Reports
Education 2018
The Auditor-General for New South Wales, Margaret Crawford, released her report today on the results of the financial audits of agencies in the Education cluster. The report focuses on key observations and findings from the most recent financial audits of these agencies. 'I am pleased to report that unqualified audit opinions were issued on the financial statements of both agencies in the Education cluster', the Auditor-General said. Statements were submitted and audited within statutory deadlines.
This report analyses the results of our audits of financial statements of the Education cluster for the year ended 30 June 2018. The table below summarises our key observations.
This report provides parliament and other users of the Education cluster’s financial statements 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 Education cluster for 2017–18.
| Observation | Conclusions and recommendations |
| 2.1 Quality of financial reporting | |
| Unqualified audit opinions were issued on the financial statements of both cluster agencies. | Sufficient audit evidence was obtained to conclude the financial statements were free of material misstatement. |
| 2.2 Timeliness of financial reporting | |
| Both cluster agencies met the statutory deadlines for completing early close procedures and submitting financial statements. | Early close procedures continue to facilitate the timely preparation of cluster agencies’ financial statements and completion of audits, but scope exists to improve outcomes by resolving issues and supplying supporting documentation earlier. |
| 2.3 Key issues from financial audits | |
| Inconsistencies in the Department’s annual leave and long service leave data, identified over the past three audits, remain unresolved. This issue impacts the Department’s liability estimates for annual leave and long service leave, including associated on-costs. It also on-flows to the Crown Entity, which assumes the Department's liability for long service leave. | Recommendation: The Department should confirm leave data and review assumptions following deployment of the new HR/Payroll system to better estimate the liability for employee benefits and the amount to be assumed by the Crown Entity. |
| 2.4 Key financial information | |
| Cluster agencies recorded net deficits in 2017–18. |
The Department recorded a net deficit of $30.7 million in 2017–18 against a budgeted surplus of $122 million. The NSW Education Standards Authority recorded a net deficit of $4.1 million against a budgeted deficit of $4.7 million. |
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 cluster for 2018
- the areas of focus identified in the Audit Office 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 of the NSW Government clusters.
| Observation | Conclusions and recommendations |
| 3.1 Internal controls | |
| Twenty internal control deficiencies were identified during our audits of cluster agencies. We assessed one as a high risk finding. | |
| Eight internal control weaknesses were repeat issues from previous financial audits that had not been fully addressed by management. | Recommendation: Management should prioritise and action recommendations to address internal control weaknesses. |
| 3.2 Information technology | |
| Delivery of the Learning Management and Business Reform (LMBR) program is complete. |
The LMBR program has been a major project for the Department since it was established in 2006. A staged approach was adopted for implementing the Department’s new HR/Payroll system to manage the risks associated with this large-scale roll-out. |
| 3.3 Valuation of the Department’s land and buildings | |
| The Department completed a revaluation of land and building assets during 2017–18. |
A market approach was used to revalue the Department’s land, resulting in a revaluation increment of $2.3 billion. A current replacement cost approach was used to revalue the Department’s school buildings, resulting in an increment of $6.2 billion. |
| 3.4 Maintenance of school facilities | |
| The Department regularly assesses the condition of school buildings and uses Life Cycle Costing to predict maintenance and capital renewal, and to prioritise maintenance activities. | The Life Cycle Costing assessment conducted by the Department in 2017–18 rated 70 per cent of school buildings as being in either as new or good condition. No school buildings were rated as being in end-of-life condition. |
| 3.4 School asset delivery | |
| The Department’s School Assets Strategic Plan is designed to ensure that there are sufficient fit-for-purpose places for students up to 2031. | The Department created a new division, School Infrastructure NSW, to oversee the planning, supply and maintenance of schools and implement major school infrastructure projects. |
This chapter provides service delivery outcomes for the Education cluster for 2017–18. It provides important contextual information about the cluster's operation, but the data on achievement of these outcomes is not audited. The Audit Office does not have a specific mandate to audit performance information.
Managing risks in the NSW public sector: risk culture and capability
The Ministry of Health, NSW Fair Trading, NSW Police Force, and NSW Treasury Corporation are taking steps to strengthen their risk culture, according to a report released today by the Auditor-General, Margaret Crawford. 'Senior management communicates the importance of managing risk to their staff, and there are many examples of risk management being integrated into daily activities', the Auditor-General said.
We did find that three of the agencies we examined could strengthen their culture so that all employees feel comfortable speaking openly about risks. To support innovation, senior management could also do better at communicating to their staff the levels of risk they are willing to accept.
Effective risk management is essential to good governance, and supports staff at all levels to make informed judgements and decisions. At a time when government is encouraging innovation and exploring new service delivery models, effective risk management is about seizing opportunities as well as managing threats.
Over the past decade, governments and regulators around the world have increasingly turned their attention to risk culture. It is now widely accepted that organisational culture is a key element of risk management because it influences how people recognise and engage with risk. Neglecting this ‘soft’ side of risk management can prevent institutions from managing risks that threaten their success and lead to missed opportunities for change, improvement or innovation.
This audit assessed how effectively NSW Government agencies are building risk management capabilities and embedding a sound risk culture throughout their organisations. To do this we examined whether:
- agencies can demonstrate that senior management is committed to risk management
- information about risk is communicated effectively throughout agencies
- agencies are building risk management capabilities.
The audit examined four agencies: the Ministry of Health, the NSW Fair Trading function within the Department of Finance, Services and Innovation, NSW Police Force and NSW Treasury Corporation (TCorp). NSW Treasury was also included as the agency responsible for the NSW Government's risk management framework.
In assessing an agency’s risk culture, we focused on four key areas:
Executive sponsorship (tone at the top)
In the four agencies we reviewed, senior management is communicating the importance of managing risk. They have endorsed risk management frameworks and funded central functions tasked with overseeing risk management within their agencies.
That said, we found that three case study agencies do not measure their existing risk culture. Without clear measures of how employees identify and engage with risk, it is difficult for agencies to tell whether employee's behaviours are aligned with the 'tone' set by the executive and management.
For example, in some agencies we examined we found a disconnect between risk tolerances espoused by senior management and how these concepts were understood by staff.
Employee perceptions of risk management
Our survey of staff indicated that while senior leaders have communicated the importance of managing risk, more could be done to strengthen a culture of open communication so that all employees feel comfortable speaking openly about risks. We found that senior management could better communicate to their staff the levels of risk they should be willing to accept.
Integration of risk management into daily activities and links to decision-making
We found examples of risk management being integrated into daily activities. On the other hand, we also identified areas where risk management deviated from good practice. For example, we found that corporate risk registers are not consistently used as a tool to support decision-making.
Support and guidance to help staff manage risks
Most case study agencies are monitoring risk-related skills and knowledge of their workforce, but only one agency has addressed the gaps it identified. While agencies are providing risk management training, surveyed staff in three case study agencies reported that risk management training is not adequate.
NSW Treasury provides agencies with direction and guidance on risk management through policy and guidelines. In line with better practice, NSW Treasury's principles-based policy acknowledges that individual agencies are in a better position to understand their own risks and design risk management frameworks that address those risks. Nevertheless, there is scope for NSW Treasury to refine its guidance material to support a better risk culture in the NSW public sector.
Recommendation
By May 2019, NSW Treasury should:
- Review the scope of its risk management guidance, and identify additional guidance, training or activities to improve risk culture across the NSW public sector. This should focus on encouraging agency heads to form a view on the current risk culture in their agencies, identify desirable changes to that risk culture, and take steps to address those changes.
Appendix one - Response from agencies
Appendix three - About the audit
Appendix four - Performance auditing
Parliamentary reference - Report number #298 - released 23 April 2018
Managing Injured Police
Overall, the NSW Police Force’s approach to managing injured officers since 2006 is appropriate, focusing on notification and early intervention and the development of successful return to work plans. Early intervention and return to work are the key factors in successfully managing injured officers and reducing the cost of workplace injuries. The Force has not done this well in the past. Through the establishment of the safety command, the Force has built a framework for managing injured officers that should optimise early return to work.
Parliamentary reference - Report number #184 - released 10 December 2008
Improving Literacy and Numeracy in Public Schools
During the course of the audit we were impressed by the dedication and efforts of teachers in NSW public schools, particularly when dealing with the needs of students with learning difficulties. Although NSW schools perform well nationally and internationally, NSW has a high concentration of poor outcomes in some schools and some regions. Each year a group of between 5 and 15 per cent of children are at risk of not reaching the minimum level of achievement needed to progress at school. In this group, indigenous students are over represented.
Parliamentary reference - Report number #183 - released 22 October 2008
Working with Hotels and Clubs to Reduce Alcohol-Related Crime
In NSW alcohol-related assaults have almost doubled over the last ten years. In 2006-07 there were 20,475 alcohol-related assaults excluding domestic violence incidents, up from 10,305 in 1997-98. In fact, the number of these assaults is increasing at a faster rate than total assaults. Incidences of alcohol-related malicious damage and offensive conduct have also increased, rising by 87 and 70 per cent respectively. Working with hotels and clubs to reduce alcohol-related crime, however we found that the number of alcohol-related assaults has reduced or stabilised in the last two years in about 14 per cent of Police local area commands.
Parliamentary reference - Report number #179 - released 23 April 2008
Efficiency of the Office of the Director of Public Prosecutions
The Office of the Director of Public Prosecutions (ODPP) prosecutes the most serious criminal cases on behalf of the people of New South Wales. The ODPP says it is efficient. We acknowledge that the ODPP has many skilful and committed staff who work very hard to achieve good results for the people of NSW. It could not, however, provide sufficient evidence for us to reach a conclusion on its efficiency. We also identified some significant opportunities for the ODPP to improve its management practices.
Parliamentary reference - Report number #177 - released 26 March 2008
Ageing Workforce - Teachers
The Department of Education and Training including TAFE NSW is faced with the loss of large numbers of retiring teachers and their associated skills and the need to replace this loss in an increasingly competitive labour environment. While the overall impact of the ageing workforce is likely to be gradual, there is still a risk of shortages. This will particularly apply to specialist secondary school teachers and TAFE teachers in certain skill sets or at specific locations.
Parliamentary reference - Report number #174 - released 13 February 2008
Managing and Measuring Success: Department of Juvenile Justice
Criminal or anti-social juvenile behaviour affects us all. Some of us may be victims of juvenile crime, some may be apprehensive about their personal safety, while others may know of young people who have been in trouble with the law. And, as taxpayers, all of us contribute to the costs of juvenile justice.
Currently about one in every 200 young people in NSW is convicted of a crime each year. The Department of Juvenile Justice works with these young offenders to help them fit back into society and lead a life free of crime.
This is not an easy task. Young offenders are often difficult to help. Many come from disadvantaged backgrounds and may have had poor parental supervision. They may have achieved little at school, have poor work prospects and psychological problems, and be part of an anti-social peer group.
While the Department of Juvenile Justice has prime responsibility, agencies in the justice and welfare systems need to work closely together to tackle these complex and diverse issues. They ultimately desire the same result for young offenders – progression to a well-adjusted, crime-free adulthood.
The report highlights the challenges facing all those who work with young offenders - youth workers, police officers, magistrates, health workers and teachers. Achieving the best possible outcome for these young people will help bring about safer and more harmonious communities for us all.
This is the first of two audits in our current performance audit program that deals with young offenders. We examined how the Department of Juvenile Justice measures performance, and whether staff have adequate information to make sound planning decisions and recommend appropriate interventions for young offenders.
Our next audit, starting later in 2005, will review whether relevant government agencies effectively coordinate the management of young offenders.
Parliamentary reference - Report number #142 - released 14 September 2005
Coordination of Rescue Services
Nearly 11,000 rescues are carried out each year in New South Wales, the majority involving motor vehicle accidents.
In metropolitan areas we have three emergency services providing general land rescue - NSW Police, the Ambulance Service and the NSW Fire Brigades. The two volunteer services, the State Emergency Service and the Volunteer Rescue Association, generally cover the remainder of the State.
Rescue arrangements in NSW are different to all other mainland states. Elsewhere, the trend in metropolitan areas has been towards consolidation with only one provider of rescue services.
The State Rescue Board of NSW was set up in 1989. Its primary role is to ensure efficient and effective rescue services are maintained throughout the State.
In this audit we examined how well placed the Board was to provide assurance to Parliament and the community that the organisation of rescue services in NSW best serves those in need of rescuing.
NSW deserves a clear and unequivocal answer on such an important issue. However, the issues are complex, often strongly argued, and generally there is insufficient relevant information upon which to make judgements about performance and value. This report outlines a way forward.
Parliamentary reference - Report number #140 - released 20 July 2005
