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
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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 Seven 2014 Focusing on Transport
Volume Seven 2014 Focusing on Transport
All agencies in transport cluster received unqualified audit opinions for the year ended 30 June 2014. The quality of financial reporting continues to improve with the number of misstatements identified during audits falling for the fifth year in a row.
Actions for Volume Four 2014 focusing on New South Wales State Finances
Volume Four 2014 focusing on New South Wales State Finances
For the second consecutive year, the General Government and Total State Sector Accounts received an unqualified auditor’s opinion following more than a decade of qualifications. The quality and timeliness of financial reporting across the NSW public sector has continued to improve. Compared to previous years, there were fewer errors in agencies’ 2013–14 financial statements submitted for audit and used for whole-of-government financial reporting.
Actions for Volume One 2014 - Areas of focus from 2013
Volume One 2014 - Areas of focus from 2013
Today the Auditor-General of New South Wales, Grant Hehir, released his Volume One Report to Parliament for 2014. The observations included in this report are designed to inform readers of common findings from the 2013 financial and performance audits so agencies and audit committees can use them to identify issues that may be relevant to their organisations.
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.