There are 45 separate entities in the cluster. Unqualified audit opinions were issued for 38 cluster agencies' 30 June 2020 financial statements audits. Four financial statements audits are still ongoing, and three agencies were not subject to audit due to NSW Treasury reporting exemptions.

The majority of cluster agencies subject to statutory reporting deadlines met the revised timeline for submitting financial statements. Twenty‑four of the 26 cluster agencies required to submit early close financial statements met the revised timeframe.

Due to issues identified during the audit, 13 financial statements audits were not completed and audit opinions not issued by the statutory deadline.

Significant deficiencies were identified in Property NSW's lease data maintenance and lease calculations.

Recommendation (partially repeat):

Property NSW should:

• review and document the accounting implications for each lease
• ensure the accuracy and validity of lease data used for the lease calculations
• review user access to the leasing system, including privileged users.

Our audits of the cluster agencies identified there was a lack of thorough quality assurance over the accuracy of lease information provided by Property NSW.

Recommendation:

The Department and cluster agencies should:

• quality assure and validate the information provided by Property NSW
• ensure changes made by Property NSW on lease data are supported and that assumptions and judgements applied are appropriate
• document their review of the data supplied.

In 2019–20, the Department resolved an additional 468 Aboriginal land claims compared to the prior year. However, the total number of unprocessed Aboriginal land claims increased by 914 to 36,769 at 30 June 2020. The number of claims remaining unprocessed for more than ten years after lodgement increased by 10.9 per cent from last year. Until claims are resolved, there is an uncertainty over who is entitled to the land and the uses and activities that can be carried out on the land.

Auditor-General's Reports to Parliament since 2007 have recommended action to address the increasing number of unprocessed claims. To date, the Department has not been able to resolve this issue.

During 2020–21, a performance audit will assess the effectiveness and efficiency of the administration of Aboriginal land claims.

The Department will need to provide additional support and guidance to help Crown land managers (CLMs) meet their financial reporting obligations.

Recommendation:

The Department should:

• in consultation with NSW Treasury, develop an appropriate statutory reporting framework for CLMs
• ensure sufficient resources are available to help CLMs meet their reporting obligations.

During 2019–20, NSW Treasury established the reporting exemption criteria for the CLMs. Based on available information, the Department determined 31 CLMs would not meet the exemption criteria and therefore are required to prepare annual financial statements.

Six high‑risk issues were identified across the cluster in 2019–20:

• 5 of those were related to financial reporting issues identified in Property NSW, Wentworth Park Sporting Complex Land Manager, Lord Howe Island Board, Planning Ministerial Corporation and Hunter and Central Coast Development Corporation
• 1 issue was related to Lord Howe Island Board's outdated business continuity plan.

One in three internal control issues identified and reported to management in 2019–20 were repeat issues.

Recommendation:

Management letter recommendations to address internal control weaknesses should be actioned promptly, with a focus on addressing high‑risk and repeat issues.

The unprecedented bushfires and COVID‑19 pandemic presented challenges for the cluster. Agencies established taskforces or response teams to respond to these emergencies.

With more staff working from home, agencies implemented protocols and procedures to manage risks associated with the remote working arrangements, and also needed to address certain technology issues.

The Department is responsible for the new Planning System Acceleration Program, which aims to fast‑track planning assessments, boost the State's economy and keep people in jobs during COVID‑19 pandemic. Between April and October 2020, the Department announced and determined 101 major projects and planning proposals.

Crown land is an important asset of the State. Management and recognition of Crown land assets is weakened when there is confusion over who is responsible for a particular Crown land parcel.

Auditor-General's Reports to Parliament since 2017 have recommended that the Department should ensure the database of Crown land is complete and accurate. Whilst the Department has commenced actions to improve the database, this remained an issue in 2019–20.

Recommendation (repeat issue):

The Department should prioritise action to ensure the Crown land database is complete and accurate. This allows state agencies and local councils to be better informed about the Crown land they control.

Since its creation on 1 July 2019, the Department has largely established its governance arrangements, including setting up the Audit and Risk Committee and internal audit function for the Department and relevant cluster agencies.

The Department still operated three main financial reporting systems in 2019–20, and has commenced the process to consolidate some of the systems.

The recent Regional NSW MoG change led to the transfer of $446 million net assets and $284 million 2019–20 budget from the Department to the newly created Department of Regional NSW on 2 April 2020.

Section highlights

• Unqualified audit opinions were issued for all completed 30 June 2020 financial statements audits. Timeliness of financial reporting remains an issue for 13 agencies.
• Significant deficiencies were identified in Property NSW's lease data maintenance and lease calculations. Cluster agencies can also improve their management of lease information provided by Property NSW.
• The number of unprocessed Aboriginal land claims continued to increase. During 2020–21, a performance audit will assess the effectiveness and efficiency of the administration of Aboriginal land claims.

The Department has not yet developed a statutory reporting framework for Crown land managers and will need to provide additional resources to help Crown land managers meet their financial reporting obligations.

Section highlights

• Six high risk issues were identified during 2019–20 audits. One in three issues identified and reported to management in 2019–20 were repeat issues.
• The Department has fast tracked the assessment and determination of 101 projects as a part of the Planning System Acceleration Program.
• There continues to be significant deficiencies in Crown land records. The Department should ensure the Crown land database is complete and accurate.

Agencies implemented three new accounting standards during the year.

Our financial statement audits of the Department of Education (the Department) and NSW Education Standards Authority (NESA) identified issues with the leasing information provided by Property NSW (PNSW). Despite the outsourcing arrangement, both the Department and NESA remain ultimately responsible for the completeness and accuracy of this information, which would have benefited from a more thorough quality assurance, validation and review process before they placed reliance upon it.

Recommendation:

We recommend the Department and NESA:

• quality assure and validate the information provided by PNSW
• ensure changes made by PNSW to lease data are supported and that assumptions and judgements applied are appropriate
• document their review of the data supplied.

Emergency legislation was enacted during the year in response to the COVID-19 pandemic. The legislation revised the statutory reporting deadlines for agencies to submit their financial statements and allowed the Treasurer to continue authorising payments from the consolidated fund until the enactment of the 2020–21 budget.

All cluster agencies prepared their financial statements on a going concern basis and submitted their financial statements within the revised statutory deadlines.

The State provided $159.0 million in stimulus funding to support the operations of cluster agencies during emergency events. Nearly half of this funding was to support cleaning activities by the Department and the Technical and Further Education Commission (the TAFE Commission) during the COVID-19 pandemic.

The number of monetary misstatements identified in agencies' financial statements decreased to 14 (23 in 2018–19).

While the number of corrections made to the financial statements after the submission date increased to eight (two in 2018–19), it is important to note these corrections provide parliament and other users of the financial statements increased confidence in the accuracy and presentation of agencies' performance and financial position.

We identified 33 internal control issues, including 15 findings that were repeated from previous years.

A high-risk issue was reported at the Department relating to the inadequate monitoring and follow up of privileged user activity in its enterprise resource planning system – SAP.

Repeat findings relate to ongoing deficiencies in information technology controls and management policies, practices and procedures.

Recommendation:

Cluster agencies should:

• prioritise and action recommendations to address internal control deficiencies
• review and confirm the appropriateness of existing privileged user access accounts
• implement a rigorous monitoring regime to ensure that any improper use of privileged user accounts can be detected in a timely manner.

The Department established a separate bushfire relief directorate and COVID-19 Taskforce to assist and support school communities in response to recent emergencies.

Other cluster agencies have established committees or response teams to oversee and address all aspects of the impact of COVID-19.

Since 2015, the NSW Government has encouraged the use of purchasing cards by public sector agencies. Purchasing cards are efficient to transact low value, high volume procurement of goods and services, but the use must be effectively monitored.

Our review of the Department's purchasing cards identified weaknesses in its oversight and monitoring controls, including the issue and cancellation of purchasing cards

Opportunities exist for the Department to better monitor card use. Tools such as data analytics are an efficient and effective detective control to identify irregular activity or misuse by cardholders.

Recommendation:

The Department should:

• improve the accuracy and completeness of exit procedures for terminated employees to ensure cards are returned and cancelled
• perform periodic reviews to ensure active cards are held only by current employees
• set transaction limits that do not exceed the limits of the user’s financial delegation
• establish a data analytics regime to help analyse and identify high risk patterns and anomalies in their purchasing card usage, augmenting their existing monitoring and detective controls.

Section highlights

• A high-risk issue regarding inadequate monitoring of privileged user access was identified at the Department.
• We continue to observe issues by schools in relation to cash management and non-compliance with procurement guidelines and purchasing card use.
• Opportunities exist for the Department and cluster agencies to enhance their monitoring and review of purchasing card activities. Tools such as data analytics procedures provide an efficient and effective detective control, particularly when used in conjunction with independent spot-checks.