Reports
Actions for Transport 2020
Transport 2020
1. Financial Reporting |
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Audit opinion | Unmodified audit opinions issued for the financial statements of all Transport cluster entities. |
Quality and timeliness of financial reporting | All cluster agencies met the statutory deadlines for completing the early close and submitting the financial statements. Transport cluster agencies continued to experience some challenges with accounting for land and infrastructure assets. The former Roads and Maritime Services and Sydney Metro recorded prior period corrections to property, plant and equipment balances. |
Impact of COVID-19 on passenger revenue and patronage | Total patronage and revenue for public transport decreased by approximately 18 per cent in 2019–20 due to COVID-19. The Transport cluster received additional funding from NSW Treasury during the year to support the reduced revenue and additional costs incurred such as cleaning on all modes of public transport and additional staff to manage physical distancing. |
Completion of the CBD and South East Light Rail | The CBD and South East Light Rail project was completed and commenced operations in this financial year. At 30 June 2020, the total cost of the project related to the CBD and South East Light Rail was $3.3 billion. Of this total cost, $2.6 billion was recorded as assets, whilst $700 million was expensed. |
2. Audit Observations |
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Internal control | While internal controls issues raised in management letters in the Transport cluster have decreased compared to the prior year, control weaknesses continue to exist in access security for financial systems. We identified 56 management letter findings across the cluster and 43 per cent of all issues were repeat issues. The majority of the repeat issues relate to information technology controls around user access management. There were three high risk issues identified - two related to financial reporting of assets and one for implementation of TAHE (see below). |
Agency responses to emergency events | Transport for NSW established the COVID-19 Taskforce in March 2020 to take responsibility for the overall response of planning and coordination for the Transport cluster. It also implemented the COVIDSafe Transport Plan which incorporates guidance on physical distancing, increasing services to support social distancing and cleaning. |
RailCorp transition to TAHE | On 1 July 2020, RailCorp was renamed Transport Asset Holding Entity of New South Wales (TAHE) and converted to a for-profit statutory State-Owned Corporation. TAHE is a commercial for-profit Public Trading Entity with the intent to provide a commercial return to its shareholders. A plan was established by NSW Treasury to transition RailCorp to TAHE which covered the period 1 July 2015 to 1 July 2019. A large portion of the planned arrangements were not implemented by 1 July 2020. As at the time of this report, the TAHE operating model, Statement of Corporate Intent (SCI) and other key plans and commercial agreements are not finalised. The State Owned Corporations Act 1989 generally requires finalisation of an SCI three months after the commencement of each financial year. However, under the Transport Administration Act 1988, TAHE received an extension from the voting shareholders, the Treasurer and Minister for Finance and Small Business, to submit its first SCI by 31 December 2020. In accordance with the original plan, interim commercial access arrangements were supposed to be in place with RailCorp prior to commencement of TAHE. Under the transitional arrangements, TAHE is continuing to operate in accordance with the asset and safety management plans of RailCorp. The final operating model is expected to include considerations of safety, operational, financial and fiscal risks. This should include a consideration of the potential conflicting objectives of a commercial return, and maintenance and safety measures. This matter has been included as a high risk finding in our management letter due to the significance of the financial reporting impacts and business risks for TAHE. Recommendation: TAHE management should:
Resolution of the above matters are critical as they may significantly impact the financial reporting arrangements for TAHE for 2020–21, in particular, accounting policies adopted as well as measurement principles of its significant infrastructure asset base. |
Completeness and accuracy of contracts registers | Across the Transport cluster, contracts and agreements are maintained by the transport agencies using disparate registers. Recommendation (repeat): Transport agencies should continue to implement a process to centrally capture all contracts and agreements entered. This will ensure:
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This report provides parliament and other users of the Transport cluster’s financial statements with the results of our audits, our observations, analysis, conclusions and recommendations in the following areas:
- financial reporting
- audit observations
- the impact of emergencies and the pandemic.
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 cluster for 2020, including any financial implications from the recent emergency events.
Section highlights
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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 cluster
- assessment of how well cluster agencies adapted their systems, policies and procedures, and governance arrangements in response to recent emergencies.
Section highlights
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Appendix one – List of 2020 recommendations
Appendix two – Status of 2019, 2018 and 2017 recommendations
Appendix three – Management letter findings
Appendix four – Financial data
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.
Actions for Train station crowding
Train station crowding
This report focuses on how Transport for NSW and Sydney Trains manage crowding at selected metropolitan train stations.
The audit found that while Sydney Trains has identified platform crowding as a key strategic risk, it does not have an overarching strategy to manage crowding in the short to medium term. Sydney Trains 'do not have sufficient oversight to know if crowding is being effectively managed’, the Auditor-General said.
Sydney Trains' operational response to crowding involves restricting customer access to platforms or station entries before crowding reaches unsafe levels or when it impacts on-time running. Assuming rail patronage increases, it is likely that Sydney Trains will restrict more customers from accessing platforms or station entries, causing customer delay. ‘Restricting customer access to platforms or station entries is not a sustainable approach to manage station crowding’, said the Auditor-General.
The Auditor-General made seven recommendations to improve Transport for NSW and Sydney Trains' management of station crowding. Transport for NSW have accepted these recommendations on behalf of the Transport cluster.
Public transport patronage has been impacted by COVID-19. This audit was conducted before these impacts occurred.
Sydney Trains patronage has increased by close to 34 per cent over the last five years, and Transport for NSW (TfNSW) expects the growth in patronage to continue over the next 30 years. As patronage increases there are more passengers entering and exiting stations, moving within stations to change services, and waiting on platforms. As a result, some Sydney metropolitan train stations are becoming increasingly crowded.
There are three main causes of station crowding:
- patronage growth exceeding the current capacity limits of the rail network
- service disruptions
- special events.
Crowds can inhibit movement, cause discomfort and can lead to increased health and safety risks to customers. In the context of a train service, unmanaged crowds can affect service operation as trains spend longer at platforms waiting for customers to alight and board services which can cause service delays. Crowding can also prevent customers from accessing services.
Our 2017 performance audit, ‘Passenger Rail Punctuality’, found that rail agencies would find it hard to maintain train punctuality after 2019 unless they significantly increased the capacity of the network to carry trains and people. TfNSW and Sydney Trains have plans to improve the network to move more passengers. These plans are set out in strategies such as More Trains, More Services and in the continued implementation of new infrastructure such as the Sydney Metro. Since 2017, TfNSW and Sydney Trains have introduced 1,500 more weekly services to increase capacity. Additional network capacity improvements are in progress for delivery from 2022 onwards.
In the meantime, TfNSW and Sydney Trains need to use other ways of managing crowding at train stations until increased capacity comes on line.
This audit examined how effectively TfNSW and Sydney Trains are managing crowding at selected metropolitan train stations in the short and medium term. In doing so, the audit examined how TfNSW and Sydney Trains know whether there is a crowding problem at stations and how they manage that crowding.
TfNSW is the lead agency for transport in NSW. TfNSW is responsible for setting the standard working timetable that Sydney Trains must implement. Sydney Trains is responsible for operating and maintaining the Sydney metropolitan heavy rail passenger service. This includes operating, staffing and maintaining most metropolitan stations. Sydney Trains’ overall responsibility is to run a safe rail network to timetable.
ConclusionSydney Trains has identified platform crowding as a key strategic risk, but does not have an overarching strategy to manage crowding in the short to medium term. TfNSW and Sydney Trains devolve responsibility for managing crowding at stations to Customer Area Managers, but do not have sufficient oversight to know if crowding is being effectively managed. TfNSW is delivering a program to influence demand for transport in key precincts but the effectiveness of this program and its impact on station crowding is unclear as Transport for NSW has not evaluated the outcomes of the program. TfNSW and Sydney Trains do not directly measure or collect data on station crowding. Data and observation on dwell time, which is the time a train waits at a platform for customers to get on and off trains, inform the development of operational approaches to manage crowding at stations. Sydney Trains has KPIs on reliability, punctuality and customer experience and use these to indirectly assess the impact of station crowding. TfNSW and Sydney Trains only formally assess station crowding as part of planning for major projects, developments or events. Sydney Trains devolve responsibility for crowd management to Customer Area Managers, who rely on frontline Sydney Trains staff to understand how crowding affects individual stations. Station staff at identified key metropolitan train stations have developed customer management plans (also known as crowd management plans). However, Sydney Trains does not have policies to support the creation, monitoring and evaluation of these plans and does not systematically collect data on when station staff activate crowding interventions under these plans. Sydney Trains stated focus is on providing a safe and reliable rail service. As such, management of station crowding is a by-product of its strategies to manage customer safety and ensure on-time running of services. Sydney Trains' operational response to crowding involves restricting customer access to platforms or stations before crowding reaches unsafe levels, or when it impacts on-time running. As rail patronage increases, it is likely that Sydney Trains will need to increase its use of interventions to manage crowding. As Sydney Trains restrict more customers from accessing platforms or station entries, it is likely these customers will experience delays caused by these interventions. Since 2015, TfNSW has been delivering the 'Travel Choices' program which aims to influence customer behaviour and to manage the demand for public transport services in key precincts. TfNSW is unable to provide data demonstrating the overall effectiveness of this program and the impact the program has on distributing public transport usage out of peak AM and PM times. TfNSW and Sydney Trains continue to explore initiatives to specifically address crowd management. |
ConclusionTfNSW and Sydney Trains do not directly measure or collect data on station crowding. There are no key performance indicators directly related to station crowding. Sydney Trains uses performance indicators on reliability, punctuality and customer experience to indirectly assess the impact of station crowding. Sydney Trains does not have a routine process for identifying whether crowding contributed to minor safety incidents. TfNSW and Sydney Trains formally assess station crowding as part of planning for major projects, developments or events. |
ConclusionSydney Trains has identified platform crowding as a strategic risk but does not have an overarching strategy to manage station crowding. Sydney Trains' stated focus is on providing a safe and reliable rail service. As such, management of station crowding is a by-product of its strategies to manage customer safety and ensure on-time running of services. Sydney Trains devolve responsibility for managing crowding at stations to Customer Area Managers but does not have sufficient oversight to know that station crowding is effectively managed. Sydney Trains does not have policies to support the creation, monitoring or evaluation of crowd management plans at key metropolitan train stations. The use of crowding interventions is likely to increase due to increasing patronage, causing more customers to experience delays directly caused by these activities. TfNSW and Sydney Trains have developed interventions to influence customer behaviour and to manage the demand for public transport services but are yet to evaluate these interventions. As such, their impact on managing station crowding is unclear. |
Appendix one – Response from agency
Appendix two – Sydney rail network
Appendix three – Rail services contract
Appendix four – Crowding pedestrian modelling
Appendix five – Airport Link stations case study
Appendix six – About the audit
Appendix seven – Performance auditing
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 #333 - released 30 April 2020
Actions for Transport 2019
Transport 2019
This report details the results of the financial audits of NSW Government's Transport cluster for the financial year ended 30 June 2019. The report focuses on key observations and findings from the most recent financial statement audits of agencies in the Transport cluster.
Unqualified audit opinions were issued for all agencies' financial statements. However, valuations of assets continue to create challenges across the cluster. The Audit Office identified some deficiencies in relation to asset valuations at Transport for NSW, Roads and Maritime Services, Rail Corporation New South Wales and Sydney Metro.
The Audit Office noted an increase in findings on internal controls across the Transport cluster. Key themes related to information technology, asset management and employee leave entitlements. The report also highlights the status of significant infrastructure projects across the Transport cluster.
The report makes several recommendations including:
- agency finance teams need to be consulted on major business decisions and commercial transactions at the time of their execution to assess the financial reporting impacts
- the Department of Transport should ensure consistent accounting policies are applied across its controlled entities.
This report analyses the results of our audits of financial statements of the Transport cluster for the year ended 30 June 2019. The table below summarises our key observations.
1. Machinery of Government changes
Transport for NSW, as the lead agency, will absorb the functions of Roads and Maritime Services |
The NSW Government announced its intention to integrate Roads and Maritime Services (RMS) into Transport for NSW (TfNSW) as part of the Machinery of Government changes. This change was not included in the Administrative Orders as the Transport Administration Act 1988 No. 109 governs the composition of the Transport cluster. The Transport Administration Amendment (RMS Dissolution) Act 2019 (the Act) received assent on 22 November 2019. The Act dissolves RMS and transfers the assets, rights and liabilities of RMS to TfNSW. As at the date of this Report, the Act is not yet in force. Transport is considering the impact of the changes on its operating model and financial reporting. |
2. Financial reporting
Audit opinions |
Unqualified audit opinions were issued on the 2018–19 financial statements of all agencies in the Transport cluster. TfNSW and Sydney Metro obtained a three-week extension from NSW Treasury to submit their financial statements for audit to resolve accounting issues surrounding the valuation of property, plant and equipment. The Department of Transport reported total consolidated property, plant and equipment of $158 billion at 30 June 2019. In 2018–19, there were issues with asset valuations at TfNSW, RMS, Sydney Metro and Rail Corporation New South Wales (RailCorp), resulting in adjustments after the submission of financial statements for audit and the correction of a prior period error. |
Preparedness for new accounting standards |
Agencies across the cluster are progressing in their implementation of the new accounting standards. Transport cluster agencies need to improve their contracts registers to ensure they have a complete list of contracts and agreements to assess the impact of the new accounting standards. |
Valuation of assets remains a challenge in the Transport cluster |
Whilst agencies complied with the requirements of the accounting standards and NSW Treasury policies on valuations, the Audit Office identified some deficiencies in relation to asset valuations across the cluster.
Sydney Metro North West officially opened in May 2019 and reported total assets of $9.1 billion. Sydney Metro derecognised $322 million in assets constructed to facilitate its operation but transferred to councils and utilities. |
Inconsistent accounting policies across the Transport cluster |
There was an inconsistency identified in the cluster relating to the valuation of substratum land. In 2018–19, RailCorp derecognised $109 million of substratum land to ensure consistency in its approach with other Transport agencies. As the parent entity, the Department of Transport needs to ensure accounting policies are consistently applied across all controlled entities for consolidation purposes. Inconsistencies in the application of accounting standards across agencies will impact comparability of financial reporting and decision making across the Transport cluster. |
Revenue growth |
Public transport passenger revenue increased by $89.0 million (5.9 per cent) in 2018–19, and patronage increased by 37.8 million (4.9 per cent) across all modes of transport based on data provided by TfNSW. The increase in revenue is mainly due to an increase in patronage as well as the annual increase in fares. |
Negative Opal cards |
Negative balance Opal cards resulted in $2.9 million in revenue not collected in 2018–19 ($10.4 million since the introduction of Opal). In January 2019, Transport made a change to the Sydney Airport stations to prevent customers with high negative balances exiting the station. In addition, in late 2018, Transport increased the minimum top up values for new cards at the airport stations. |
3. Audit observations
Internal controls | There was an increase in findings on internal controls across the Transport cluster. Key themes relate to information technology, employee leave entitlements and asset management. Twenty-nine per cent of all issues were repeat issues. The majority of the repeat issues related to information technology controls. |
Write-off of assets | In addition to a $322 million derecognition of assets transferred to councils and utilities by Sydney Metro and a $109 million derecognition of substratum land at RailCorp, the Transport cluster wrote-off $278 million of assets related to roads, bridges, maritime assets, traffic signals and controls network. These mainly related to roads, bridges, maritime assets, traffic signals and the control network where new infrastructure assets substantially replaced an existing asset as part of construction activities. |
Transport Asset Holding Entity (TAHE) |
TAHE was established to be a dedicated asset manager for the delivery of public transport asset management. The Transport Administration Amendment (Transport Entities) Act 2017 will transition RailCorp into TAHE. RailCorp is now expected to transition to TAHE from 1 July 2020 (previously 1 July 2019). Several working groups have been considering various aspects of the TAHE transition including its status as a for profit Public Trading Enterprise, the operating model and the impact of the new accounting standards AASB 16 'Leases' and AASB 1059 'Service Concession Arrangements: Grantors'. The considerations of these aspects identified several challenges in the implementation of TAHE which has led to the revised transition date. Given the delays in implementation, it is important to clarify the intent of the TAHE model. |
Excess annual leave |
Twenty-six per cent of Transport employees have annual leave balances exceeding 30 days. Of the employees with excess leave balances, 732 (10.3 per cent) did not take any annual leave in 2018–19.
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Completeness and accuracy of contracts registers |
There are no centralised processes to record all significant contracts and agreements in a register across the Transport cluster.
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This report provides parliament and other users of the Transport cluster’s financial statements with the results of our audits, our observations, analysis, conclusions and recommendations in the following areas:
- financial reporting
- audit observations.
This cluster was impacted by the Machinery of Government changes on 1 July 2019. The NSW Government announced its intention to integrate Roads and Maritime Services (RMS) into Transport for NSW (TfNSW). This report is focused on the Transport cluster prior to these changes. Please refer to the section on Machinery of Government changes for more details.
Machinery of Government refers to how the government organises the structures and functions of the public service. Machinery of Government changes are where the government reorganises these structures and functions, and are given effect by Administrative orders.
The Transport cluster was impacted by recent Machinery of Government changes. These changes were announced by the Department of Premier and Cabinet but were not included in the Administrative Orders as the Transport Administration Act 1988 No. 109 governs the composition of the Transport cluster. It was the intention of government to transfer the functions of the RMS into TfNSW. This requires legislative changes to the Transport Administration Act 1988 No. 109.
Section highlights
Under the Machinery of Government changes, the NSW Government will transfer the functions of RMS into TfNSW.
- The Transport Administration Amendment (RMS Dissolution) Act 2019 (the Act) received assent on 22 November 2019.
- The Act will dissolve RMS and transfer its functions, assets, rights and liabilities to TfNSW.
- As at the date of this report, the Act is not yet in force.
- There are risks and challenges for asset and liability transfers, governance and retention of knowledge.
- As of 1 July 2019, administrative arrangements (delegations and reporting line changes) were put in place to enable TfNSW and RMS to operate within a single management structure, while still remaining as separate legal entities.
- Transport is working on a number of options as to how to implement the changes.
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 cluster for 2019.
Section highlights
- Unqualified audit opinions were issued on all agencies' financial statements.
- RMS required an extension from NSW Treasury for their early close procedures.
- TfNSW and Sydney Metro required extensions to submit their year-end financial statements.
- Valuation of assets remains a challenge across the cluster.
- There remains Opal cards with negative balances.
- Sydney Metro derecognised assets of $322 million in relation to assets constructed for third parties.
- Inconsistencies in the application of accounting policies across cluster agencies impact comparability of financial reporting across the Transport cluster.
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 cluster.
Section highlights
- There was an increase in findings on internal controls across the Transport cluster. Twenty-nine per cent of all issues were repeat issues.
- Transport entities wrote-off over $278 million of assets which were replaced by new assets or technology.
- Twenty-six per cent of Transport employees have excess annual leave.
- There are no processes to ensure all significant contracts and agreements are captured by agencies in a centralised register.
Appendix one – Timeliness of financial reporting by agency
Appendix two – Management letter findings by agency
Appendix three – List of 2019 recommendations
Appendix four – Status of 2017 and 2018 recommendations
Appendix five – Cluster agencies
© 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.
Actions for Engagement of probity advisers and probity auditors
Engagement of probity advisers and probity auditors
Three key agencies are not fully complying with the NSW Procurement Board’s Direction for engaging probity practitioners, according to a report released today by the Acting Auditor-General for New South Wales, Ian Goodwin. They also do not have effective processes to achieve compliance or assure that probity engagements achieved value for money.
Probity is defined as the quality of having strong moral principles, honesty and decency. Probity is important for NSW Government agencies as it helps ensure decisions are made with integrity, fairness and accountability, while attaining value for money.
Probity advisers provide guidance on issues concerning integrity, fairness and accountability that may arise throughout asset procurement and disposal processes. Probity auditors verify that agencies' processes are consistent with government laws and legislation, guidelines and best practice principles.
According to the NSW State Infrastructure Strategy 2018-2038, New South Wales has more infrastructure projects underway than any state or territory in Australia. The scale of the spend on procuring and constructing new public transport networks, roads, schools and hospitals, the complexity of these projects and public scrutiny of aspects of their delivery has increased the focus on probity in the public sector.
A Procurement Board Direction, 'PBD-2013-05 Engagement of probity advisers and probity auditors' (the Direction), sets out the requirements for NSW Government agencies' use and engagement of probity practitioners. It confirms agencies should routinely take into account probity considerations in their procurement. The Direction also specifies that NSW Government agencies can use probity advisers and probity auditors (probity practitioners) when making decisions on procuring and disposing of assets, but that agencies:
- should use external probity practitioners as the exception rather than the rule
- should not use external probity practitioners as an 'insurance policy'
- must be accountable for decisions made
- cannot substitute the use of probity practitioners for good management practices
- not engage the same probity practitioner on an ongoing basis, and ensure the relationship remains robustly independent.
The scale of probity spend may be small in the context of the NSW Government's spend on projects. However, government agencies remain responsible for probity considerations whether they engage external probity practitioners or not.
The audit assessed whether Transport for NSW, the Department of Education and the Ministry of Health:
- complied with the requirements of ‘PBD-2013-05 Engagement of Probity Advisers and Probity Auditors’
- effectively ensured they achieved value for money when they used probity practitioners.
These entities are referred to as 'participating agencies' in this report.
We also surveyed 40 NSW Government agencies with the largest total expenditures (top 40 agencies) to get a cross sector view of their use of probity practitioners. These agencies are listed in Appendix two.
Conclusion
We found instances where each of the three participating agencies had not fully complied with the requirements of the NSW Procurement Board Direction ‘PBD-2013-05 Engagement of Probity Advisers and Probity Auditors’ when they engaged probity practitioners. We also found they did not have effective processes to achieve compliance or assure the engagements achieved value for money.
In the sample of engagements we selected, we found instances where the participating agencies did not always:
- document detailed terms of reference
- ensure the practitioner was sufficiently independent
- manage probity practitioners' independence and conflict of interest issues transparently
- provide practitioners with full access to records, people and meetings
- establish independent reporting lines reporting was limited to project managers
- evaluate whether value for money was achieved.
We also found:
- agencies tend to rely on only a limited number of probity service providers, sometimes using them on a continuous basis, which may threaten the actual or perceived independence of probity practitioners
- the NSW Procurement Board does not effectively monitor agencies' compliance with the Direction's requirements. Our enquiries revealed that the Board has not asked any agency to report on its use of probity practitioners since the Direction's inception in 2013.
There are no professional standards and capability requirements for probity practitioners
NSW Government agencies use probity practitioners to independently verify that their procurement and asset disposal processes are transparent, fair and accountable in the pursuit of value for money.
Probity practitioners are not subject to regulations that require them to have professional qualifications, experience and capability. Government agencies in New South Wales have difficulty finding probity standards, regulations or best practice guides to reference, which may diminish the degree of reliance stakeholders can place on practitioners’ work.
The NSW Procurement Board provides direction for the use of probity practitioners
The NSW Procurement Board Direction 'PBD-2013-15 for engagement of probity advisers and probity auditors' outlines the requirements for agencies' use of probity practitioners in the New South Wales public sector. All NSW Government agencies, except local government, state owned corporations and universities, must comply with the Direction when engaging probity practitioners. This is illustrated in Exhibit 1 below.
Actions for Transport 2017
Transport 2017
The following report focuses on key observations and findings from the most recent financial statement audits of agencies in the Transport cluster.
Unqualified audit opinions were issued for all agencies' financial statements. However, the report notes the agencies can improve their asset revaluation processes.
Actions for 2016 - An overview
2016 - An overview
This report focuses on key observations and findings from 2016 audits and highlights key areas of focus for financial and performance audits in 2017.
Financial reporting | |
Observation | Conclusion |
Only one qualified audit opinion was issued on the 2015–16 financial statements of NSW public sector agencies, compared to two in 2014–15. | The quality of financial reporting continued to improve across the NSW public sector. |
More 2015–16 financial statements and audit opinions were signed within three months of the year end. | Timely financial reporting was facilitated by more agencies resolving significant accounting issues early, completing asset valuations on time and compiling sufficient evidence to support financial statement balances. |
NSW Treasury’s early close procedures in 2015–16 were again successful in improving the quality and timeliness of financial reporting, largely facilitated by the early resolution of accounting issues. For 2016–17, NSW Treasury has narrowed the scope of mandatory early close procedures. |
The narrowed scope of mandatory early close procedures may diminish the good performance in ensuring the quality and timeliness of financial reporting achieved in recent years. To mitigate this risk, NSW Treasury has mandated that agencies perform non-financial asset valuations and prepare proforma financial statements in their early close procedures. It also encourages them to continue with the good practices embedded in recent years. |
Although most agencies complied with NSW Treasury’s early close asset revaluation procedures we identified areas where they can improve. | Asset revaluations need to commence early enough to ensure all assets are identified and the results are analysed, recorded and reflected accurately in the early close financial statements. |
Number of misstatements | |||||
Year ended 30 June | 2015-16 | 2014-15 | 2013-14 | 2012-13 | 2011-12 |
Total reported misstatements | 298 | 396 | 459 | 661 | 1,077 |
All material misstatements identified by agencies and audit teams were corrected before the financial statements and audit opinions were signed. A material misstatement relates to an incorrect amount, classification, presentation or disclosure in the financial statements that could reasonably be expected to influence the economic decisions of users.
Significant matters reported to the portfolio Minister, Treasurer and Agency Head
In 2015–16, we reported the following significant matters to the portfolio Minister, Treasurer and agency head in our Statutory Audit Reports:
Appropriate financial controls help ensure the efficient and effective use of resources and the implementation and administration of agency policies. They are essential for quality and timely decision making.
In 2015–16, our audit teams made the following key observations on the financial controls of NSW public sector agencies.
Financial controls | |
Observation | Conclusion |
More needs to be done to implement audit recommendations on a timely basis. We found 212 internal control issues identified in previous audits had not been adequately addressed by 30 June 2016. |
Delays in implementing audit recommendations can impact the quality of financial information and the effectiveness of decision making. Agencies need to ensure they have action plans, timeframes and assigned responsibilities to address recommendations in a timely manner. |
Agencies continue to face challenges managing information security. Most information technology issues we identified related to poor IT user administration in areas like password controls and inappropriate access. | Agencies should review the design and effectiveness of information security controls to ensure data is adequately protected. |
We found shared service provider agreements did not always adequately address information security requirements. |
Where agencies use shared service providers they should consider whether the service level arrangements adequately address information security. |
Thirteen of 108 agencies required to attest to having a minimum set of information security controls did not do so in their 2015 annual reports. | The 'NSW Government Digital Information Security Policy' recognises the growing need for effective information security. With cyber security threats continuing to increase as digital services expand we plan to look at cyber security as part of our 2017–18 performance audit program. |
We identified instances where service level agreements with shared service providers were outdated, signed too late or did not exist. | Corporate and shared service arrangements are more effective when service level arrangements are negotiated and signed in time, clearly detail rights and responsibilities and include meaningful KPIs, fee arrangements and dispute resolution processes. |
Internal controls at GovConnect, the private sector provider of transactional and information technology services to many NSW public sector agencies were ineffective in 2015–16. We found mitigating actions taken to manage transition risks from ServiceFirst to GovConnect were ineffective in ensuring effective control over client transactions and data. | The Department of Finance, Services and Innovation should ensure GovConnect addresses the control deficiencies. It should also examine the breakdowns in the transition of the shared service arrangements and apply the learnings to other services being transitioned to the private sector. |
Maintenance backlogs exist in several NSW public sector agencies, including Roads and Maritime Services, Sydney Trains, NSW Health, the Department of Education and the Department of Justice. | To address backlog maintenance it is important for agencies to have asset lifecycle planning strategies that ensure newly built and existing assets are funded and maintained to a desired service level. |
Actions for Volume Eight 2013 focusing on Transport and Ports
Volume Eight 2013 focusing on Transport and Ports
Unqualified audit opinions were issued on the above corporations’ 30 June 2013 financial statements. During the year, Treasury issued TC 13/01 ‘Mandatory early close procedures for 2013’. This Circular aimed to improve the quality and timeliness of agencies’ annual financial statements. In 2012-13, application of the circular was made mandatory for State owned corporations. As a result, the port corporations were required to perform the early close procedures. All the port corporations were successful in performing the procedures, which helped them submit financial statements by an earlier due date. The early close procedures also resulted in general improvements to the quality of most financial statements.
The report recommends all transport entities should do more to reduce excessive annual leave balances to ensure they will comply with new targets set by the Premier, RailCorp, Sydney Trains and NSW Trains should minimise the amount of overtime bonuses paid to train drivers and that Transport for NSW should set targets to measure the overall satisfaction of train users.
Actions for Volume Eight 2011 Focus on Transport and Ports
Volume Eight 2011 Focus on Transport and Ports
The report includes comments on financial audits of government agencies in the Transport and Ports sectors. The audit of corporations’ financial statements for the year ended 30 June 2011 resulted in unmodified audit opinions within the Independent Auditor’s Reports. A key recommendation from the report is that Sydney Ports Corporation should continue working with other government authorities and industry stakeholders to improve the effectiveness of program initiatives for increasing container freight movements by rail. The Corporation should review the underlying causes hindering growth in the rail mode and develop and implement strategies to address the unfavourable trend.