions were issued for all completed cluster agencies' 2021–22 financial statements audits. Two audits are ongoing.
An 'Other Matter' paragraph was included in the audit opinion for the Jobs for NSW Fund's 30 June 2021 financial report to reflect the non-compliance with the Jobs for NSW Act 2015 (the Act) and Government Sector Finance Act 2018. The Act requires the board to consist of seven members that include the Secretary of the Treasury, the Secretary of the Department of Premier and Cabinet, and five ministerial appointments. The board has consisted of two secretaries since 24 May 2019 when the independent members resigned. The remaining five members have not been appointed by the ministers as required by section 5(2) of the Act.
Three cluster agencies accepted changes to their office leasing arrangements managed by Property NSW. This has resulted in the collective derecognition of $24.8 million of right-of-use assets and $26.7 million in lease liabilities, and recognition of $1.9 million of other gains.
What the key issues were
The number of issues we reported to management decreased from 108 in 2020–21 to 103 in 2021–22. Thirty per cent of issues were repeated from the prior year.
Six high-risk issues were identified across the cluster related to the quality and timeliness of financial reporting, governance processes and internal controls.
Recommendations were made to address these deficiencies.
This report provides Parliament and other users of the Enterprise, Investment and Trade cluster's financial statements with the results of our audits, analysis, conclusions and recommendations in the following areas:
- financial reporting
- audit observations.
Financial reporting is an important element of good governance. Confidence and transparency in public sector decision-making are enhanced when financial reporting is accurate and timely.
This chapter outlines our audit observations related to the financial reporting of agencies in the Enterprise, Investment and Trade cluster (the cluster) for 2022.
Section highlights
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Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision-making.
This chapter outlines our observations and insights from our financial statement audits of agencies in the Enterprise, Investment and Trade cluster.
Section highlights
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Appendix one – Misstatements in financial statements submitted for audit
Appendix two – Early close procedures
Appendix three – Timeliness of financial reporting
Appendix four – Financial data
Copyright notice
© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.
Actions for Members' additional entitlements 2022
Members' additional entitlements 2022
What the report is about
The Auditor-General's review analyses claims made by members of the NSW Parliament during the 2021–22 financial year by testing a sample of transactions. Our sample consisted of 63 claims submitted by 59 of the 142 members.
What we found
While we did not identify any instances of material non-compliance with the Parliamentary Remuneration Tribunal's Determination, we did identify 38 departures from the determination, which were of an administrative nature.
What we recommended
The Department of Parliamentary Services (the department) should continue to work with the presiding officers, members, the clerk of the Parliaments and the clerk of the Legislative Assembly to enhance reporting of members' expenditure.
The Auditor-General has reviewed the compliance of the members of the NSW Parliament (members) with certain requirements outlined in the Parliamentary Remuneration Tribunal's Determination (the determination) for the year ended 30 June 2022.
The Auditor-General's review analyses claims made by members during the 2021–22 financial year. We use data analytics to select a sample of members' claims, and focus on claims that data analysis identifies as being at higher risk. We do not test every claim made by members. Our sample consisted of 63 claims submitted by 59 of the 142 members.
Results
Although our review did not identify any instances of material non-compliance with the determination for the year ended 30 June 2022, we did identify 38 departures from the determination, which were of administrative nature. Such departures may help identify areas in the current processes where greater clarity is needed or where training or education for members is warranted. These departures were as follows:
- 12 claims were not submitted for payment within 60 days of receipt or occurrence of the expense
- 16 annual loyalty scheme declarations were submitted by members after the due date specified in the guidelines
- 6 reconciliations for the Sydney Allowance were submitted after the due date
- 4 publications claimed under the Communications Allowance had not made the required authorisations and attributions on the publication.
Background
The Parliamentary Remuneration Tribunal (the tribunal) determines the salary and additional entitlements of the members, details of which are set out in the tribunal's annual determination. The NSW Parliament, through the Department of Parliamentary Services (the department), administers payments of additional entitlements to members. An overview is presented below:
Twelve claims were not submitted for payment within 60 days of receipt or occurrence of the expense
The determination requires members' expense claims to be submitted to the department within 60 days of when the expense is incurred or receipted. Our audit procedures identified 12 instances where members submitted their claims between 15 and 280 days late.
Sixteen annual loyalty/incentive scheme declarations were submitted by members after the due date specified in the guidelines
At the end of each financial year, members must declare they have not used loyalty/incentive scheme benefits accrued from their parliamentary duties for private purposes. The determination requires current members to complete the declarations at the end of each year (by 31 July 2022 per the department's administrative process). Former members must complete the declarations within 30 days of leaving Parliament.
We found 16 current members submitted their declarations between one and nine days late. The declaration is important as it affirms that loyalty benefits accrued using the members' parliamentary allowances and entitlements were not used for private purposes. Additionally, we found two members who did not submit their declaration form.
Six reconciliations for the Sydney Allowance reconciliations were submitted after the due date
Open prior period recommendations
Enhanced public reporting
In 2016, the Auditor-General's Report to Parliament recommended the tribunal consider requiring the department to regularly publish full details of members' expenditure claims on its website in an accessible and searchable format. The tribunal had developed a plan requiring greater public reporting of members' additional expenditure from 1 July 2019 but does not have the power to require the department to facilitate this. This matter has been raised every year since 2016 and it continues to remain an open recommendation in 2022.
The Annual Reports of the Legislative Assembly and the Legislative Council, published on the Parliament's website, currently list the total amount claimed during the year by each member for each allowance. However, transparency around members’ claims would be enhanced if information was more extensively and regularly published on the Parliament’s website. The department should continue to work with the presiding officers, members, the clerk of the Parliaments and the clerk of the Legislative Assembly to enhance reporting of members' expenditure.
Resolved prior period recommendations
Clarifying key parameters of the annual determination
In 2020, the Auditor-General's Report to Parliament recommended the department work with the tribunal to provide additional guidance to members to clarify the:
- definition of 'parliamentary duties'
- activities that meet the definition
- requirements for retaining documents.
To address this recommendation, the department performed a review of the definitions and activities used by other jurisdictions in their administration of members' entitlements. The department has clarified these items as part of their submission with respect to the 2022 determination. The department will continue to monitor for changes in the administration of members' entitlements occurring at the federal level.
Appendix one – response from Department of Parliamentary Services
Copyright notice
© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.
Actions for Planning and Environment 2022
Planning and Environment 2022
What the report is about
Result of the Planning and Environment cluster agencies' financial statements audits for the year ended 30 June 2022.
What we found
Unmodified audit opinions were issued for all completed 30 June 2022 financial statements audits of cluster agencies. Seven audits are ongoing.
Disclaimed audit opinions were issued for the 2010–11 to 2015–16 financial statements of the Water Administration Ministerial Corporation (WAMC), as management was unable to certify that the financial statements exhibit a true and fair view of WAMC's financial position and financial performance.
Qualified audit opinions were issued for WAMC's 2016–17 and 2017–18 financial statements due to insufficient evidence to support the completeness and valuation of water meters infrastructure assets, the impairment of water meters, and the completeness of buildings at Nimmie Caira.
Unqualified audit opinions were issued for WAMC's 2018–19 and 2019–20 financial statements.
The Department of Planning and Environment (the department) assessed 45 Category 2 Statutory Land Managers (SLM) did not meet the reporting exemption criteria and therefore were required to prepare 2021–22 financial statements. None of these 45 Category 2 SLMs prepared and submitted their 30 June 2022 financial statements by the statutory reporting deadline.
All 119 Commons Trusts have never submitted their financial statements for audit as required by the Government Sector Finance Act 2018 (GSF Act).
NSW Treasury has confirmed that the Catholic Metropolitan Cemeteries Trust (CMCT) is a controlled entity of the State. To date, CMCT has not met its obligations to prepare financial statements under the GSF Act and it has not submitted financial statements to the Auditor-General for audit.
What the key issues were
Since 2017, the Audit Office has recommended the department address the different practices across the local government sector in accounting for rural firefighting equipment. Despite repeated recommendations, the department did little to resolve this issue. At the time of writing, 32 of 118 completed council audits received qualified audit opinions on their 30 June 2022 financial statements.
There continues to be significant deficiencies in Crown land records. The department uses the Crown Land Information Database (CLID) to record key information relating to Crown land in New South Wales that is managed and controlled by the department and land managers. The CLID system was not designed to facilitate financial reporting, and the department is required to conduct extensive adjustments and reconciliations to produce accurate information for the financial statements.
The department implemented the CrownTracker system as a replacement for CLID. The project was finalised in June 2022, but it has not achieved the intended outcomes.
Nine high-risk issues were identified across the cluster related to the findings outlined above and weaknesses in IT general controls, financial reporting, governance processes and internal controls.
Recommendations were made to address these deficiencies.
This report provides Parliament and other users of the Planning and Environment cluster’s financial statements with the results of our audits, analysis, conclusions and recommendations in the following areas:
- financial reporting
- audit observations.
Financial reporting is an important element of good governance. Confidence and transparency in public sector decision-making are enhanced when financial reporting is accurate and timely.
This chapter outlines our audit observations related to the financial reporting of agencies in the Planning and Environment cluster (the cluster) for 2022.
Section highlights
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Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision-making.
This chapter outlines our observations and insights from our financial statement audits of agencies in the Planning and Environment cluster.
Section highlights
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Appendix one – Misstatements in financial statements submitted for audit
Appendix two – Early close procedures
Appendix three – Timeliness of financial reporting
Appendix four – Financial data
Appendix five – Councils received qualified audit opinions
Copyright notice
© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.
Actions for Stronger Communities 2022
Stronger Communities 2022
What the report is about
Results of the Stronger Communities cluster agencies' financial statement audits for the year ended 30 June 2022.
What we found
Unqualified audit opinions were issued on all completed 30 June 2022 financial statement audits. One audit is ongoing.
All 13 cluster agencies that have accommodation arrangements with Property NSW derecognised right-of-use assets and lease liabilities of $917 million and $1 billion respectively. The agencies also collectively recorded a gain on derecognition of $136 million.
The Department of Communities and Justice (the department) assumed the responsibility for delivery of the Process and Technology Harmonisation program from the Department of Customer Service. In 2021–22, the department incurred costs of $42.8 million in relation to the project, which remains ongoing.
The number of monetary misstatements identified during the audits decreased from 50 in 2020–21 to 48 in 2021–22.
What the key issues were
Six of the 15 cluster agencies required to submit 2021–22 mandatory early close procedures did not meet the statutory deadlines. One agency did not complete all mandatory procedures.
Five high-risk findings were identified in 2021–22. They related to deficiencies in:
- user access administration at the department, NSW Rural Fire Service and New South Wales Aboriginal Land Council (NSWALC)
- segregation of duties at the NSW Trustee and Guardian and NSWALC.
Recommendations were made to those agencies to address these control deficiencies.
This report provides Parliament and other users of the Stronger Communities cluster’s financial statements with the results of our audits, analysis, conclusions and recommendations in the following areas:
- financial reporting
- audit observations.
Financial reporting is an important element of good governance. Confidence and transparency in public sector decision making are enhanced when financial reporting is accurate and timely.
This chapter outlines our audit observations related to the financial reporting of agencies in the Stronger Communities cluster (the cluster) for 2022.
Section highlights
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Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision making.
This chapter outlines our observations and insights from our financial statement audits of agencies in the Stronger Communities cluster.
Section highlights
|
Appendix one – Misstatements in financial statements submitted for audit
Appendix two – Early close procedures
Appendix three – Timeliness of financial reporting
Appendix four – Financial data
Copyright notice
© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.
Actions for Regional NSW 2022
Regional NSW 2022
What the report is about
Result of the Regional NSW cluster agencies' financial statement audits for the year ended 30 June 2022.
What we found
Unmodified audit opinions were issued for Regional NSW cluster agencies. Two audits are ongoing.
What the key issues were
The Department of Regional NSW (the department) and Local Land Services (LLS) accepted changes to their office leasing arrangements managed by Property NSW.
These changes resulted in the collective derecognition of $100.6 million of rights-of-use-assets and $110.4 million of lease liabilities.
In 2021–22, the cluster agencies continued to assist communities in their recovery from recent weather emergencies, including significant flooding in New South Wales.
The Northern Rivers Reconstruction Corporation was established in May 2022 to rebuild communities in the Lismore and Northern Rivers region impacted by floods.
The number of matters reported to management decreased from 36 in 2020–21 to 14 in 2021–22.
Five moderate risk issues were identified and 14% of reported issues were repeat issues.
One moderate risk issue was a repeat issue related to Local Land Services' annual fair value assessment of the asset improvements on land reserves used for moving stock.
This report provides Parliament and other users of the Regional NSW cluster financial statements with the results of our audits, analysis, conclusions and recommendations in the following areas:
- financial reporting
- audit observations.
Financial reporting is an important element of good governance. Confidence and transparency in public sector decision-making are enhanced when financial reporting is accurate and timely.
This chapter outlines our audit observations related to the financial reporting of agencies in the Regional NSW cluster (the cluster) for 2022.
Section highlights
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Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision-making.
This chapter outlines our observations and insights from our financial statement audits of agencies in the Regional NSW cluster.
Section highlights
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Actions for Health 2022
Health 2022
What the report is about
Result of Health cluster (the cluster) agencies' financial statement audits for the year ended 30 June 2022.
What we found
Unmodified audit opinions were issued for the financial statements for all Health cluster agencies.
The COVID-19 pandemic continued to increase the complexity and number of accounting matters faced by the cluster. The total gross value of corrected misstatements in 2021–22 was $353.3 million, of which $186.7 million related to an increase in the impairment provision for Rapid Antigen Tests (RATs).
A qualified audit opinion was issued on the Annual Prudential Compliance Statement related to five residential aged care facilities. There were 20 instances (19 in 2020–21) of non-compliance with the prudential responsibilities within the Aged Care Act 1997.
What the key issues were
The total number of matters we reported to management across the cluster decreased from 116 in 2020–21 to 67 in 2021–22. Of the 67 issues raised, four were high risk (three in 2020-21) and 37 were moderate risk (57 in 2020–21). Nearly half of all control deficiencies reported in 2021–22 were repeat issues.
Three unresolved high-risk issues were:
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COVID-19 inventories impairment – we continued to identify issues relating to management’s impairment model which relies on anticipated future consumption patterns. RATs had not been assessed for impairment.
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Asset capitalisation threshold – management has not reviewed the appropriateness of the asset capitalisation threshold since 2006.
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Forced-finalisation of HealthRoster time records – we continued to observe unapproved rosters being finalised by system administrators so payroll can be processed on time. 2.6 million time records were processed in this way in 2021–22.
What we recommended
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COVID-19 inventories impairment – ensure consumption patterns are supported by relevant data and plans.
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Assets capitalisation threshold – undertake further review of the appropriateness of applying a $10,000 threshold before capitalising expenditure on property, plant and equipment.
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Forced-finalisation of HealthRoster time records – develop a methodology to quantify the potential monetary value of unapproved rosters being finalised.
This report provides Parliament and other users of Health cluster (the cluster) agencies' financial statements with the results of our audits, analysis, conclusions and recommendations in the following areas:
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financial reporting
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audit observations.
Financial reporting is an important element of good governance. Confidence and transparency in public sector decision-making are enhanced when financial reporting is accurate and timely.
This chapter outlines our audit observations related to the financial reporting of agencies in the Health cluster (the cluster) for 2022.
Section highlights
|
Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision-making.
This chapter outlines our observations and insights from our financial statement audits of agencies in the cluster.
Section highlights
|
Appendix one – Misstatements in financial statements submitted for audit
Appendix two – Early close procedures
Appendix three – Timeliness of financial reporting
Appendix four – Financial data
Copyright notice
© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.