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.