What this report is about

Results of the local government sector financial statement audits for the year ended 30 June 2023.

Findings

Unqualified audit opinions were issued for 85 councils, eight county councils and 12 joint organisations.

Qualified audit opinions were issued for 36 councils due to non-recognition of rural firefighting equipment vested under section 119(2) of the Rural Fires Act 1997.

The audits of seven councils, one county council and one joint organisation remain in progress at the date of this report due to significant accounting issues.

Fifty councils, county councils and joint organisations missed the statutory deadline of submitting their financial statements to the Office of Local Government, within the Department of Planning, Housing and Infrastructure, by 31 October.

Audit management letters included 1,131 findings with 40% being repeat findings and 91 findings being high-risk. Governance, asset management and information technology continue to represent 65% of the key areas for improvement.

Fifty councils do not have basic governance and internal controls to manage cyber security.

Recommendations

To improve quality and timeliness of financial reporting, councils should:

• adopt early financial reporting procedures, including asset valuations
• ensure integrity and completeness of asset source records
• perform procedures to confirm completeness, accuracy and condition of vested rural firefighting equipment.

To improve internal controls, councils should:

• track progress of implementing audit recommendations, and prioritise high-risk repeat issues
• continue to focus on cyber security governance and controls.

Pursuant to the Local Government Act 1993 I am pleased to present my Auditor-General’s report on Local Government 2023. My report provides the results of the 2022–23 financial audits of 121 councils, eight county councils and 12 joint organisations. It also includes the results of the 2021–22 audits for two councils and two joint organisations which were completed after tabling of the Auditor-General’s report on Local Government 2022. The 2022–23 audits for eight councils, one county council and one joint organisation remain in progress due to significant accounting issues.

This will be my last consolidated report on local councils in NSW as my term as Auditor-General ends in April. Without a doubt, the change in mandate to make me the auditor of the local government sector has been the biggest challenge in my term. Challenging for councils as they adjust to consistent audit arrangements and for the staff of the Audit Office of NSW as they learn about the issues facing NSW councils.

The change in mandate aimed to improve the quality of financial management and reporting across the sector. This will take time. But this report does show some ‘green shoots’ with more councils submitting financial reports to the Office of Local Government by 31 October and more councils having Audit, Risk and Improvement Committees. 

I also want to acknowledge that councils face significant challenges responding to and recovering from emergency events whilst cost and resourcing pressures have been persistent.

The findings from our audits identify opportunities to further improve timeliness and quality of financial reporting and integrity of systems and processes. The recommendations in this report are also intended to improve financial management and reporting capability, encourage sound governance, and boost cyber resilience.

Margaret Crawford PSM
Auditor-General for New South Wales

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

This chapter outlines audit observations related to the financial reporting audit results of councils, county councils and joint organisations.

A strong system of internal controls enables councils to operate effectively and efficiently, produce reliable financial reports, comply with laws and regulations, and support ethical government.

This chapter outlines the overall trends in governance and internal controls across councils, county councils and joint organisations in 2022–23.

Financial audits focus on key governance matters and internal controls supporting the preparation of councils’ financial statements. Breakdowns and weaknesses in internal controls increase the risk of fraud and error. Deficiencies in internal controls, matters of governance interest and unresolved issues are reported to management and those charged with governance through audit management letters. These letters include our observations with risk ratings, related implications, and recommendations.

Appendix one – Response from the Office of Local Government within the Department of Planning, Housing and Infrastructure

Appendix two – NSW Crown Solicitor’s advice

Appendix three – Status of previous recommendations

Appendix four – Status of audits

Appendix five – Councils received qualified audit opinions for non-recognition of rural firefighting equipment

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

What this report is about

NSW local councils provide a wide range of essential services and infrastructure to their communities and are increasingly reliant on digital technologies.

Councils need to manage cyber security risks to ensure their information, data and systems are appropriately safeguarded. Councils also need to be prepared to detect, respond and recover when a cyber security incident occurs.

The audit assessed how effectively three selected councils identified and managed cyber security risks.

The audit also included the Department of Planning, Housing and Infrastructure (Office of Local Government) and Department of Customer Service (Cyber Security NSW), due to their roles in providing guidance and support to local councils.

Audit findings

The audit found that the selected councils are not effectively identifying and managing cyber security risks. Each of the councils undertook activities to improve their cyber security during the audit period, but this audit found significant gaps in their cyber security risk management and cyber security processes.

Such gaps result in unmitigated risks to the security of information and assets which, if compromised, could impact their local communities, service delivery and public infrastructure.

Cyber Security NSW and the Office of Local Government recommend that councils adopt requirements in the Cyber Security Guidelines for Local Government, but could do more to monitor whether the Guidelines are enabling better cyber security risk management in the sector.

Audit recommendations

In summary, the councils should:

• integrate assessment and monitoring of cyber security risks into corporate governance processes
• self-assess their performance against Cyber Security NSW's guidelines for local government
• develop and implement a risk-based cyber security improvement plan and program of activities
• develop, implement and test a cyber incident response plan.

Cyber Security NSW and the Office of Local Government should regularly consult on cyber security risks facing local government, and review the effectiveness of guidelines and related resources for the sector.

While this report focuses on the performance of the selected councils, the findings and recommendations should be considered by all councils to better understand their risks and challenges relevant to managing cyber security risks.

Local councils in New South Wales (NSW) provide a wide range of essential services and infrastructure to their communities and are increasingly reliant on digital technologies for this.

Councils use various information systems and software to manage significant amounts of information and data relevant to their corporate functions, infrastructure and service delivery. This may include sensitive information about residents, customers and staff.

Audit Office of New South Wales reports to Parliament have highlighted gaps in councils' cyber security risk management approaches since 2020. The Local Government 2023 report, tabled in March 2024, found that 50 councils were yet to implement cyber security governance frameworks and related internal controls.

The threat from cyber security incidents continues to rise. Such incidents can harm local government service delivery and may include the theft of information, denial of access to critical technology, or even the hijacking of systems for profit or malicious intent.

It is important that councils are effectively identifying and managing cyber security risks to:

• protect their information, data and systems
• be prepared to detect, respond to and recover from cyber security incidents 
• ensure confidence in the services they are providing for their communities.

This report outlines important findings and recommendations from a performance audit of three councils: City of Parramatta Council, Singleton Council and Warrumbungle Shire Council. This audit report has deidentified findings for each council, but the specific findings have been directly shared with each council to enable them to remediate and improve cyber safeguards. The findings and recommendations in this report are likely to be relevant to most local councils in NSW and councils are encouraged to ensure they have sufficient cyber safeguards.

This audit assessed how effectively the selected councils identified and managed cyber security risks. The audit considered whether the councils:

• effectively identify and plan for cyber security risks
• have controls in place to effectively manage identified cyber security risks
• have processes in place to detect, respond to, and recover from cyber security incidents.

This audit also included the Department of Customer Service and the Office of Local Government (OLG) within the Department of Planning and Environment (DPE) due to their roles in providing guidance and support to local government.¹

Cyber Security NSW, part of the Department of Customer Service, supports local councils to improve their cyber resilience through a range of services and guidance, including the Cyber Security Guidelines – Local Government issued in December 2022.

The OLG is responsible for strengthening the sustainability, performance, integrity, transparency and accountability of the local government sector.

¹ The OLG was part of DPE up to 1 January 2024, when DPE was abolished and the OLG became part of the Department of Planning, Housing and Infrastructure (DPHI).

Local councils in New South Wales (NSW) provide a wide range of essential services and infrastructure to their communities. In doing so, councils use a range of information technology (IT) systems, assets, and digital services.

This audit follows several audit reports by the Audit Office of New South Wales that have considered how effectively NSW Government entities, including local councils have managed cyber security risks (see Appendix three).

The Audit Office of New South Wales has reported on how councils have managed cyber security risks since 2020. In the Local Government 2023 report, tabled in March 2024, gaps in cyber security frameworks and related internal controls were reported in 50 councils.

This chapter includes a summary of thematic key findings for the selected councils.

Cyber Security NSW is responsible for supporting local councils to improve their cyber resilience through a range of services and guidance and published its Local Government Engagement Plan in 2023 (discussed below).

The Office of Local Government (OLG) is responsible for strengthening the sustainability, performance, integrity, transparency and accountability of the local government sector. It does this through a range of activities including monitoring sector-wide and council-specific risks, issuing guidance, engaging with councils to build capacity and supporting the Minister for Local Government’s discretionary intervention powers.

Appendix one - Response from entities Cyber security in LG

Appendix two - Glossary-  Cyber security in local government

Appendix three – Overview of Audit Office of New South Wales reports that consider cyber security - Cyber security in local government

Appendix four – Cyber Security Guidelines – Local Government foundational requirements- Cyber security in local government

Appendix five – About the audit- Cyber security in local government

Appendix six – Performance auditing -Cyber security in local government

Copyright notice

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

Parliamentary reference - Report number #392- released 26 March 2024

What this report is about

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

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

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

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

Audit findings

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

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

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

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

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

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

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

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

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

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

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

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

Margaret Crawford PSM
Auditor-General for NSW

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

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

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

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

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

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

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

The status of agencies' responses to audit recommendations

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

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

Appendix one – Included reports 2018–2024 Regulation insights

Appendix two – About this report- Regulation insights

What this report is about

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

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

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

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

Audit findings

TfNSW has not effectively planned the replacement of DRIVES.

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

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

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

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

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

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

Audit recommendations

TfNSW should:

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

The DRIver VEhicle System_¹ (often known as DRIVES) is the Transport for NSW (TfNSW) system which is used to manage over 6.2 million driver licences and over seven million vehicle registrations in New South Wales.

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

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

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

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

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

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

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

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

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

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

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

Appendix one – Response from entity 

Appendix two – Statutory and regulatory framework related to DRIVES 

Appendix three – About the audit 

Appendix four – Performance auditing 

Parliamentary reference - Report number #388 - released 20 February 2024.

What this report is about

Results of the audit of the Consolidated State Financial Statements of the New South Wales General Government Sector (GGS) and Total State Sector (TSS) for the year ended 30 June 2023.

Findings

The audit opinion on the 2022–23 Consolidated State Financial Statements was qualified in relation to two issues and included an emphasis of matter.

The first qualification matter is a continuation of the prior year limitation of scope on the audit relating to the Catholic Metropolitan Cemeteries Trust (CMCT), a controlled state entity, who continued to deny access to its management, books and records for the purposes of a financial audit. As a result, the Audit Office was unable to obtain sufficient appropriate audit evidence to support the assets, liabilities, income and expenses relating to CMCT recorded in the TSS and the equity investment recognised in the GGS relating to the net assets of CMCT.

The second qualification matter relates to the limitations on the accuracy and reliability of financial information relating to Statutory Land Managers (SLMs) and Common Trust entities (CTs) controlled by the State and were either exempted from requirements to prepare financial reports, or who were required to submit financial reports and have not done so. The Audit Office was unable to obtain sufficient appropriate audit evidence to determine the impact on the value of non-land assets and liabilities, income and expenses that should be recognised in the 2022–23 Consolidated State Financial Statements and which have not been recorded in the Consolidated State Financial Statements.

The independent audit opinion also includes an emphasis of matter drawing attention to key decisions made by the NSW Government regarding the future of the Transport Asset Holding Entity of New South Wales (TAHE).

Recommendations

The report includes recommendations for NSW Treasury to address several high-risk findings, including:

• ensuring accurate and reliable financial information is available to recognise the non-land balances of SLMs and CTs
• ensuring the CMCT, SLMs and CTs meet their statutory reporting obligations
• conducting a broader review of the financial reporting exemption framework
• continued monitoring of TAHE's control over its assets
• providing timely guidance to the sector relating to legislative or policy changes that impact financial reporting
• developing an accounting policy for the reimbursement of unsuccessful tender bid cost contributions.

Read the PDF report

What this report is about

Result of the Treasury portfolio of agencies’ financial statement audits for the year ended 30 June 2023.

The results of the audit of the NSW Government’s consolidated Total State Sector Accounts (TSSA), which are prepared by NSW Treasury, will be reported separately in our report on ‘State Finances 2023’.

The audit found

Unqualified audit opinions were issued on all general purpose financial statement audits.

Qualified audit opinions were issued on two of the 24 other engagements prepared by portfolio agencies. These related to payments made from Special Deposit Accounts that did not comply with the relevant legislation.

The number of monetary misstatements identified in our audits increased from 29 in 2021–22 to 39 in 2022–23.

The new parental leave policy impacted agencies across all portfolios. NSW Treasury should perform annual assessments to identify changes in legislation and regulation and provide timely guidance to the sector.

Transport for NSW and Sydney Metro have capitalised over $300 million of tender bid costs paid to unsuccessful tender bidders relating to significant infrastructure projects. Whilst NSW Treasury policy provides clarity on the reimbursement of unsuccessful bidders’ costs, clearer guidance on how to account for these costs in agencies’ financial statements is required.

The key audit issues were

Five high-risk issues were reported in 2022–23. Three were new findings on contract management, accounting treatments for workers compensation renewal premium adjustments and the management and oversight of a Special Deposit Account. Two repeat issues referred to the need to improve quality review processes over financial reporting and the timely approval of administration costs.

Portfolio agencies should prioritise and action recommendations to address internal control deficiencies.

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

• financial reporting
• audit observations.

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

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

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

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

Appendix one – Misstatements in financial statements submitted for audit

Appendix two – Early close procedures

Appendix three – Timeliness of financial reporting

Appendix four – Financial data

Appendix five – Acquittals and other opinions

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

What this report is about

Results of the Health portfolio of agencies' financial statement audits for the year ended 30 June 2023.

The audit found

Unmodified audit opinions were issued for all Health portfolio agencies' financial statements. 

The number of monetary misstatements increased in 2022–23, driven by key accounting issues, including the first-time recognition of paid parental leave and plant and equipment fair value adjustments. 

The key audit issues were 

NSW Health identified errors regarding the recognition and calculation of long service leave entitlements for employees with ten or more years of service that had periods of part time service in the first ten years, resulting in prior period restatements. 

Comprehensive revaluation of buildings at the Graythwaite Charitable Trust found errors in the previous year's valuation, resulting in prior period restatements. 

New parental leave legislation increased employee liabilities for portfolio agencies. The Ministry of Health corrected the consolidated financial statements to record parental leave liabilities for all agencies within the Health portfolio.   

A repeat high-risk issue relates to processing time records by administrators that have not been reviewed prior to running the pay cycle.   

Thirty per cent of reported issues were repeat issues. 

The audit recommended 

Portfolio agencies should ensure any changes to employee entitlements are assessed for their potential financial statements impact under the relevant Australian Accounting Standards. 

Portfolio agencies should address deficiencies that resulted in qualified reports on:   

• the design and operation of shared service controls
• prudential non-compliance at residential aged care facilities.

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

• financial reporting
• audit observations.

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

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

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

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

Appendix one – Misstatements in financial statements submitted for audit

Appendix two – Early close procedures

Appendix three – Timeliness of financial reporting

Appendix four – Financial data

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

What this report is about

Result of the Transport portfolio of agencies' financial statement audits for the year ended 30 June 2023.

The audit found

Unqualified audit opinions were issued for all Transport portfolio agencies.

An 'emphasis of matter' paragraph was included in the Transport Asset Holding Entity of New South Wales' (TAHE) independent auditor's report, which draws attention to management's disclosure regarding proposed changes to TAHE's operating model.

Government's decision to convert TAHE into a non-commercial Public Non-Financial Corporation may impact the future valuation and the control of TAHE's assets.

Transport for NSW's valuation of roads and bridges resulted in a net increase to its asset value by $15.7 billion.

Transport for NSW and Sydney Metro have capitalised over $300 million of tender bid costs paid to unsuccessful tender bidders relating to significant infrastructure projects. Whilst NSW Treasury policy provides clarity on the reimbursement of unsuccessful bidders' costs, clearer guidance on how to account for these costs in agency's financial statements is required.

The key audit issues were

The number of issues reported to management decreased from 53 in 2021–22 to 49 in 2022–23.

High-risk findings include:

• gaps in how Sydney Metro manages its contractors and how conflicts of interest are recorded and managed
• future financial reporting implications to account for government's proposed changes to TAHE's future operating model, including asset valuations and control assessments of assets and operations
• Parramatta Park Trust's tree assets' valuation methodology needs to be addressed.

Recommendations were made to address the identified deficiencies.

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

• financial reporting
• audit observations.

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

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

Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision-making.
This chapter outlines our observations and insights from our financial statement audits of agencies in the Transport portfolio.

Appendix one – Misstatements in financial statements submitted for audit 

Appendix two – Early close procedures

Appendix three – Timeliness of financial reporting 

Appendix four – Financial data 

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

What this report is about

Results of the Education portfolio of agencies’ financial statements audits for the year ended 30 June 2023.

What we found

Unqualified audit opinions were issued for all Education portfolio agencies.

An ‘other matter’ paragraph was included in the TAFE Commission’s independent auditor’s report as it did not have a delegation or sub-delegation from the Minister for Education and Early Learning to incur expenditure on grants from other portfolio agencies.

What the key issues were

Comprehensive valuations of buildings at the Department of Education (the department) and at the TAFE Commission found that certain assumptions applied in previous years needed to be updated, resulting in prior period restatements.

The department prepaid a building contractor for early works on a project and some of the prepayment is in legal dispute.

The department duplicated a claim for project funding from Restart NSW in 2021.

New parental leave legislation increased employee liabilities for portfolio agencies. The department and the NSW Education Standards Authority (the Authority) updated their financial statements to record parental leave liabilities.

A high risk matter was raised for the Authority to improve the quality and timeliness of information to support their financial statement close process.

What we recommended

Portfolio agencies should ensure any changes to employee entitlements are assessed for their potential financial statements impact under the relevant Australian Accounting Standards.

The department should:

• improve processes to ensure project claims are not duplicated
• assess the risks associated with providing prepayments to contractors.

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

• financial reporting
• audit observations.

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

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

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

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

Appendix one – Early close procedures

Appendix two – Financial data

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

What this report is about

Students in rural and remote areas of NSW face greater challenges compared to their metropolitan peers.

This report examined how the NSW Department of Education (the department) is ensuring that rural and remote students have access to the same quality of early childhood, school education, and skills pathways as metropolitan students.

What we found

A decade since the previous (2013) strategy to address educational disadvantage, there remain considerable gaps in access and outcomes between rural and remote students and metropolitan students.

The Rural and Remote Education Strategy (2021–24) is unlikely to address these longstanding and known issues of educational disadvantage in rural and remote areas.

Key enabling factors such as resourcing a dedicated team, setting performance measures, and establishing suitable governance arrangements were not put in place to support effective implementation of the 2021 strategy.

The department has programs aimed at addressing remoteness challenges, but does not know if these initiatives improve access or outcomes.

The department does not monitor or report on student access or outcomes according to geographic location.

What we recommended

The Department of Education should:

• develop a new strategy that addresses disadvantage in regional, rural and remote education
• establish and report publicly on regional, rural and remote key performance indicators
• improve data collection by using a standard remoteness classification
• improve governance arrangements for regional, rural and remote education
• review the resources provided for regional, rural and remote areas that recognises the additional costs
• develop an approach that ensures all students can access best practice modes of delivery.

In February 2021, the department of Education (the department) released the ‘Rural and Remote Education Strategy (2021–2024)’. The strategy sets a vision that ‘every child in regional New South Wales has access to the same quality of education as their metropolitan peers’. It recognises that students in rural and remote areas of New South Wales face greater challenges compared to students in metropolitan locations. These challenges contribute to regional, rural and remote students underperforming on major educational indicators compared to their metropolitan peers.

In recent years, regional, rural and remote communities experienced a series of natural disasters as well as the COVID-19 pandemic. In response to the pandemic and subsequent school closures, the department introduced new initiatives aimed at minimising the disruption to children including online learning and small group tuition.

The department established a regional, rural and remote education policy unit in 2021 to support delivery of the strategy and its vision.

The objective of this audit was to assess the effectiveness of the department’s activities to ensure that regional, rural and remote students have access to the same quality of early childhood, school education, and skills pathways as their metropolitan peers.

In making this assessment, the audit examined whether:

• The department developed and implemented a strategy that enables regional, rural and remote students to access the same quality of early childhood education, school education, and skills pathways as students in metropolitan New South Wales.
• The department has been addressing the complexities and needs of regional, rural and remote early childhood education, school education, and skills pathways.

This chapter examines the process to develop the Rural and Remote Education Strategy (2021–2024). It considers whether there was a comprehensive program of stakeholder consultation, whether relevant research and evidence was incorporated and whether an effective performance monitoring system was established.

The department made genuine efforts to consult with stakeholders on the new strategy

The department had a clear process to engage and obtain feedback from key stakeholders during the development of the new strategy. It developed a range of documents to support the consultation process including a stakeholder engagement plan, communications plan, and presentation. The department used the International Association for Public Participation (IAP2) Spectrum of Public Participation principles to help ensure that relevant stakeholders were included in the planning and decision-making process.

In late 2019, the department began its first phase of consultations with internal and external stakeholders to get their views on rural and remote education. It consulted internally with department directors, advisory groups, and learning communities, and externally with government agencies, service providers, non-government schools, and universities.

In March 2020, the department developed a stakeholder engagement paper to test the key issues from stakeholder consultations. Four focus areas were identified and included in a consultation paper that went out to key stakeholders for the second round of consultations in May 2020.

In the third consultation phase, the department conducted a workshop with stakeholders to review the earlier feedback, prioritise issues, identify gaps, and provide further input.

This consultation process enabled the department to identify issues and challenges to inform the new strategy. However, it was already aware that the blueprint was having limited success, and had already identified potential focus areas, following the evaluation of the blueprint in 2019.

The department did not consider recent research when developing the new strategy

The department's guidance materials promote the importance of considering research during policymaking. The guidelines describe the need to understand a topic, consult with stakeholders, identify gaps in existing knowledge, and ensure future work is informed by current literature.

In 2013, the department published a literature review on rural and remote education to inform the blueprint. The literature review found that students in rural and remote schools were not performing as well as their metropolitan peers, and that this performance gap was widening. The review attributed this to the higher number of children from low socio-economic backgrounds attending rural and remote schools. The review also identified several other factors that could negatively impact performance outcomes for rural and remote students. The department used the findings of the literature review to develop the key focus areas in the 2013 blueprint.

When the department began developing the new rural and remote education strategy in 2019, it recognised the need to review the literature on recent international initiatives. However, it has not yet released this review. This means that the department could have missed important new developments since it last examined the literature in 2013. Incorporating up-to-date research is important where past strategies have not met all their intended outcomes.

A national review into rural and remote education in 2018 examined Australian and international literature to inform its findings. The review made 11 recommendations to the Australian and state governments. While the NSW Government was not required to formally respond to the review, it could have considered the work done by that review when developing the new strategy. Several review recommendations are addressed in the strategy, while several others are only partly addressed. Gaps between review recommendations and specific strategy actions include improving the availability of quality accommodation, substantially reducing the waiting times for specialist assessments of students with learning difficulties and disabilities and increasing access to high quality distance education.

In 2019, the department commissioned a rural and remote project to contribute a research and evidence base to the new strategy. The main aim of the project was to help the department understand how it could better support rural and remote schools to increase educational outcomes. There was not enough time for this review to be completed prior to the release of the strategy. As of June 2023, the research project had not yet been released.

The strategy did not address all findings and recommendations from a recent evaluation

In 2020, the department's Centre for Education Statistics and Evaluation (CESE) published an evaluation of the blueprint. The evaluation examined how the actions in the blueprint were implemented. It recommended that a new strategy be developed, and made recommendations for things that should be incorporated into the strategy.

The blueprint aimed to ensure students in rural and remote areas could access the same quality of education as their metropolitan peers. The blueprint identified four focus areas to meet that aim:

• quality early childhood education
• great teachers and school leaders
• curriculum access for all
• effective partnerships and connections.

The department developed several initiatives to help meet the objectives of each of the four focus areas. These initiatives are described in Exhibit 5 below.

The evaluation found that initiatives in two of the four focus areas – Quality early childhood education and Curriculum access for all – had performed well. However, the evaluation found that initiatives in the other two focus areas – Great teachers and school leaders and Effective partnerships and connections – did not achieve intended outcomes.

On the whole, the evaluation found that the 'remoteness gap' between rural and remote students and metropolitan students had not reduced since the blueprint was introduced. It recommended that the department continue its focus on rural and remote education by developing a new evidence-based strategy that focused on student outcomes and clear measures of success.

Objectives and actions in the new strategy were similar to those in the blueprint

The 2021 strategy sets an overall vision that 'every child in regional New South Wales has access to the same quality of education as their metropolitan peers'. It also states that the department 'is committed to ensuring all rural and remote students have equitable access to educational opportunities'.

Four areas in the blueprint remained a focus in the new strategy – early childhood education, teacher recruitment and retention, curriculum, and student wellbeing support services. Each focus area identifies a goal, as well as the aims and actions that contribute to those goals.

While this shows the department identified that these areas required continued attention, most actions were to 'increase', 'expand' or 'improve' existing programs and resources. The new strategy did not propose any new ideas or solutions, despite the blueprint achieving limited success in improving outcomes for rural and remote students.

There were no baseline or target measures set to monitor progress of the new strategy

The blueprint evaluation recommended that the department develop a new evidence-based strategy which focused on improving student outcomes. It also recommended the department use a program logic methodology to ensure there was a clear definition of success, adequate measures of success, and continual monitoring to ensure success.

Program logic models are a visual representation of the various components of a program. They can be used to illustrate program priorities, inputs, activities, outputs, outcomes, and assumptions. Logic models are used to explain how a proposed solution will address a specific problem. They are important because they can help test assumptions, build business cases, and identify potential enablers or barriers that could impact the project.

The department did not complete a program logic model during development of the new strategy, nor did it define measures to monitor whether the strategy's overall vision for quality education or the commitment to equitable access was on track to be achieved.

The department has not comprehensively monitored changes in educational outcomes in regional, rural and remote areas since the evaluation of the blueprint in 2020. This evaluation had seven indicators of educational outcomes by remoteness. The measures used in the evaluation could have provided a starting point given the similarity in focus areas between the blueprint and the new strategy. Not addressing past review recommendations increases risks that issues will be repeated.

The policy unit advised it has plans to set up a dashboard to monitor performance across the department's business plan measures by remoteness. This is intended to identify areas where system-wide improvements are required. This is not a comprehensive account of the strategy outcomes because the business plan measures don't capture all the goals of the strategy.

There were no timeframes or resources identified for implementing new strategy actions

The strategy has an overall timeframe of 2021–2024 but does not clarify when it expects the vision, goals, or aims to be achieved, or actions to be implemented.

The department's guidance on policymaking sets out how projects should be transitioned between the policy and implementation teams. This guidance is intended to help ensure the policy intent and scope of the project are not lost during the delivery of the project. The guidance highlights that the policy team should establish clear project implementation timeframes. It is important to have clear timeframes because it enables teams to measure progress, manage resources, and prioritise actions to ensure project outcomes are achieved.

The strategy states that there is a further $1 billion of investment planned over the next three years for rural and remote education but does not identify how this is allocated across its focus areas. It is important to identify the resources required to support the implementation of a program so that program objectives are met in a timely and cost-effective manner. The previous blueprint identified much lower funding of $80 million but more clearly showed how it would be allocated for identified actions across the four focus areas.

In response to our requests, the department separately identified $1.286 billion in expenditure for regional, rural and remote schools referenced in the strategy. Most of this expenditure related to existing department programs and activities rather than new initiatives. The total amount included:

• $576.9 million for new and upgraded schools
• $365.8 million for upgraded information technology equipment and resources
• $120 million for school facility upgrades to be co-funded by schools
• $60 million to replace school roofs
• $60 million for the COVID Intensive Learning Support Program
• $32 million for the Early Action for Success program
• $29.7 million for staffing incentives
• $21.7 million for literacy and numeracy interventions
• $18.8 million in school location allowances
• $1.45 million for the Rural Learning Exchange Pilot
• $0.4 million for Rural and Remote Network initiatives.

This chapter examines the arrangements in place to implement the strategy. It considers whether effective governance arrangements are in place and how progress is monitored and reported.

This chapter considers the effectiveness of arrangements to ensure regional, rural and remote students have access to quality early childhood education, school education, and post‑school transitions.

This chapter considers the department's arrangements to monitor educational and wellbeing outcomes of students by remoteness. It reports on differences in outcomes between students in metropolitan areas and those in regional, rural and remote areas.

Those living in regional, rural and remote areas can have greater difficulty in accessing government services, often needing to travel long distances, or facing lower service levels than provided in major cities. This context is important when considering educational and wellbeing outcomes, given the disruptive effects of waiting or missing out on important services.

The rest of this chapter details key measures in the department's outcome and business plan.

Appendix one – Response from agency

Appendix two – About the audit

Appendix three – Performance auditing

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Parliamentary reference - Report number #385 - released 10 August 2023