Reports
Newcastle Urban Transformation and Transport Program
The urban renewal projects on former railway land in the Newcastle city centre are well targeted to support the objectives of the Newcastle Urban Transformation and Transport Program (the Program), according to a report released today by the Auditor-General for New South Wales, Margaret Crawford. The planned uses of the former railway land achieve a balance between the economic and social objectives of the Program at a reasonable cost to the government. However, the evidence that the cost of the light rail will be justified by its contribution to the Program is not convincing.
The Newcastle Urban Transformation and Transport Program (the Program) is an urban renewal and transport program in the Newcastle city centre. The Hunter and Central Coast Development Corporation (HCCDC) has led the Program since 2017. UrbanGrowth NSW led the Program from 2014 until 2017. Transport for NSW has been responsible for delivering the transport parts of the Program since the Program commenced. All references to HCCDC in this report relate to both HCCDC and its predecessor, the Hunter Development Corporation. All references to UrbanGrowth NSW in this report relate only to its Newcastle office from 2014 to 2017.
This audit had two objectives:
- To assess the economy of the approach chosen to achieve the objectives of the Program.
- To assess the effectiveness of the consultation and oversight of the Program.
We addressed the audit objectives by answering the following questions:
a) Was the decision to build light rail an economical option for achieving Program objectives?
b) Has the best value been obtained for the use of the former railway land?
c) Was good practice used in consultation on key Program decisions?
d) Did governance arrangements support delivery of the program?
1. The urban renewal projects on the former railway land are well targeted to support the objectives of the Program. However, there is insufficient evidence that the cost of the light rail will be justified by its contribution to Program objectives.
The planned uses of the former railway land achieve a balance between the economic and social objectives of the Program at a reasonable cost to the Government. HCCDC, and previously UrbanGrowth NSW, identified and considered options for land use that would best meet Program objectives. Required probity processes were followed for developments that involved financial transactions. Our audit did not assess the achievement of these objectives because none of the projects have been completed yet.
Analysis presented in the Program business case and other planning documents showed that the light rail would have small transport benefits and was expected to make a modest contribution to broader Program objectives. Analysis in the Program business case argued that despite this, the light rail was justified because it would attract investment and promote economic development around the route. The Program business case referred to several international examples to support this argument, but did not make a convincing case that these examples were comparable to the proposed light rail in Newcastle.
The audited agencies argue that the contribution of light rail cannot be assessed separately because it is a part of a broader Program. The cost of the light rail makes up around 53 per cent of the total Program funding. Given the cost of the light rail, agencies need to be able to demonstrate that this investment provides value for money by making a measurable contribution to the Program objectives.
2. Consultation and oversight were mostly effective during the implementation stages of the Program. There were weaknesses in both areas in the planning stages.
Consultations about the urban renewal activities from around 2015 onward followed good practice standards. These consultations were based on an internationally accepted framework and met their stated objectives. Community consultations on the decision to close the train line were held in 2006 and 2009. However, the final decision in 2012 was made without a specific community consultation. There was no community consultation on the decision to build a light rail.
The governance arrangements that were in place during the planning stages of the Program did not provide effective oversight. This meant there was not a single agreed set of Program objectives until 2016 and roles and responsibilities for the Program were not clear. Leadership and oversight improved during the implementation phase of the Program. Roles and responsibilities were clarified and a multi-agency steering committee was established to resolve issues that needed multi-agency coordination.
Recommendations
For future infrastructure programs, NSW Government agencies should support economical decision-making on infrastructure projects by:
- providing balanced advice to decision makers on the benefits and risks of large infrastructure investments at all stages of the decision-making process
- providing scope and cost estimates that are as accurate and complete as possible when initial funding decisions are being made
- making business cases available to the public.
The planned uses of the former railway land align with the objectives of encouraging people to visit and live in the city centre, creating attractive public spaces, and supporting growth in employment in the city. The transport benefits of the activities are less clear, because the light rail is the major transport project and this will not make significant improvements to transport in Newcastle.
The processes used for selling and leasing parts of the former railway land followed industry standards. Options for the former railway land were identified and assessed systematically. Competitive processes were used for most transactions and the required assessment and approval processes were followed. The sale of land to the University of Newcastle did not use a competitive process, but required processes for direct negotiations were followed.
Recommendation
By March 2019, the Hunter and Central Coast Development Corporation should:
- work with relevant stakeholders to explore options for increasing the focus on the heritage objective of the Program in projects on the former railway land. This could include projects that recognise the cultural and industrial heritage of Newcastle.
Consultations focusing on urban renewal options for the Program included a range of stakeholders and provided opportunities for input into decisions about the use of the former railway land. These consultations received mostly positive feedback from participants. Changes and additions were made to the objectives of the Program and specific projects in response to feedback received.
There had been several decades of debate about the potential closure of the train line, including community consultations in 2006 and 2009. However, the final decision to close the train line was made and announced in 2012 without a specific community consultation. HCCDC states that consultation with industry and business representatives constitutes community consultation because industry representatives are also members of the community. This does not meet good practice standards because it is not a representative sample of the community.
There was no community consultation on the decision to build a light rail. There were subsequent opportunities for members of the community to comment on the implementation options, but the decision to build it had already been made. A community and industry consultation was held on which route the light rail should use, but the results of this were not made public.
Recommendation
For future infrastructure programs, NSW Government agencies should consult with a wide range of stakeholders before major decisions are made and announced, and report publicly on the results and outcomes of consultations.
The governance arrangements that were in place during the planning stages of the Program did not provide effective oversight. Project leadership and oversight improved during the implementation phase of the Program.
Multi-agency coordination and oversight were ineffective during the planning stages of the Program. Examples include: multiple versions of Program objectives being in circulation; unclear reporting lines for project management groups; and poor role definition for the initial advisory board. Program ownership was clarified in mid-2016 with the appointment of a new Program Director with clear accountability for the delivery of the Program. This was supported by the creation of a multi-agency steering committee that was more effective than previous oversight bodies.
The limitations that existed in multi-agency coordination and oversight had some negative consequences in important aspects of project management for the Program. This included whole-of-government benefits management and the coordination of work to mitigate impacts of the Program on small businesses.
Recommendations
For future infrastructure programs, NSW Government agencies should:
- develop and implement a benefits management approach from the beginning of a program to ensure responsibility for defining benefits and measuring their achievement is clear
- establish whole-of-government oversight early in the program to guide major decisions. This should include:
- agreeing on objectives and ensuring all agencies understand these
- clearly defining roles and responsibilities for all agencies
- establishing whole-of-government coordination for the assessment and mitigation of the impact of major construction projects on businesses and the community.
By March 2019, the Hunter and Central Coast Development Corporation should update and implement the Program Benefits Realisation Plan. This should include:
- setting measurable targets for the desired benefits
- clearly allocating ownership for achieving the desired benefits
- monitoring progress toward achieving the desired benefits and reporting publicly on the results.
Appendix one - Response from agencies
Appendix two - About the audit
Appendix three - Performance auditing
Parliamentary reference - Report number #310 - released 12 December 2018
Family and Community Services 2018
The Auditor-General for New South Wales, Margaret Crawford released her report today on the Family and Community Services cluster. The report focuses on key observations and findings from the most recent financial audits of agencies in the cluster. Cluster entities received unqualified audit opinions for their 30 June 2018 financial statements. Opportunities to improve the quality of financial reporting were identified and reported to management.
This report analyses the results of our audits of financial statements of the Family and Community Services cluster for the year ended 30 June 2018. The table below summarises our key observations.
This report provides NSW Parliament and other users of the financial statements of Family and Community Services' agencies with the results of our audits, our observations, analysis, conclusions and recommendations in the following areas:
- financial reporting
- audit observations
- service delivery.
Financial reporting is an important element of good governance. Confidence and transparency in public sector decision making are enhanced when financial reporting is accurate and timely.
This chapter outlines our audit observations related to the financial reporting of agencies in the Family and Community Services cluster for 2018.
| Observation | Conclusions and recommendations |
| 2.1 Quality of financial reporting | |
| Unqualified audit opinions were issued for all cluster agencies' financial statements. | Conclusion: Sufficient audit evidence was obtained to conclude the financial statements were free of material misstatement. |
| Agencies complied with NSW Treasury’s mandatory early close requirements. Completing other early close procedures was inconsistent and not always supported by adequate evidence. |
Conclusion: There are opportunities for agencies to improve the quality of financial reporting by:
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| 2.2 Timeliness of financial reporting | |
| Agencies completed revaluations of property, plant and equipment and submitted 31 March 2018 financial statements by the due date as required by NSW Treasury. Agencies submitted year-end financial statements by the statutory deadline. |
Conclusion: Early revaluations of property, plant and equipment contributes to agencies meeting the year-end statutory reporting deadline. |
Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision making.
This chapter outlines our observations and insights from:
- our financial statement audits of agencies in the Family and Community Services cluster for 2018
- the areas of focus identified in the Audit Office annual work program.
The Audit Office Annual Work Program provides a summary of all audits to be conducted within the proposed time period as well as detailed information on the areas of focus for each NSW Government cluster.
| Observation | Conclusions and recommendations |
| 3.1 Internal controls | |
| The 2017–18 audits reported 47 internal control weaknesses. While none were high risk, there were 15 repeat issues. |
Conclusion: Management accepted audit findings and advised they are actioning recommendations. Timely action is important to ensure internal controls operate effectively. |
| Twenty-two of these internal control weaknesses related to information technology processes and control environment. | Conclusion: Control weaknesses in information systems may compromise the integrity and security of financial data used for decision making and financial reporting. Recommendation: Agencies should strengthen user access administration to prevent inappropriate access to key IT systems by:
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| The Department, NSW Land and Housing Corporation (LAHC) and three other cluster agencies’ contract registers are incomplete and/or inaccurate. | Recommendation: Agencies should ensure their contract registers are complete and accurate so they can more effectively govern contracts and manage compliance obligations. |
| 3.2 Audit Office annual work program | |
| Financial impact of the commissioning approach. The transfer of disability services to the National Disability Insurance Scheme and other commissioning of service delivery has contributed to a 36 per cent decrease in frontline employee numbers since 2015–16. Similarly, corporate services’ employee numbers reduced by 34 per cent. The Department’s salary costs have reduced by $232 million or 18 per cent from 2016–17. |
Conclusion: The ratio of corporate services employee numbers to support frontline and support services has remained at 1:10 since 2015–16, which indicates restructures have been planned to align with the transfer of disability services. |
| Impact of the new social housing maintenance contract Maintenance expenses have increased by about 40 per cent since the new maintenance contract commenced in April 2016. LAHC measures the benefits of the new maintenance contract such as improved tenant satisfaction. |
Conclusion: The new maintenance contract has contributed to some positive social outcomes such as tenants being employed by the contractors to conduct maintenance, as call centre operators and in administration. However, more can be done to ensure value for money is being achieved. |
| ChildStory IT Project Whilst phase one of the ChildStory IT project went 'live' in 2017–18, the planned timetable has not been met and the revised date for full implementation is end of 2018. According to the 2014–15 NSW Budget, the budget for ChildStory was $100 million over a four-year period. During the design and implementation stage, this amount was revised to $128 million, with approval of the Expenditure Review Committee. The actual cost incurred over the four years until 30 June 2018, is approximately $131 million. We identified issues with the data migration from the legacy systems to ChildStory. |
Conclusion: To inform future IT projects, we understand the Department is capturing our findings, along with the findings from the Department of Finance, Services and Innovation’s ‘Healthchecks’. |
This chapter outlines certain service delivery outcomes for 2017–18. The data on activity levels and performance is provided by Cluster agencies. The Audit Office does not have a specific mandate to audit performance information. Accordingly, the information in this chapter is unaudited.
In our recent performance audit, Progress and measurement of Premier's Priorities, we identified 12 limitations of performance measurement and performance data. We recommended that the Department of Premier and Cabinet ensure that processes to check and verify data are in place for all agency data sources.
Internal Controls and Governance 2018
The Auditor-General for New South Wales Margaret Crawford found that as NSW state government agencies’ digital footprint increases they need to do more to address new and emerging information technology (IT) risks. This is one of the key findings to emerge from the second stand-alone report on internal controls and governance of the 40 largest NSW state government agencies.
This report analyses the internal controls and governance of the 40 largest agencies in the NSW public sector for the year ended 30 June 2018.
This report covers the findings and recommendations from our 2017–18 financial audits that relate to internal controls and governance at the 40 largest agencies (refer to Appendix three) in the NSW public sector.
This report offers insights into internal controls and governance in the NSW public sector
This is our second report dedicated to internal controls and governance at NSW State Government agencies. The report provides insights into the effectiveness of controls and governance processes in the NSW public sector by:
- highlighting the potential risks posed by weaknesses in controls and governance processes
- helping agencies benchmark the adequacy of their processes against their peers
- focusing on new and emerging risks, and the internal controls and governance processes that might address those risks.
Without strong governance systems and internal controls, agencies increase the risks associated with effectively managing their finances and delivering services to citizens. The way agencies deliver services increasingly relies on contracts and partnerships with the private sector. Many of these arrangements deliver front line services, but others provide less visible back office support. For example, an agency may rely on an IT service provider to manage a key system used to provide services to the community. The contract and service level agreements are only truly effective where they are actively managed to reduce risks to continuous quality service delivery, such as interruptions caused by system outages, cyber security attacks and data security breaches.
Our audits do not review all aspects of internal controls and governance every year. We select a range of measures, and report on those that present heightened risks for agencies to mitigate. This report divides these into the following five areas:
- Internal control trends
- Information technology (IT), including IT vendor management
- Transparency and performance reporting
- Management of purchasing cards and taxis
- Fraud and corruption control.
The findings in this report should not be used to draw conclusions on the effectiveness of individual agency control environments and governance arrangements. Specific financial reporting, controls and service delivery comments are included in the individual 2018 cluster financial audit reports, which will be tabled in Parliament from November to December 2018.
The focus of the report has changed since last year
Last year's report topics included asset management, ethics and conduct, and risk management. We are reporting on new topics this year. We plan to introduce new topics and re-visit our previous topics in subsequent reports on a cyclical basis. This will provide a baseline against which to measure the NSW public sectors’ progress in implementing appropriate internal controls and governance processes to mitigate existing, new and emerging risks in the public sector.
Agencies selected for the volume account for 95 per cent of the state's expenditure
While we have covered only 40 agencies in this report, those selected are a large enough group to identify common issues and insights. They represent about 95 per cent of total expenditure for all NSW public sector agencies.
Internal controls are processes, policies and procedures that help agencies to:
- operate effectively and efficiently
- produce reliable financial reports
- comply with laws and regulations
- support ethical government.
This chapter outlines the overall trends for agency controls and governance issues, including the number of findings, level of risk and the most common deficiencies we found across agencies. The rest of this volume presents this year’s controls and governance findings in more detail.
| Observation | Conclusions and recommendations |
|---|---|
| 2.1 High risk findings | |
| We found six high risk findings (seven in 2016–17), one of which was repeated from both last year and 2015–16. | Recommendation: Agencies should reduce risk by addressing high risk internal control deficiencies as a priority. |
| 2.2 Common findings | |
| We found several internal controls and governance findings common to multiple agencies. | Conclusion: Central agencies or the lead agency in a cluster can play a lead role in helping ensure agency responses to common findings are consistent, timely, efficient and effective. |
| 2.3 New and repeat findings | |
| Although internal control deficiencies decreased over the last four years, this year has seen a 42 per cent increase in internal control deficiencies. | The increase in new IT control deficiencies and repeat IT control deficiencies signifies an emerging risk for agencies. |
| IT control deficiencies feature in this increase, having risen by 63 per cent since last year. The number of repeat IT control deficiencies has doubled and is driven by the increasing digital footprint left by agencies as government prioritises on-line interfaces with citizens, and the number of transactions conducted through digital channels increases |
Recommendation: Agencies should reduce IT risks by:
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Government agencies’ financial reporting is now heavily reliant on information technology (IT). IT is also increasingly important to the delivery of agency services. These systems often provide the data to help monitor the efficiency and effectiveness of agency processes and services they deliver. Our audits reviewed whether agencies have effective controls in place to manage both key financial systems and IT service contracts.
| Observation | Conclusions and recommendations |
|---|---|
| 3.1 Management of IT vendors | |
| Contract management framework Although 87 per cent of agencies have a contract management policy to manage IT vendors, one fifth require review. |
Conclusion: Agencies can more effectively manage IT vendor contracts by developing policies and procedures to ensure vendor management frameworks are kept up to date, plans are in place to manage vendor performance and risk, and compliance with the framework is monitored by:
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| Contract risk management Forty-one per cent of agencies are not using contract management plans and do not assess contract risks. Half of the agencies that did assess contract risks, had not updated the risk assessments since the commencement of the contract. |
Conclusion: Instead of applying a 'set and forget' approach in relation to management of contract risks, agencies should assess risk regularly and develop a plan to actively manage identified risks throughout the contract lifecycle - from negotiation and commencement, to termination. |
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Performance management Only 24 per cent of agencies sought assurance about the accuracy of vendor reporting against KPIs, yet sixty-seven per cent of the IT contracts allow agencies to determine performance based payments and/or penalise underperformance. |
Conclusion: Agencies are monitoring IT vendor performance, but could improve outcomes and more effectively manage under-performance by:
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Transitioning services Where IT vendor contracts do make provision for transitioning-out, only 28 per cent of agencies have developed a transitioning-out plan with their IT vendor. |
Conclusion: Contract transition/phase out clauses and plans can mitigate risks to service disruption, ensure internal controls remain in place, avoid unnecessary costs and reduce the risk of 'vendor lock-in'. |
| Contract Registers Eleven out of forty agencies did not have a contract register, or have registers that are not accurate and/or complete. |
Conclusion: A contract register helps to manage an agency’s compliance obligations under the Government Information (Public Access) Act 2009 (the GIPA Act). However, it also helps agencies more effectively manage IT vendors by:
Recommendation: Agencies should ensure their contract registers are complete and accurate so they can more effectively govern contracts and manage compliance obligations. |
| 3.2 IT general controls | |
| Governance Ninety-five per cent of agencies have established policies to manage key IT processes and functions within the agency, with ten per cent of those due for review. |
Conclusion: Regular review of IT policies ensures risks are considered and appropriate strategies and procedures are implemented to manage these risks on a consistent basis. An absence of policies can lead to ad-hoc responses to risks, and failure to consider emerging IT risks and changes to agency IT environments. |
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User access administration
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Recommendation: Agencies should strengthen the administration of user access to prevent inappropriate access to key systems. |
| Privileged access Forty per cent of agencies do not periodically review logs of the activities of privileged users to identify suspicious or unauthorised activities. |
Recommendation: Agencies should:
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| Password controls Twenty-three per cent of agencies did not comply with their own policy on password parameters. |
Recommendation: Agencies should ensure IT password settings comply with their password policies. |
| Program changes Fifteen per cent of agencies had deficient IT program change controls mainly related to segregation of duties and authorisation and testing of IT program changes prior to deployment. |
Recommendation: Agencies should maintain appropriate segregation of duties in their IT functions and test system changes before they are deployed. |
This chapter outlines our audit observations, conclusions and recommendations from our review of how agencies reported their performance in their 2016–17 annual reports. The Annual Reports (Statutory Bodies) Regulation 2015 and Annual Reports (Departments) Regulation 2015 (annual reports regulation) currently prescribes the minimum requirements for agency annual reports.
| Observation | Conclusion or recommendation |
| 4.1 Reporting on performance | |
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Only 57 per cent of agencies linked reporting on performance to their strategic objectives. The use of targets and reporting performance over time was limited and applied inconsistently. |
Conclusion: There is significant disparity in the quality and consistency of how agencies report on their performance in their annual reports. This limits the reliability and transparency of reported performance information. Agencies could improve performance reporting by clearly linking strategic objectives to reported outcomes, and reporting on performance against targets over time. NSW Treasury may need to provide more guidance to agencies to support consistent and high-quality performance reporting in annual reports. |
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There is no independent assurance that the performance metrics agencies report in their annual reports are accurate. Prior performance audits have noted issues related to the collection of performance information. For example, our 2016 Report on Red Tape Reduction highlighted inaccuracies in how the dollar-value of red tape reduction had been reported. |
Conclusion: The ability of Parliament and the public to rely on reported information as a relevant and accurate reflection of an agency's performance is limited. The relevance and accuracy of performance information is enhanced when:
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| 4.2 Reporting on reports | |
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Agency reporting on major projects does not meet the requirements of the annual reports regulation. Forty-seven per cent of agencies did not report on costs to date and estimated completion dates for major works in progress. Of the 47 per cent of agencies that reported on major works, only one agency reported detail about significant cost overruns, delays, amendments, deferments or cancellations. |
NSW Treasury produce an annual report checklist to help agencies comply with their annual report obligations. Recommendation: Agencies should comply with the annual reports regulation and report on all mandatory fields, including significant cost overruns and delays, for their major works in progress. |
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The information the annual reports regulation requires agencies to report deals only with major works in progress. There is no requirement to report on completed works. Sixteen of 30 agencies reported some information on completed major works. |
Conclusion: Agencies could improve their transparency if they reported, or were required to report:
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This chapter outlines our audit observations, conclusions and recommendations, arising from our review of agency preventative and detective controls over purchasing card and taxi use for 2017–18.
| Observation | Conclusion or recommendation |
| 5.1 Management of purchasing cards | |
| Volume of credit card spend Purchasing card expenditure has increased by 76 per cent over the last four years in response to a government review into the cost savings possible from using purchasing cards for low value, high volume procurement. |
Conclusion: The increasing use of purchasing cards highlights the importance of an effective framework for the use and management of purchasing cards. |
| Policy framework We found all agencies that held purchasing cards had a policy in place, but 26 per cent of agencies have not reviewed their purchasing card policy by the scheduled date, or do not have a scheduled revision date stated within their policy. |
Recommendation: Agencies should mitigate the risks associated with increased purchasing card use by ensuring policies and purchasing card frameworks remain current and compliant with the core requirements of TPP 17–09 'Use and Management of NSW Government Purchasing Cards'. |
| Preventative controls We found that:
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Agencies have designed and implemented preventative controls aimed at deterring the potential misuse of purchasing cards. Conclusion: Further opportunities exist for agencies to better control the use of purchasing cards, such as:
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Detective controls Major reviews, such as data analytics (29 per cent of agencies) and independent spot checks (49 per cent of agencies) are not widely used. |
Agencies have designed and implemented detective controls aimed at identifying potential misuse of purchasing cards. Conclusion: More effective monitoring using purchasing card data can provide better visibility over spending activity and can be used to:
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| 5.2 Management of taxis | |
| Policy framework Thirteen per cent of agencies have not developed and implemented a policy to manage taxi use. In addition:
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Conclusion: Agencies can promote savings and provide more options to staff where their taxi use policies:
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| Detective controls All agencies approve taxi expenditure by expense reimbursement, purchasing card and Cabcharge, and have implemented controls around this approval process. However, beyond this there is minimal monitoring and review activity, such as data monitoring, independent spot checks or internal audit reviews. |
Conclusion: Taxi spend at agencies is not significant in terms of its dollar value, but it is significant from a probity perspective. Agencies can better address the probity risk by incorporating taxi use into a broader purchasing card or fraud monitoring program. |
Fraud and corruption control is one of the 17 key elements of our governance lighthouse. Recent reports from ICAC into state agencies and local government councils highlight the need for effective fraud control and ethical frameworks. Effective frameworks can help protect an agency from events that risk serious reputational damage and financial loss.
Our 2016 Fraud Survey found the NSW Government agencies we surveyed reported 1,077 frauds over the three year period to 30 June 2015. For those frauds where an estimate of losses was made, the reported value exceeded $10.0 million. The report also highlighted that the full extent of fraud in the NSW public sector could be higher than reported because:
- unreported frauds in organisations can be almost three times the number of reported frauds
- our 2015 survey did not include all NSW public sector agencies, nor did it include any NSW universities or local councils
- fraud committed by citizens such as fare evasion and fraudulent state tax self-assessments was not within the scope of our 2015 survey
- agencies did not estimate a value for 599 of the 1,077 (56 per cent) reported frauds.
Commissioning and outsourcing of services to the private sector and the advancement of digital technology are changing the fraud and corruption risks agencies face. Fraud risk assessments should be updated regularly and in particular where there are changes in agency business models. NSW Treasury Circular TC18-02 NSW Fraud and Corruption Control Policy now requires agencies develop, implement and maintain a fraud and corruption control framework, effective from 1 July 2018.
Our Fraud Control Improvement Kit provides guidance and practical advice to help organisations implement an effective fraud control framework. The kit is divided into ten attributes. Three key attributes have been assessed below; prevention, detection and notification systems.
This chapter outlines our audit observations, conclusions and recommendations, arising from our review of agency fraud and corruption controls for 2017–18.
| Observation | Conclusion or recommendation |
| 6.1 Prevention systems | |
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Prevention systems Only 54 per cent of agencies have an employment screening policy and all agencies have IT security policies, but gaps in IT security controls could undermine their policies. |
Conclusion: Most agencies have implemented fraud prevention systems to reduce the risk of fraud. However poor IT security along with other gaps in agency prevention systems, such as employment screening practices heightens the risk of fraud and inappropriate use of data. Agencies can improve their fraud prevention systems by:
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| Twenty-three per cent of agencies were not performing fraud risk assessments and some agency fraud risk assessments may not be as robust as they could be. | Conclusion: Agencies' systems of internal controls may be less effective where new and emerging fraud risks have been overlooked, or known weaknesses have not been rectified. |
| 6.2 Detection systems | |
| Detection systems Several agencies reported they were developing a data monitoring program, but only 38 per cent of agencies had already implemented a program. |
Studies have shown data monitoring, whereby entire populations of transactional data are analysed for indicators of fraudulent activity, is one of the most effective methods of early detection. Early detection decreases the duration a fraud remains undetected thereby limiting the extent of losses. Conclusion: Data monitoring is an effective tool for early detection of fraud and is more effective when informed by a comprehensive fraud risk assessment. |
| 6.3 Notification systems | |
| Notification system All agencies have notification systems for reporting actual or suspected fraud and corruption. Most agencies provide multiple reporting lines, provide training and publicise options for staff to report actual or suspected fraud and corruption. |
Conclusion: Training staff about their obligations and the use of fraud notification systems promotes a fraud-aware culture |
Matching skills training with market needs
In 2012, governments across Australia entered into the National Partnership Agreement on Skills Reform. Under the National Partnership Agreement, the Australian Government provided incentive payments to States and Territories to move towards a more contestable Vocational Education and Training (VET) market. The aim of the National Partnership Agreement was to foster a more accessible, transparent, efficient and high quality training sector that is responsive to the needs of students and industry.
The New South Wales Government introduced the Smart and Skilled program in response to the National Partnership Agreement. Through Smart and Skilled, students can choose a vocational course from a list of approved qualifications and training providers. Students pay the same fee for their chosen qualification regardless of the selected training provider and the government covers the gap between the student fee and the fixed price of the qualification through a subsidy paid to their training provider.
Smart and Skilled commenced in January 2015, with the then Department of Education and Communities having primary responsibility for its implementation. Since July 2015, the NSW Department of Industry (the Department) has been responsible for VET in New South Wales and the implementation of Smart and Skilled.
The NSW Skills Board, comprising nine part-time members appointed by the Minister for Skills, provides independent strategic advice on VET reform and funding. In line with most other States and Territories, the Department maintains a 'Skills List' which contains government subsidised qualifications to address identified priority skill needs in New South Wales.
This audit assessed the effectiveness of the Department in identifying, prioritising, and aligning course subsidies to the skill needs of NSW. To do this we examined whether:
- the Department effectively identifies and prioritises present and future skill needs
- Smart and Skilled funding is aligned with the priority skill areas
- skill needs and available VET courses are effectively communicated to potential participants and training providers.
Smart and Skilled is a relatively new and complex program, and is being delivered in the context of significant reform to VET nationally and in New South Wales. A large scale government funded contestable market was not present in the VET sector in New South Wales before the introduction of Smart and Skilled. This audit's findings should be considered in that context.
The Department needs to better use the data it has, and collect additional data, to support its analysis of priority skill needs in New South Wales, and direct funding accordingly.
- funding scholarships and support for disadvantaged students
- funding training in regional and remote areas
- providing additional support to deliver some qualifications that the market is not providing.
The Department needs to evaluate these funding strategies to ensure they are achieving their goals. It should also explore why training providers are not delivering some priority qualifications through Smart and Skilled.
Training providers compete for funding allocations based on their capacity to deliver. The Department successfully manages the budget by capping funding allocated to each Smart and Skilled training provider. However, training providers have only one year of funding certainty at present. Training providers that are performing well are not rewarded with greater certainty.
The Department needs to improve its communication with prospective students to ensure they can make informed decisions in the VET market.
The Department also needs to communicate more transparently to training providers about its funding allocations and decisions about changes to the NSW Skills List.
The Department relies on stakeholder proposals to update the NSW Skills List. Stakeholders include industry, training providers and government departments. These stakeholders, particularly industry, are likely to be aware of skill needs, and have a strong incentive to propose qualifications that address these needs. The Department’s process of collecting stakeholder proposals helps to ensure that it can identify qualifications needed to address material skill needs.
It is also important that the Department ensures the NSW Skills List only includes priority qualifications that need to be subsidised by government. The Department does not have robust processes in place to remove qualifications from the NSW Skills List. As a result, there is a risk that the list may include lower priority skill areas. Since the NSW Skills List was first created, new additions to the list have outnumbered those removed by five to one.
The Department does not always validate information gathered from stakeholder proposals, even when it has data to do so. Further, its decision making about what to include on, or delete from, the NSW Skills List is not transparent because the rationale for decisions is not adequately documented.
The Department is undertaking projects to better use data to support its decisions about what should be on the NSW Skills List. Some of these projects should deliver useful data soon, but some can only provide useful information when sufficient trend data is available.
Recommendation
The Department should:
- by June 2019, increase transparency of decisions about proposed changes to the NSW Skills List and improve record-keeping of deliberations regarding these changes
- by December 2019, use data more effectively and consistently to ensure that the NSW Skills List only includes high priority qualifications
Only qualifications on the NSW Skills List are eligible for subsidies under Smart and Skilled. As the Department does not have a robust process for removing low priority qualifications from the NSW Skills list, some low priority qualifications may be subsidised.
The Department allocates the Smart and Skilled budget through contracts with Smart and Skilled training providers. Training providers that meet contractual obligations and perform well in terms of enrolments and completion rates are rewarded with renewed contracts and more funding for increased enrolments, but these decisions are not based on student outcomes. The Department reduces or removes funding from training providers that do not meet quality standards, breach contract conditions or that are unable to spend their allocated funding effectively. Contracts are for only one year, offering training providers little funding certainty.
Smart and Skilled provides additional funding for scholarships and for training providers in locations where the cost of delivery is high or to those that cater to students with disabilities. The Department has not yet evaluated whether this additional funding is achieving its intended outcomes.
Eight per cent of the qualifications that have been on the NSW Skills List since 2015 are not delivered under Smart and Skilled anywhere in New South Wales. A further 14 per cent of the qualifications that are offered by training providers have had no student commencements. The Department is yet to identify the reasons that these high priority qualifications are either not offered or not taken up by students.
Recommendation
The Department should:
- by June 2019, investigate why training providers do not offer, and prospective students do not enrol in, some Smart and Skilled subsidised qualifications
- by December 2019, evaluate the effectiveness of Smart and Skilled funding which supplements standard subsidies for qualifications on the NSW Skills List, to determine whether it is achieving its objectives
- by December 2019, provide longer term funding certainty to high performing training providers, while retaining incentives for them to continue to perform well.
In a contestable market, it is important for consumers to have sufficient information to make informed decisions. The Department does not provide some key information to prospective VET students to support their decisions, such as measures of provider quality and examples of employment and further education outcomes of students completing particular courses. Existing information is spread across numerous channels and is not presented in a user friendly manner. This is a potential barrier to participation in VET for those less engaged with the system or less ICT literate.
The Department conveys relevant information about the program to training providers through its websites and its regional offices. However, it could better communicate some specific information directly to individual Smart and Skilled training providers, such as reasons their proposals to include new qualifications on the NSW Skills List are accepted or rejected.
While the Department is implementing a communication strategy for VET in New South Wales, it does not have a specific communications strategy for Smart and Skilled which comprehensively identifies the needs of different stakeholders and how these can be addressed.
Recommendation
By December 2019, the Department should develop and implement a specific communications strategy for Smart and Skilled to:
- support prospective student engagement and informed decision making
- meet the information needs of training providers
Appendix one - Response from agency
Appendix two - About the audit
Appendix three - Performance auditing
Parliamentary reference - Report number #305 - released 26 July 2018
HealthRoster benefits realisation
The HealthRoster system is delivering some business benefits but Local Health Districts are yet to use all of its features, according to a report released today by the Auditor-General for New South Wales, Margaret Crawford. HealthRoster is an IT system designed to more effectively roster staff to meet the needs of Local Health Districts and other NSW health agencies.
The NSW public health system employs over 100,000 people in clinical and non-clinical roles across the state. With increasing demand for services, it is vital that NSW Health effectively rosters staff to ensure high quality and efficient patient care, while maintaining good workplace practices to support staff in demanding roles.
NSW Health is implementing HealthRoster as its single state-wide rostering system to more effectively roster staff according to the demands of each location. Between 2013–14 and 2016–17, our financial audits of individual LHDs had reported issues with rostering and payroll processes and systems.
NSW Health grouped all Local Health Districts (LHDs), and other NSW Health organisations, into four clusters to manage the implementation of HealthRoster over four years. Refer to Exhibit 4 for a list of the NSW Health entities in each cluster.
- Cluster 1 implementation commenced in 2014–15 and was completed in 2015–16.
- Cluster 2 implementation commenced in 2015–16 and was completed in 2016–17.
- Cluster 3 began implementation in 2016–17 and was underway during the conduct of the audit.
- Cluster 4 began planning for implementation in 2017–18.
Full implementation, including capability for centralised data and reporting, is planned for completion in 2019.
This audit assessed the effectiveness of the HealthRoster system in delivering business benefits. In making this assessment, we examined whether:
- expected business benefits of HealthRoster were well-defined
- HealthRoster is achieving business benefits where implemented.
The HealthRoster project has a timespan from 2009 to 2019. We examined the HealthRoster implementation in LHDs, and other NSW Health organisations, focusing on the period from 2014, when eHealth assumed responsibility for project implementation, to early 2018.
Business benefits identified for HealthRoster accurately reflect business needs.
NSW Health has a good understanding of the issues in previous rostering systems and has designed HealthRoster to adequately address these issues. Interviews with frontline staff indicate that HealthRoster facilitates rostering which complies with industrial awards. This is a key business benefit that supports the provision of quality patient care. We saw no evidence that any major business needs or issues with the previous rostering systems are not being addressed by HealthRoster.
In the period examined in this audit since 2015, NSW Health has applied appropriate project management and governance structures to ensure that risks and issues are well managed during HealthRoster implementation.
HealthRoster has had two changes to its budget and timeline. Overall, the capital cost for the project has increased from $88.6 million to $125.6 million (42 per cent) and has delayed expected project completion by four years from 2015 to 2019. NSW Health attributes the increased cost and extended time frame to the large scale and complexity of the full implementation of HealthRoster.
NSW Health has established appropriate governance arrangements to ensure that HealthRoster is successfully implemented and that it will achieve business benefits in the long term. During implementation, local steering committees monitor risks and resolve implementation issues. Risks or issues that cannot be resolved locally are escalated to the state-wide steering committee.
NSW Health has grouped local health districts, and other NSW Health organisations, into four clusters for implementation. This has enabled NSW Health to apply lessons learnt from each implementation to improve future implementations.
NSW Health has a benefits realisation framework, but it is not fully applied to HealthRoster.
NSW Health can demonstrate that HealthRoster has delivered some functional business benefits, including rosters that comply with a wide variety of employment awards.
NSW Health is not yet measuring and tracking the value of business benefits achieved. NSW Health did not have benefits realisation plans with baseline measures defined for LHDs in cluster 1 and 2 before implementation. Without baseline measures NSW Health is unable to quantify business benefits achieved. However, analysis of post-implementation reviews and interviews with frontline staff indicate that benefits are being achieved. As a result, NSW Health now includes defining baseline measures and setting targets as part of LHD implementation planning. It has created a benefits realisation toolkit to assist this process from cluster 3 implementations onwards.
NSW Health conducted post-implementation reviews for clusters 1 and 2 and found that LHDs in these clusters were not using HealthRoster to realise all the benefits that HealthRoster could deliver.
By September 2018, NSW Health should:
- Ensure that Local Health Districts undertake benefits realisation planning according to the NSW Health benefits realisation framework
- Regularly measure benefits realised, at state and local health district levels, from the statewide implementation of HealthRoster
- Review the use of HealthRoster in Local Health Districts in clusters 1 and 2 and assist them to improve their HealthRoster related processes and practices.
By June 2019, NSW Health should:
- Ensure that all Local Health Districts are effectively using demand based rostering.
Appendix one - Response from agency
Appendix two - About the audit
Appendix three - Performance auditing
Parliamentary reference - Report number #301 - released 7 June 2018
Regional Assistance Programs
Infrastructure NSW effectively manages how grant applications for regional assistance programs are assessed and recommended for funding. Its contract management processes are also effective. However, we are unable to conclude whether the objectives of these programs have been achieved as the relevant agencies have not yet measured their benefits, according to a report released today by the Auditor-General for New South Wales, Margaret Crawford.
In 2011, the NSW Government established Restart NSW to fund new infrastructure with the proceeds from the sale and lease of government assets. From 2011 to 2017, the NSW Government allocated $1.7 billion from the fund for infrastructure in regional areas, with an additional commitment of $1.3 billion to be allocated by 2021. The NSW Government allocates these funds through regional assistance programs such as Resources for Regions and Fixing Country Roads. NSW councils are the primary recipients of funding provided under these programs.
The NSW Government announced the Resources for Regions program in 2012 with the aim of addressing infrastructure constraints in mining affected communities. Infrastructure NSW administers the program, with support from the Department of Premier and Cabinet.
The NSW Government announced the Fixing Country Roads program in 2014 with the aim of building more efficient road freight networks. Transport for NSW and Infrastructure NSW jointly administer this program, which funds local councils to deliver projects that help connect local and regional roads to state highways and freight hubs.
This audit assessed whether these two programs (Resources for Regions and Fixing Country Roads) were being effectively managed and achieved their objectives. In making this assessment, we answered the following questions:
- How well are the relevant agencies managing the assessment and recommendation process?
- How do the relevant agencies ensure that funded projects are being delivered?
- Do the funded projects meet program and project objectives?
The audit focussed on four rounds of Resources for Regions funding between 2013–14 to 2015–16, as well as the first two rounds of Fixing Country Roads funding in 2014–15 and 2015–16.
The project selection criteria are consistent with the program objectives set by the NSW Government, and the RIAP applied the criteria consistently. Probity and record keeping practices did not fully comply with the probity plans.
The assessment methodology designed by Infrastructure NSW is consistent with2 the program objectives and criteria. In the rounds that we reviewed, all funded projects met the assessment criteria.
Infrastructure NSW developed probity plans for both programs which provided guidance on the record keeping required to maintain an audit trail, including the use of conflict of interest registers. Infrastructure NSW and Transport for NSW did not fully comply with these requirements. The relevant agencies have taken steps to address this in the current funding rounds for both programs.
NSW Procurement Board Directions require agencies to ensure that they do not engage a probity advisor that is engaged elsewhere in the agency. Infrastructure NSW has not fully complied with this requirement. A conflict of interest arose when Infrastructure NSW engaged the same consultancy to act as its internal auditor and probity advisor.
While these infringements of probity arrangements are unlikely to have had a major impact on the assessment process, they weaken the transparency and accountability of the process.
Some councils have identified resourcing and capability issues which impact on their ability to participate in the application process. For both programs, the relevant agencies conducted briefings and webinars with applicants to provide advice on the objectives of the programs and how to improve the quality of their applications. Additionally, Transport for NSW and the Department of Premier and Cabinet have developed tools to assist councils to demonstrate the economic impact of their applications.
The relevant agencies provided feedback on unsuccessful applications to councils. Councils reported that the quality of this feedback has improved over time.
Recommendations
- By June 2018, Infrastructure NSW should:
- ensure probity reports address whether all elements of the probity plan have been effectively implemented.
- By June 2018, Infrastructure NSW and Transport for NSW should:
- maintain and store all documentation regarding assessment and probity matters according to the State Records Act 1998, the NSW Standard on Records Management and the relevant probity plans
Infrastructure NSW is responsible for overseeing and monitoring projects funded under Resources for Regions and Fixing Country Roads. Infrastructure NSW effectively manages projects to keep them on track, however it could do more to assure itself that all recipients have complied with funding deeds. Benefits and outcomes should also start to be measured and reported as soon as practicable after projects are completed to inform assessment of future projects.
Infrastructure NSW identifies projects experiencing unreasonable delays or higher than expected expenses as 'at‑risk'. After Infrastructure NSW identifies a project as 'at‑risk', it puts in place processes to resolve issues to bring them back on track. Infrastructure NSW, working with Public Works Advisory regional offices, employs a risk‑based approach to validate payment claims, however this process should be strengthened. Infrastructure NSW would get better assurance by also conducting annual audits of compliance with the funding deed for a random sample of projects.
Infrastructure NSW collects project completion reports for all Resources for Regions and Fixing Country Roads funded projects. It applies the Infrastructure Investor Assurance Framework to Resources for Regions and Fixing Country Roads at a program level. This means that each round of funding (under both programs) is treated as a distinct program for the purposes of benefits realisation. It plans to assess whether benefits have been realised once each project in a funding round is completed. As a result, no benefits realisation assessment has been done for any project funded under either Resources for Regions or Fixing Country Roads. Without project‑level benefits realisation, future decisions are not informed by the lessons from previous investments.
Recommendations
- By December 2018, Infrastructure NSW should:
- conduct annual audits of compliance with the funding deed for a random sample of projects funded under Resources for Regions and Fixing Country Roads
- publish the circumstances under which unspent funds can be allocated to changes in project scope
- measure benefits delivered by projects that were completed before December 2017
- implement an annual process to measure benefits for projects completed after December 2017
- By December 2018, Transport for NSW and Infrastructure NSW should:
- incorporate a benefits realisation framework as part of the detailed application.
Appendix one - Response from agencies
Appendix two - Maps of funded projects
Appendix three - About the audit
Appendix four - Performance auditing
Parliamentary reference - Report number #300 - released 17 May 2018
Grants to non-government schools
The NSW Department of Education could strengthen its management of the $1.2 billion provided to non-government schools annually. This would provide greater accountability for the use of public funds, according to a report released today by the Auditor-General for New South Wales, Margaret Crawford.
Non‑government schools educate 418,000 school children each year, representing 35 per cent of all students in NSW. The NSW Department of Education administers several grant schemes to support these schools, with the aim of improving student learning outcomes and supporting parent choice. To be eligible for NSW Government funding, non‑government schools must be registered with the NSW Education Standards Authority (NESA) and not operate 'for profit' as per section 83C of the NSW Education Act 1990 (the Act). Non‑government schools can either be registered as independent or part of a System Authority.
In 2017–18, non‑government schools in NSW will receive over $1.2 billion from the NSW Government, as well as $3.4 billion from the Australian Government. Recently, the Australian Government has changed the way it funds schools. The NSW Government is assessing how these changes will impact State funding for non‑government schools.
This audit assessed how effectively and efficiently NSW Government grants to non‑government schools are allocated and managed. This audit did not assess the use of NSW Government grants by individual non‑government schools or System Authorities because the Auditor‑General of New South Wales does not have the mandate to assess how government funds are spent by non‑government entities.
Conclusion
The Department of Education effectively and efficiently allocates grants to non‑government schools. Clarifying the objectives of grants, monitoring progress towards these objectives, and improving oversight, would strengthen accountability for the use of public funds by non‑government schools.
We tested a sample of grants provided to non‑government schools under all major schemes, and found that the Department of Education consistently allocates and distributes grants in line with its methodology. The Department has clear processes and procedures to efficiently collect data from schools, calculate the level of funding each school or System should receive, obtain appropriate approvals, and make payments.
We identified three areas where the Department could strengthen its management of grants to provide greater accountability for the use of public funds. First, the Department’s objectives for providing grants to non‑government schools are covered by legislation, intergovernmental agreements and grant guidelines. The Department could consolidate these objectives to allow for more consistent monitoring. Second, the Department relies on schools or System Authorities to engage a registered auditor to certify the accuracy of information on their enrolments and usage of grants. Greater scrutiny of the registration and independence of the auditors would increase confidence in the accuracy of this information. Third, the Department does not monitor how System Authorities reallocate grant funding to their member schools. Further oversight in this area would increase accountability for the use of public funds.
The Department effectively and efficiently allocates grants to non‑government schools. Strengthening its processes would provide greater assurance that the information it collects is accurate.
The Department provides clear guidelines to assist schools to provide the necessary census information to calculate per capita grants. Schools must get an independent external auditor, registered with ASIC, to certify their enrolment figures. The Department checks a sample of the auditors to ensure that they are registered with ASIC. Some other jurisdictions perform additional procedures to increase confidence in the accuracy of the census (for example, independently checking a sample of schools’ census data).
The Department accurately calculates and distributes per capita grants in accordance with its methodology. The previous methodology, used prior to 2018, was not updated frequently enough to reflect changes in schools' circumstances. Over 2014 to 2017, the Department provided additional grants to non‑government schools under the National Education Reform Agreement (NERA), to bring funding more closely in line with the Australian Department of Education and Training's Schooling Resource Standard (SRS). From 2018, the Department has changed the way it calculates per capita grants to more closely align with the Australian Department of Education and Training's approach.
The Department determines eligibility for grants by checking a school's registration status with NESA. However, NESA's approach to monitoring compliance with the registration requirements prioritises student learning and wellbeing requirements over the requirement for policies and procedures for proper governance. Given their importance to the appropriate use of government funding, NESA could increase its monitoring of policies and procedures for proper governance through its program of random inspections. Further, the Department and NESA should enter into a formal agreement to share information to more accurately determine the level of risk of non‑compliance at each school. This may help both agencies more effectively target their monitoring to higher‑risk schools.
By December 2018, the NSW Department of Education should:
- Strengthen its processes to provide greater assurance that the enrolment and expenditure information it collects from non‑government schools is accurate. This should build on the work the Australian Government already does in this area.
- Establish formal information‑sharing arrangements with the NSW Education Standards Authority to more effectively monitor schools' eligibility to receive funding.
By December 2018, the NSW Education Standards Authority should:
- Extend its inspection practices to increase coverage of the registration requirement for policies and procedures for the proper governance of schools.
- Establish formal information‑sharing arrangements with the NSW Department of Education to more effectively monitor schools' continued compliance with the registration requirements.
The Department’s current approach to managing grants to non‑government schools could be improved to provide greater confidence that funds are being spent in line with the objectives of the grant schemes.
The NSW Government provides funding to non‑government schools to improve student learning outcomes, and to support schooling choices by parents, but does not monitor whether these grants are achieving this. In addition, each grant program has specific objectives. The main objectives for the per capita grant program is to increase the rate of students completing Year 12 (or equivalent), and to improve education outcomes for students. While non‑government schools publicly report on some educational measures via the MySchool website, these measures do not address all the objectives. Strengthened monitoring and reporting of progress towards objectives, at a school level, would increase accountability for public funding. This may require the Department to formalise its access to student level information.
The Department has listed five broad categories of acceptable use for per capita grants, however, provides no further guidance on what expenditure would fit into these categories. Clarifying the appropriate use of grants would increase confidence that funding is being used as intended. Schools must engage an independent auditor, registered with ASIC, to certify that the funding has been spent. The Department could strengthen this approach by improving its processes to check the registration of the auditor, and to verify their independence.
The Department has limited oversight of funding provided to System Authorities (Systems). The Department provides grants to Systems for all their member schools. The Systems can distribute the grants to their schools according to their own methodology. Systems are not required to report to the Department how much of their grant was retained for administrative or centralised expenses. Increased oversight over how the Systems distribute this grant could provide increased transparency for the use of public funds by systems.
By December 2018, the NSW Department of Education should:
- Establish and communicate funding conditions that require funded schools to:
- adhere to conditions of funding, such as the acceptable use of grants, and accounting requirements to demonstrate compliance
- report their progress towards the objectives of the scheme or wider Government initiatives
- allow the Department to conduct investigations to verify enrolment and expenditure of funds
- provide the Department with access to existing student level data to inform policy development and analysis.
- Increase its oversight of System Authorities by requiring them to:
- re‑allocate funds across their system on a needs basis, and report to the Department on this
- provide a yearly submission with enough detail to demonstrate that each System school has spent their State funding in line with the Department's requirements.
Appendix one - Response from agencies
Appendix two - NESA's risk-based compliance monitoring
Appendix three - About the audit
Appendix four - Performance auditing
Parliamentary reference - Report number #299 - released 3 May 2018
Council reporting on service delivery
New South Wales local government councils’ could do more to demonstrate how well they are delivering services in their reports to the public, according to a report released today by the Auditor-General for New South Wales, Margaret Crawford. Many councils report activity, but do not report on outcomes in a way that would help their communities assess how well they are performing. Most councils also did not report on the cost of services, making it difficult for communities to see how efficiently they are being delivered. And councils are not consistently publishing targets to demonstrate what they are striving for.
I am pleased to present my first local government performance audit pursuant to section 421D of the Local Government Act 1993.
My new mandate supports the Parliament’s objectives to:
- strengthen governance and financial oversight in the local government sector
- improve financial management, fiscal responsibility and public accountability for how councils use citizens’ funds.
Performance audits aim to help councils improve their efficiency and effectiveness. They will also provide communities with independent information on the performance of their councils.
For this inaugural audit in the local government sector, I have chosen to examine how well councils report to their constituents about the services they provide.
In this way, the report will enable benchmarking and provide improvement guidance to all councils across New South Wales.
Specific recommendations to drive improved reporting are directed to the Office of Local Government, which is the regulator of councils in New South Wales.
Councils provide a range of services which have a direct impact on the amenity, safety and health of their communities. These services need to meet the needs and expectations of their communities, as well as relevant regulatory requirements set by state and federal governments. Councils have a high level of autonomy in decisions about how and to whom they provide services, so it is important that local communities have access to information about how well they are being delivered and meeting community needs. Ultimately councils should aim to ensure that reporting performance is subject to quality controls designed to provide independent assurance.
Councils report extensively on the things they have done, but minimally on the outcomes from that effort, efficiency and performance over time.
Councils could improve reporting on service delivery by more clearly relating the resources needed with the outputs produced, and by reporting against clear targets. This would enable communities to understand how efficiently services are being delivered and how well councils are tracking against their goals and priorities.
Across the sector, a greater focus is also needed on reporting performance over time so that communities can track changes in performance and councils can demonstrate whether they are on target to meet any agreed timeframes for service improvements.
The degree to which councils demonstrate good practice in reporting on service delivery varies greatly between councils. Metropolitan and regional town and city councils generally produce better quality reporting than rural councils. This variation indicates that, at least in the near-term, OLG's efforts in building capability in reporting would be best directed toward rural councils.
Recommendation
By mid-2018, OLG should:
- assist rural councils to develop their reporting capability.
The Framework which councils are required to use to report on service delivery, is intended to drive good practice in reporting. Despite this, the Framework is silent on a number of aspects of reporting that should be considered fundamental to transparent reporting on service delivery. It does not provide guidance on reporting efficiency or cost effectiveness in service delivery and provides limited guidance on how annual reports link with other plans produced as part of the Framework. OLG's review of the Framework, currently underway, needs to address these issues.
Recommendation
By mid-2018, OLG should:
- issue additional guidance on good practice in council reporting, with specific information on:
- reporting on performance against targets
- reporting on performance against outcome
- assessing and reporting on efficiency and cost effectiveness
- reporting performance over time
- clearer integration of all reports and plans that are required by the Framework, particularly the role of End of Term Reporting
- defining reporting terms to encourage consistency.
The Framework is silent on inclusion of efficiency or cost effectiveness indicators in reports
The guidelines produced by OLG in 2013 to assist councils to implement their Framework requirements advise that performance measures should be included in all plans. However, the Framework does not specifically state that efficiency or cost effectiveness indicators should be included as part of this process. This has been identified as a weakness in the 2012 performance audit report and the Local Government Reform Panel review of reporting by councils on service delivery.
The Framework and supporting documents provide limited guidance on reporting
Councils' annual reports provide a consolidated summary of their efforts and achievements in service delivery and financial management. However, OLG provides limited guidance on:
- good practice in reporting to the community
- how the annual report links with other plans and reports required by the Framework.
Further, the Framework includes both Annual and End of Term Reports. However, End of Term reports are published prior to council elections and are mainly a consolidation of annual reports produced during a council’s term. The relationship between Annual reports and End of Term reports is not clear.
OLG is reviewing the Framework and guidance
OLG commenced work on reviewing of the Framework in 2013 but this was deferred with work re‑starting in 2017. The revised guidelines and manual were expected to be released late in 2017.
OLG should build on the Framework to improve guidance on reporting on service delivery, including in annual reports
The Framework provides limited guidance on how best to report on service delivery, including in annual reports. It is silent on inclusion of efficiency or cost effectiveness indicators in reporting, which are fundamental aspects of performance reporting. Councils we consulted would welcome more guidance from OLG on these aspects of reporting.
Our consultation with councils highlighted that many council staff would welcome a set of reporting principles that provide guidance to councils, without being prescriptive. This would allow councils to tailor their approach to the individual characteristics, needs and priorities of their local communities.
Consolidating what councils are required to report to state agencies would reduce the reporting burden and enable councils to better report on performance. Comparative performance indicators are also needed to provide councils and the public with a clear understanding of councils' performance relative to each other.
Recommendations
By mid-2018, OLG should:
- commence work to consolidate the information reported by individual councils to NSW Government agencies as part of their compliance requirements.
- progress work on the development of a Performance Measurement Framework, and associated performance indicators, that can be used by councils and the NSW Government in sector-wide performance reporting.
Streamlining the reporting burden would help councils improve reporting
The NSW Government does not have a central view of all local government reporting, planning and compliance obligations. A 2016 draft IPART ‘Review of reporting and compliance burdens on Local Government’ noted that councils provide a wide range of services under 67 different Acts, administered by 27 different NSW Government agencies. Consolidating and coordinating reporting requirements would assist with better reporting over time and comparative reporting. It would also provide an opportunity for NSW Government agencies to reduce the reporting burden on councils by identifying and removing duplication.
Enabling rural councils to perform tailored surveys of their communities may be more beneficial than a state-wide survey in defining outcome indicators
Some councils use community satisfaction survey data to develop outcome indicators for reporting. The results from these are used by councils to set service delivery targets and report on outcomes. This helps to drive service delivery in line with community expectations. While some regional councils do conduct satisfaction surveys, surveys are mainly used by metropolitan councils which generally have the resources needed to run them.
OLG and the Department of Premier and Cabinet have explored the potential to conduct state-wide resident satisfaction surveys with a view to establishing measures to improve service delivery. This work has drawn from a similar approach adopted in Victoria. Our consultation with stakeholders in Victoria indicated that the state level survey is not sufficiently detailed or specific enough to be used as a tool in setting targets that respond to local circumstances, expectations and priorities. Our analysis of reports and consultation with stakeholders suggest that better use of resident survey data in rural and regional areas may support improvements in performance reporting in these areas. Rural councils may benefit more from tailored surveys of groups of councils with similar challenges, priorities and circumstances than from a standard state-wide survey. These could potentially be achieved through regional cooperation between groups of similar councils or regional groups.
Comparative reporting indicators are needed to enable councils to respond to service delivery priorities of their communities
The Local Government Reform Panel in 2012 identified the need for ‘more consistent data collection and benchmarking to enable councils and the public to gain a clear understanding of how a council is performing relative to their peers’.
OLG commenced work in 2012 to build a new performance measurement Framework for councils which aimed to move away from compliance reporting. This work was also strongly influenced by the approach used in Victoria that requires councils to report on a set of 79 indicators which are reported on the Victorian 'Know your council' website. OLG’s work did not fully progress at the time and several other local government representative bodies have since commenced work to establish performance measurement frameworks. OLG advised us it has recently recommenced its work on this project.
Our consultation identified some desire amongst councils to be able to compare their performance to support improvement in the delivery of services. We also identified a level of frustration that more progress has not been made toward establishment of a set of indicators that councils can use to measure performance and drive improvement in service delivery.
Several councils we spoke with were concerned that the current approaches to comparative reporting did not adequately acknowledge that councils need to tailor their service types, level and mix to the needs of their community. Comparative reporting approaches tend to focus on output measures such as number of applications processed, library loans annually and opening hours for sporting facilities, rather than outcome measures. These approaches risk unjustified and adverse interpretations of performance where councils have made a decision based on community consultation, local priorities and available resources. To mitigate this, it is important to
- adopt a partnership approach to the development of indicators
- ensure indicators measure performance, not just level of activity
- compare performance between councils that are similar in terms of size and location.
It may be more feasible, at least in the short term, for OLG to support small groups of like councils to develop indicators suited to their situation.
Based on our consultations, key lessons from implementing a sector-wide performance indicator framework in Victoria included the benefits of:
- consolidation of the various compliance data currently being reported by councils to provide an initial platform for comparative performance reporting
- adopting a partnership approach to development of common indicators with groups of like councils.
Appendix one - Response from agency
Appendix two - Service delivery categorisation
Appendix three - Reporting targets and performance over time
Appendix four - Performance auditing
Appendix five - About the audit
Parliamentary reference - Report number #296 - released 1 February 2018
Volume Eleven 2012 focusing on Health
One in three ambulance crews were delayed for longer than 30 minutes at hospital. Over the year these delays totalled 84,680 hours of lost time, up from 78,224 last year and 58,399 the year before. The longer ambulance crews are at hospitals the less time they are available to respond to the next emergency.
Volume Eight 2012 focusing on Transport and Ports
We issued unqualified audit opinions on the transport entities’ 30 June 2012 financial statements.
Some of the findings of the report include:
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government funding to the public transport operators totalled $4.4 billion in 2011-12 ($3.7 billion in 2010-11)
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passenger services revenue only covered 20 per cent of RailCorp's operating costs
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Transport for NSW has formalised a protocol to mitigate the risk of potential conflicts of interests
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At present, no sustainability framework exists for the transport agencies around environment and sustainability. Transport for NSW should complete its Environment and Sustainability Policy Framework by June 2013 and should publicly report its results annually
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Transport patronage continued to grow with 510 million journeys on train, bus and ferry services
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CityRail had two peak hour periods where only 36 per cent and 39 per cent of services were on time
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On-time running performance for Sydney Ferries was above the NSW 2021 plan target of 98.5 per cent for most routes in 2011-12
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Customer surveys by transport agencies no longer specifically address crowding on public transport. Transport for NSW should observe and report on crowding on all transport modes
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Over 2,500 transport staff, or 8.3 per cent of the workforce, have excessive leave balances. All transport entities should do more to reduce excessive annual leave balances to ensure they will comply with new targets set by the Premier.
