What this report is about

This report focuses on the 2023–24 Consolidated State Financial Statements of the New South Wales General Government Sector (GGS) and Total State Sector (TSS), which comprise the Total State Sector Accounts.

It comments on the key matters and highlights significant factors that have contributed to the State’s financial outcomes for the year ended 30 June 2024.

Observations

The audit opinion on the Total State Sector Accounts for the year ended 30 June 2024 was unqualified.

The GGS’s net operating balance for the 2023–24 financial year was a deficit of $10.7 billion. This was $2.9 billion more than the original budgeted deficit of $7.8 billion, and $1.1 billion more than the revised budget deficit of $9.6 billion estimated during the 2023–24 half yearly review.

Revenue growth exceeded expense growth in 2022–23 and 2023–24, after several years when expenses increased in excess of revenue as the government responded to COVID-19 and natural disasters.

The State recorded $769 million in write offs of infrastructure and other assets in 2023–24, largely from transport projects including the Great Western Highway upgrade, the Beaches Link project and the Fast Rail program.

The State also wrote off $334 million of inventories including expired rapid antigen test kits and personal protective equipment.

The GGS’s net debt to gross state product increased from -0.3% in 2019 to 11.4% in 2024. It is predicted to reach 14.2% of gross state product by 2028.

The State maintained its triple-A and AA+ credit ratings.

Recommendations

Seven of nine 2023 report recommendations have been addressed.

NSW Treasury is working to address the two open recommendations relating to reviewing the financial reporting exemption framework.

The Audit Office’s annual work program

The Annual Work Program 2024–27 was published in August 2024

Each year, the Audit Office’s Annual Work Program reflects an ongoing strategic assessment of the risks and challenges facing government. It outlines subsequent focus areas for financial audits, as well as planned performance audit topics published as a three-year rolling program. We aim to inform NSW Parliament, the public sector and the community about key risks we identify, as well as our priorities and expected timeframes for delivering our work. This helps to give our stakeholders the best opportunity to prepare for, and engage with, our audits.

Our financial audit program this year included a consolidated report on the audit results of NSW Government agencies’ financial statements. The State agencies 2024 report highlighted the issues that had the most significant impact across the whole sector.

There are five key focus areas in our performance audit program:

• effective advice and decision making
• First Nations people in NSW
• environment and sustainability
• efficient and responsible use of public resources
• cyber security.

A sharper focus on information technology risks and data

The NSW public sector is increasingly reliant on information technology to improve service delivery. The Systems Assurance, Cyber and Data Branch within the Audit Office seeks to respond to the pervasive risks and opportunities associated with information technology, and the growing availability of large amounts of data. The creation of this branch reflects the prominence of data and cyber issues within our Corporate Strategy and Annual Work Program, and the importance of our information systems assurance work. The work of the branch supports our financial and performance audits, with insights reflected in our financial and performance audit reports.

The outcome we seek is a sharper focus on information technology risks within the public sector, particularly cyber security risks, to be highlighted in our performance and financial audits. Our increasing use of data for more effective audits aims to further enhance our audit reports.

The Systems Assurance, Cyber and Data Branch also plays a role in thought leadership about artificial intelligence and its impacts on the way we work and the work of the agencies we audit. This plan includes commencing our first audit focused on artificial intelligence.

Digital audit transformation

The Audit Office is embarking on a digital audit transformation which is looking at how we can better use data and technology to enhance our audits.

This transformation looks to re-imagine how we plan for, complete and report on our financial and performance audits incorporating data analytic solutions, automation and predictive analytics, leading to more efficient, effective and timely audits.

An initial key focus is on standardising and automating data requests from agencies, which will streamline processes, save time, automate some audit procedures and improve audit risk assessment and benchmarking.

We understand that there are some key enablers required to achieve this outcome and acknowledge that there are some key risks that we need to manage. Ensuring that we have a workforce that is digitally capable, and technological solutions that are fit-for-purpose, while continuing to maintain high levels of security and privacy over information is essential.

While this transformation will be staged, the support of the sector will be crucial to ensure speedy and consistent implementation across the entire sector.

Audits will target the efficient and responsible use of public resources

The Government Sector Employment Act 2013 establishes the core values of the public sector in NSW. One of these core values is that public servants should be fiscally responsible and focus on the efficient, effective and prudent use of resources.

The Government Sector Audit Act 1983 provides that the Auditor-General may have regard to the wastage of public resources and may deal with reports about the serious and substantial waste of public money. Serious and substantial waste involves the uneconomical, inefficient or ineffective use of resources, whether authorised or unauthorised, and which could result in a loss of public funds or resources.

Waste can result in an opportunity cost for government where money could have been used for a better purpose, or better spent on achieving the same purpose. Waste can also lead to higher costs being incurred to address earlier failings in program design, budgeting and management.

The Audit Office’s work program for 2024–27 includes audits that focus on identifying whether the planning and management of key programs and services has been efficient and financially responsible, and whether opportunities to avoid and reduce waste have been identified early.

Climate-related financial reporting in NSW

The NSW Government has announced the introduction of mandatory climate-related financial disclosures as part of agencies’ annual reporting.

The release of climate-related financial disclosures by government entities is intended to provide transparency on the NSW Government’s exposure to the impacts of climate change and enhance accountability over strategies to respond to risks and capitalise on opportunities.

NSW Treasury recently issued its framework for first year climate-related financial disclosures

In October 2024, NSW Treasury issued TPG24-33 ‘Reporting Framework for First Year Climate-related Financial Disclosures’ (the Framework). The Framework sets out mandatory reporting requirements, including key guiding principles and disclosure content.

The Framework is closely informed by the Australian Accounting Standards Board’s (AASBs) Australian sustainability reporting standard, AASB S2 ‘Climate-related Disclosures’. It has been tailored by NSW Treasury to reflect NSW Government circumstances and reporting entity capability and capacity.

Entity level climate-related financial disclosures will commence in stages from 1 July 2024

The disclosure obligations will commence in 2024–25 for the largest entities or those entities likely to be most exposed to material climate-related risks. Based on NSW Treasury’s assessment, 29 ‘phase 1 entities’ will apply the Framework for their 2024–25 climate disclosures.

Other entities will apply the Framework when they make their first climate-related financial disclosures in subsequent phases.

The assurance regime over climate-related financial disclosures is being developed

The Audit Office has been engaging with NSW Treasury to determine the nature and scope of independent public sector assurance over future climate-related disclosures at both a whole-of-government and agency level. Assurance requirements are expected to be staged, with NSW Treasury recently seeking expressions of interest for some phase 1 entities to have their 2024–25 climate disclosures assured by the Audit Office. Mandatory assurance for all phase 1 entities will commence in 2025–26.

Appendix 1 – Key audit matters

Appendix 2 – Prescribed entities

Appendix 3 – Controlled entities of the State

© 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.

About this report

Results and key themes from our audits of the state agencies’ financial statements for the year ended 30 June 2024.

It also includes observations on the following areas of focus:

• risk management
• capital projects
• shared service arrangements.

Findings

The Treasurer did not table the audited Total State Sector Accounts (TSSA) in Parliament as required by the Government Sector Finance Act 2018, and Responsible Ministers did not table 16 annual reports in Parliament by the required date.

Audit results

Unqualified opinions were issued for all but one agency.  The quality of financial statements submitted for audit improved, with reported misstatements down to a gross value of $3.9 billion in 2023–24, compared to $10.8 billion in 2022–23.

Key themes

Errors in accounting for assets led to financial statements adjustments of $1.4 billion. 

Our audits identified deficiencies in key controls across financial management, payroll, contract management and procurement.

Risk management

Risk management maturity is low across most agencies. Some of the largest 40 agencies self-assess their risk maturity as requiring improvement.

Capital projects

There is a lack of transparency in the NSW budget papers relating to significant capital projects. The estimated total costs for some major projects are not published as the amounts are considered commercially sensitive. The budget papers do not provide a complete and accurate reflection of the actual costs of large infrastructure projects.

Shared service arrangements

Three of the five agencies that provide shared services to 108 customer agencies did not obtain independent assurance over the effectiveness of their control environment. 

Recommendations

The report makes recommendations to agencies to improve controls and processes in relation to:

• financial reporting
• financial management
• risk management
• shared service arrangements
• capital projects.

Financial reporting is an important element of good governance. Confidence in, and transparency of, public sector decision making is enhanced when financial reporting is accurate and timely.

This chapter outlines our audit observations relating to the financial reporting of State Government agencies.

Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are also essential for quality and timely decision making.

This chapter outlines observations and insights from our audits of financial statements of the 40 largest agencies in the State sector. These agencies are listed in Appendix 3.

This chapter outlines audit observations, conclusions and recommendations from our review of agencies’ risk maturity, assessment processes, governance, systems and culture across the 40 largest agencies in the state sector. These agencies are listed in Appendix 3.

This chapter outlines observations, conclusions and recommendations from our review of the 15 most significant capital projects in the State.

Shared service arrangements can centralise corporate services functions such as finance, human resources, procurement and information technology (IT). Across NSW Government agencies, many business processes and IT functions are provided on a shared services model, that is, one agency operates a business function or IT platform that is used by other agencies rather than each agency maintaining their own. These services are shared by several agencies (‘customers’), but generally are operated and managed by one agency or department (‘provider’).

This chapter outlines audit observations, conclusions and recommendations from our review of shared service arrangements provided and received by the 40 largest agencies in the state sector. These agencies are listed in Appendix 3.

This report outlines the findings on shared service arrangements.

Appendix 1 – Status of audits of consolidated entities

Appendix 2 – Status of audits of non-consolidated entities

Appendix 3 – Forty largest State agencies contents

© 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.

What this report is about

Workers compensation schemes in NSW provide compulsory workplace injury insurance. The effective management of workers compensation is important to ensure injured workers are provided with prompt support to ensure timely, safe and sustainable return to work.

Insurance and Care NSW (icare) manages workers compensation insurance. The State Insurance Regulatory Authority (SIRA) regulates workers compensation schemes. NSW Treasury has a stewardship role but does not directly manage the schemes.

This audit assessed the effectiveness and economy of icare’s management of workers compensation claims, and the effectiveness of SIRA’s oversight of workers compensation claims.

Findings

icare is implementing major reforms to its approach to workers compensation claims management - but it is yet to demonstrate if these changes are the most effective or economical way to improve outcomes.

icare’s planning and assurance processes for its reforms have not adequately assessed existing claims models or analysed other reform options.

icare's activities have not focused enough on its core responsibilities of improving return to work and maintaining financial sustainability.

SIRA has improved the effectiveness of its workers compensation regulatory activities in recent years. Prior to 2019, SIRA was mostly focussed on developing regulatory frameworks and was less active in its supervision of workers compensation schemes.

NSW Treasury's role in relation to workers compensation has been unclear, which has limited its support for performance improvements.

Recommendations

icare should:

• Ensure that its annual Statement of Business Intent clearly sets out its approach to achieving its legislative objectives.
• Monitor and evaluate its workers compensation scheme reforms.
• Develop a quality assurance program to ensure insurance claim payments are accurate.

NSW Treasury should:

• Work with relevant agencies to improve public sector workers compensation scheme outcomes.
• Engage with the icare Board to ensure icare's management is in line with relevant NSW Treasury policies.

SIRA should:

• Address identified gaps in its fraud investigation.
• Develop a co-ordinated research strategy.

Workers compensation schemes in New South Wales provide workplace injury insurance for around 4.7 million workers. The effective management of workers compensation is important to ensure injured workers are appropriately supported and provided with prompt treatment to ensure timely, safe and sustainable return to work. There were around 110,000 injured workers compensation claims in 2022–23.

The two main workers compensation schemes in NSW are the Nominal Insurer (NI), which is for the private sector and is funded by premiums paid by employers, and the Treasury Managed Fund (TMF) which covers public sector workers and is funded by the NSW Government.

Insurance and Care NSW (icare) is responsible for managing the provision of workers compensation insurance, as well as several other insurance schemes. The State Insurance Regulatory Authority (SIRA) is responsible for regulating workers compensation and other insurance schemes. NSW Treasury has an oversight and monitoring role but does not directly manage or regulate workers compensation schemes.

icare outsources the management of workers compensation claims to several external insurance agents, which it refers to as claims service providers (CSPs). Tasks completed by CSPs include registering and assessing workers compensation claims, managing payments to injured workers, and liaising with injured workers, employers, and medical providers to support injury management and return to work.

The objective of this audit was to assess the effectiveness and economy of icare’s management of workers compensation claims, and the effectiveness of SIRA’s oversight of workers compensation claims. To address this objective, the audit considered whether icare’s reforms to its workers compensation claims management models are effective and economical, and whether there is an effective performance and accountability framework for the NI and TMF.

icare did not assess its existing claims management model or conduct a comprehensive options analysis assessing alternative claims management models before selecting its new claims management model for the Nominal Insurer

In 2021, icare decided to change the claims management model for the Nominal Insurer (NI) from a single outsourced claims service provider (CSP) to a model using multiple CSPs. icare did not conduct a detailed analysis of options before deciding on its new claims management model for the NI. icare did not complete a business case or undertake analysis of costs and benefits of the chosen model compared to other options, such as in-house provision of services by icare, a hybrid delivery model, or remaining with a single-provider model with improved support and performance incentives.

icare completed a procurement strategy which acknowledged a potential alternative model based on icare delivering claims management services. However, there was no detailed analysis or costing of this or other models for comparison with the outsourced model that had been chosen. The in-house provision option was not recommended because it was stated that ‘competition between external service providers can drive better performance than what icare could achieve’. The 2019 Independent Review Report on the NI recommended that icare use additional providers to reduce the pressure on its single provider. It was appropriate for icare to consider this recommendation when developing its new claims model, but it does not remove the need for icare to conduct its own detailed analysis to support decision making on major projects.

The absence of a business case or other similar detailed analysis reduces icare’s accountability for improved outcomes. It also means the stated benefits and costs of icare’s claims services model have not been fully tested. Introducing competition and performance-based payments to CSPs might improve return to work and financial sustainability outcomes but could create perverse incentives or increase the risk of CSPs withdrawing from contracts. A business case would have also provided information that could have been used to inform an evaluation framework for the new claims services model, including interim measures to help assess whether intended benefits are on track.

A business case is the primary document to outline the case for change and analysis of alternative options, as well as the costs, benefits and financial viability of the proposal. icare’s procurement policy does not require the development of a business case, but the NSW Procurement Strategy and NSW Treasury Business Case Guidelines require agencies to demonstrate value for money by submitting a business case to NSW Treasury for investment proposals over $10 million. At the point when icare sought approval from the icare Board to commence the procurement process, the maximum total contract value for the engagement of the six providers was estimated at between $3.7 billion and $6.4 billion over ten years.

icare conducted a comprehensive procurement process to select CSPs for its new NI claims management model

The procurement process for new providers for the NI involved an open market process that included extensive engagement with potential CSPs. This allowed icare to improve its understanding of the capacity and capability of providers and work collaboratively to refine the details of its claims management model.

icare developed a detailed procurement strategy that outlined the objectives of the new model, expected costs, services sought, governance framework, and an evaluation plan. icare provided regular updates to the icare Board on the progress of the procurement process and sought approval for key decisions about the changes being made.

icare met its planned timeframe for having contracts with multiple CSPs in place by 1 January 2023. icare’s contracts provide it with flexibility to adjust the performance measures after three years if required. The contracts also require 12 months’ notice from the CSP if they wish to withdraw from the contract. This helps icare to manage the risk of a reduction in capacity to manage claims if an existing CSP withdraws.

icare is implementing a new remuneration structure for CSPs which aims to provide better financial incentives to improve performance

The icare Board approved the introduction of a multiple provider model as part of its NI Improvement Program in December 2021. As a part of planning for the change, icare developed a different remuneration structure for the new CSP contracts that aim to create stronger incentives for innovation to improve performance. The previous remuneration model for providers involved a guaranteed fee that was set at 110% of the estimated cost of providing the service and had no financial penalties if CSPs did not meet performance targets. The new remuneration model splits the fees paid to CSPs into three categories:

1. a base fee, a guaranteed fixed fee which covers 95% of a benchmarked cost agreed by icare and CSPs (this was the estimated cost of providing the service in an efficient way)
2. a quality fee, which may be positive (up to ten per cent of the benchmarked cost) or negative (up to five per cent) depending on the CSP’s performance against the quality measures specified in the contract. These are mostly related to compliance with claims management processes such as timeliness, accuracy, and record keeping
3. an outcome fee up to 50% of the benchmarked cost depending on the CSP’s performance against the outcome measures specified in the contract. These relate to the key performance measures in the system such as return to work rates, claim payments made, and medical costs. The outcomes fee can only be earned if the CSP achieves acceptable performance in the quality measures.

This remuneration model aims to provide CSPs with financial incentives to improve performance. Setting the 'base fee' at slightly below the expected cost of providing the service should mean that CSPs need to meet their quality measures to ensure they cover costs and would need to exceed performance targets in order to increase its profit margin. The success of this model will depend on factors including the appropriateness of the base fee and performance targets, and the behaviour of CSPs. These changes are not yet fully implemented and icare is taking a staged approach to the transition of new CSPs, so it is too early to judge their effectiveness.

icare’s new remuneration structure will increase payments to CSPs for the NI without initially requiring improved performance

The new provider model is expected to cost up to $100 million more per year compared to icare’s previous, single provider model. This fee increase depends on the extent to which CSPs achieve its outcome targets. For example, if all CSPs improve their performance to a level where they meet all of their performance targets, the full $100 million would be paid to CSPs. A lower amount would be paid if some CSPs did not achieve outcome targets. icare’s modelling indicates that the extra costs in payments to CSPs would be offset by reductions in payments to injured workers as a result of improvements in return to work rates.

For at least the first year of the new model, icare has committed to paying a proportion of the outcome fees to CSPs even if they do not achieve their performance targets. This is intended to support CSPs to invest in their systems with the goal of achieving better longer-term performance. However, it means that icare will initially pay higher fees for similar or potentially lower performance.

icare lowered the return to work rate targets in 2023 compared to 2022 to account for the impact of the transition to the new multiple provider claims management model. Exhibit 9 shows the differences between the targets in 2021–22 and 2022–23.

Source: icare planning documents (unpublished).

CSP remuneration has increased from around $251 million in 2018–19 to almost $379 million in 2022–23, an increase of more than 50%. CSP remuneration has increased in each financial year during this period (Exhibit 10).

icare’s focus for reforming the TMF is not based on addressing key strategic challenges for the scheme

icare initiated a ‘TMF transformation program’ in 2022. The business case for the TMF transformation program did not include an assessment of the key strategic challenges for the TMF or describe how the transformation would improve return to work rates. Instead, it focused predominantly on the implementation of a single IT platform for managing workers compensation claims. While a single IT platform may be an important technological enabler for claims management, it does not address the underlying strategic issues that contributed to a decline in claims management performance and increase in costs in the TMF.

icare’s analysis indicates that the implementation of the new IT system will cause a short-term decline in return to work rates for the TMF. Reducing performance in return to work rates, even if only temporarily, can have a long-term impact on outcomes for affected workers and for scheme costs. icare’s internal modelling indicates that if the early stages of a claim are not managed well, claimants are much more likely to have a long-term claim.

The primary purpose of the workers compensation scheme is to optimise return to work outcomes for injured workers and to maintain the financial sustainability of the schemes. Previous reviews have stated that icare should apply a return to work focus for all its activities because this is the outcome on which it is judged by Parliament, workers, employers and the community.

icare has commenced a procurement process for the TMF without conducting detailed analysis of its claims management model

In December 2023, icare completed a procurement strategy for approval by the icare Board to guide its procurement of CSPs for the TMF. The TMF procurement strategy refers to the broader improvement objectives for the TMF, which include improving return to work performance and increasing capability to manage psychological injury claims. It contains a brief analysis of an in-house claims management model compared to an out-sourced approach. However, it does not include detailed analysis of options for its claims management model. This analysis contained a similar amount of detail as the procurement strategy for the NI (see Chapter 2). It did not include any evaluation of the outsourced model that icare has used previously and did not assess options for hybrid models that use a mixture of in-house and outsourced services. icare has had the same claims management model for the TMF, using the same three CSPs prior to its establishment in 2015. icare inherited contractual arrangements with three CSPs that had commenced in 2010. Its most recent procurement process for CSPs took place in 2019. Before commencing this procurement, icare did not evaluate the effectiveness of the arrangements that were in place from 2010 to 2019 or analyse alternative options for claims management models.

icare plans to draw on the work done for the NI procurement of CSPs in 2022 by using clauses in the NI contracts to extend them to cover TMF work. icare has also commenced an open expression of interest process to engage with other potential CSPs for the TMF.

The TMF procurement strategy sets out options for a revised performance and remuneration framework for CSPs in the TMF. This is based on the work done for the NI procurement and has the same goal of providing stronger financial incentives for CSPs to improve their claims management performance.

icare’s analysis estimates that these changes will lead to savings because the new remuneration model will improve CSP performance, which will reduce overall scheme costs. However, the estimates presented in the TMF procurement strategy, which was presented to the icare Board for approval, do not have supporting analysis or completed modelling of costs. A key gap is the details used to estimate the actual costs for CSPs to deliver the services, which underpins the payment amounts under the revised remuneration framework. The strategy also does not include analysis of risks, such as impacts to return to work rates because of the transition to a new model. Without these details, icare cannot demonstrate that its planned approach is likely to deliver value for money.

Fees paid to CSPs for the TMF have increased significantly in recent years despite previous forecasts of reductions in fees paid and improvements in performance

icare’s payments to CSPs managing TMF claims has increased by around 30% in the last five years, rising from around $90 million in 2018–19 to around $125 million in 2022–23. This increase in payments to CSPs occurred during a period when return to work performance declined by two percentage points and the total payments for workers compensation claims increased by around 60%. The number of claims received also increased significantly in this time, as noted in Chapter 1.

Some of icare’s reform activities aim to improve return to work and financial sustainability

One of the stated goals of icare’s NI improvement program is ‘getting injured workers back to work sooner’ and the improvement program includes implementing a new claims management model for the NI (discussed in Chapter 2). Alongside this program, icare has made other changes that aim to improve the day-to-day claims management processes. In recent years icare has begun working to clarify roles and responsibilities for the claims management process. This has included consultation with CSPs and producing written documents that specify which issues should be handled by CSPs and which should be referred to icare.

icare has also developed a Professional Standards Framework that aims to provide a consistent set of standards that case managers are expected to adhere to. This framework sets out minimum standards and capability expected of CSP staff. It is a contractual requirement for NI providers to comply with the framework through its recruitment and training for staff. The framework is intended to also apply to the TMF but is not yet included in TMF provider contracts. Since 2021, icare has also provided training material to CSPs focussing on key aspects of claims management. Training covers topics that have previously been identified as areas of weakness, such as the calculation of weekly payments, initial contact, and injury management.

icare’s accountability for achieving scheme outcomes is not clear enough

While the practical changes discussed have the potential to help improve claims management performance, icare’s acceptance of overall accountability for scheme outcomes remains unclear. In 2021, icare considered several ‘business models’ that would guide its overall approach to reforming its workers compensation claims models. It decided to adopt what it described as a ‘platform’ model, which positioned icare as a facilitator and focused on self-direction and choice for employers and employees. Among the models that it chose not to adopt was a ‘scheme administrator’ model, which was characterised by transparency and clear accountability for performance.

This underlying approach can be seen in icare’s reforms to the claims management model for the NI. Some elements of the reforms target improvements in return to work outcomes, such as the introduction of performance-based payments to CSPs (discussed in Chapter 2). However, icare described the goal of the reforms as creating a competitive market of CSPs that would provide choice to employers, which indicates icare taking accountability for implementing system changes but not for the achievement of outcomes. icare’s plans for reforms to the TMF are similarly focused on icare’s accountability for providing support systems for workers compensation schemes, rather than accepting responsibility for ensuring the key outcomes are achieved.

The management of workers compensation schemes is a complex task. There are external factors outside icare’s control that influence the key performance measures of return to work and scheme financial viability. However, as the provider of workers compensation schemes, icare is primarily accountable for improving return to work rates for the NI and TMF and its strategies and activities should be focused accordingly. icare’s most recent corporate strategy documents described its current phase of its organisational strategy as ‘increase focus on those we serve’. This is a positive change from the previous year when the same phase was described as ‘simplify for improved outcomes’.

icare has committed significant resources to internal organisational improvement programs

icare has committed significant resources to an organisational improvement program in recent years. The program responds to the recommendations of previous external reviews (summarised in Chapter 1). These reviews made a combined total of 107 recommendations. Of these, 98 related to ‘enterprise improvement’, covering internal processes such as governance, procurement and risk management. The focus of the recommendations on internal processes reflects the terms of reference for these reviews. As a result, icare’s improvement program has a focus on internal organisational change, rather than a broader strategic assessment of the key challenges to the performance of workers compensation schemes, such as the rise in psychological injury claims.

The program has been overseen by an external advisor and quarterly reports have been published that outline progress, with the first report published in December 2021 and the most recent in August 2023. Accountability for implementing recommendations of external reviews is important. However, the strong focus on internal organisational projects has contributed to increases in icare’s operating expenses without fully addressing the strategic challenges to the key legislative objectives of workers compensation schemes – optimising return to work outcomes and ensuring financial sustainability.

icare’s employee and other operating expenses have increased significantly during a period when workers compensation scheme performance has not improved

According to its annual financial reports, icare’s total employee expenses have increased significantly in recent years. The total number of employees at icare increased from 1,431 in 2020–21 to 1,756 in 2022–23, an increase of 23%. icare’s budget for 2023–24 includes a further increase in staff numbers to 1,800.

There has been a corresponding increase in icare’s employee expenses, with staff costs increasing by 29%, from $214 million in 2020–21 to $276 million in 2022–23. icare did not take on any new functions during this period and the performance of the NI and TMF did not improve, as described in Chapter 1. Over the past three years icare has added the highest number of new employee positions in the ‘digital and transformation’ area. Additional staff positions have also been created in corporate areas including people and culture and risk and governance. Many of these positions relate to icare’s improvement program.

icare’s other operating expenses have also increased in recent years, rising from $699 million in 2020–21 to $814 million in 2022–23. The majority of icare’s other operating expenses are fees paid to CSPs. However, icare has also spent a significant amount on contractors, contingent workers, and consultants in recent years, despite also increasing its permanent staff numbers. Some of these contractor and consultant expenses related to icare’s improvement program discussed above. Over the last three years, icare spent an average of more than $100 million per year on hired labour, comprised of:

• $60 million per year on contractors
• $35 million per year on contingent workers
• $8 million per year on consultants.

icare completed a review of its corporate expenses in September 2023 and reported the results of this review to the icare Board. icare’s review stated that it had reduced its expenses by a total of $88 million from 2019–20 to 2021–22. This included a reported decrease of $40 million in spending on contractors and contingent workers, which is in contrast to its annual financial reporting data which shows an increase of $25 million during this period. icare’s expenses review used management reporting data which categorises expenses differently to the way expenses are categorised in annual financial statements. For example, a large proportion of expenditure on contractors and contingent workers was categorised as project expenditure in icare’s management reporting. While this may be appropriate for management reporting purposes, it resulted in icare reporting lower expenditure on contractors and contingent workers in its expenses review compared to its annual reporting.

The number of icare senior executives in the top pay band for the NSW public service increased from two in 2021–22 to eight in 2022–23. The average remuneration of icare’s senior executives in 2022–23 was $652,000. This is more than double the average remuneration for the two senior executives that were in the highest pay band at the former WorkCover Authority, icare’s predecessor agency, in its last year of operation in 2014–15. It is also approximately double the average remuneration for senior executives at icare’s equivalent entities in comparable jurisdictions. The average remuneration for the ten senior executives at WorkSafe Queensland in 2022–23 was $285,000 and the average remuneration for the 11 senior executives at WorkSafe Victoria was $276,000.

icare spent at least $470 million on projects that were intended to improve the operations of the workers compensation schemes between 2016–17 and 2019–20. This includes the implementation of a single provider claims management model and the introduction of a new IT platform but does not include the cost of contractors and consultants who worked on these projects. Previous external reviews of icare found that these projects did not achieve their objectives and contributed to a deterioration in performance against the key legislative objectives for workers compensation of return to work and financial sustainability. icare spent another $45 million on moving back to a multiple provider model for the NI from 2023.

icare’s reporting on the performance of workers compensation schemes has not provided a clear indication of performance in its core areas of responsibility

icare’s public reporting has not provided transparency in the key areas of return to work and financial sustainability of workers compensation schemes. Prior to 2019–20, icare did not report publicly on its return to work rate targets in the NI. icare did not report on a TMF return to work target until 2022–23. icare’s four most recent annual reports have included an ‘enterprise performance scorecard’. In 2021–22 this scorecard had 11 measures, with only four that related to insurance scheme performance (return to work rate in the NI, net results in NI, net results in TMF and investments). The scorecard had seven measures that related to icare’s internal processes in that year, such as staff engagement scores, risk management, and internal audit. In 2022–23, the scorecard included five measures that related to insurance scheme performance. However, the measure relating to return to work performance for the NI had changed from the previous years. As a part of its reforms to the NI, icare plans to publish more information about workers compensation scheme outcomes on its website. It commenced this reporting in December 2023.

The key document outlining icare’s strategic approach to managing its operations is the Statement of Business Intent (SBI). The measure icare has used for reporting on return to work targets for the NI in its SBI has changed in each of the last four years. Exhibit 13 shows icare’s internal reporting on NI return to work targets since 2020–21. The frequent changes to the way icare has reported on its key performance measures make it difficult to track its performance over time.

SIRA has recently updated its strategic framework to improve the effectiveness of its regulatory activities

One of SIRA's principal legislative objectives is to provide effective supervision of the workers compensation system. SIRA updated its strategic framework in 2021. The strategy outlines guiding considerations across four ‘pillars’ of SIRA’s regulatory work: scheme design, licensing, supervision, and enforcement.

SIRA has increased its focus on supporting improvements to return to work outcomes in recent years. It commissioned a research paper to inform SIRA's system-wide strategy to improve return to work rates. This paper provides a summary of the current evidence relating to factors most likely to support better return to work outcomes. This research has been used to inform SIRA's strategies and plans. For example:

• SIRA has a return to work action plan which outlines ten actions aimed at supporting improvements in return to work rates. Actions include reviewing insurers’ return to work practices in 2022, developing a return to work standard of practice, and targeting compliance work to employers identified as higher risk.
• SIRA advises it is currently developing a ‘Recover Through Work Strategy’ which expected to replace its action plan. The draft strategy covers research, promotion and education activities related to early intervention, psychological injuries, and additional data and insights relating to return to work.
• SIRA developed a mental health recovery and support action plan in 2021 based on research it had commissioned. 

SIRA has used regulatory instruments including written directions and letters of censure to icare when it has identified issues that require remediation, as noted in Chapter 2. SIRA’s ability to regulate the workers compensation scheme is limited by the fact that it cannot impose licence conditions on the NI or other entities, which limits its ability to escalate its regulatory responses if needed.

A previous review of the legislative arrangements for workers compensation recommended that SIRA should be given additional powers to ensure it can fully perform its regulatory functions for workers schemes. The review also found the roles and responsibilities between icare and SIRA were unclear in some areas. For example, workers compensation legislation allocates operational functions to SIRA which has created duplication and inefficiencies as noted in this chapter. The review recommended government consider amending legislation to state clearly the powers and functions of each entity. Both issues are yet to be addressed.

SIRA was mostly focussed on developing regulatory guidelines and frameworks in the years after it was established

SIRA was created in late 2015 and was tasked with regulating multiple insurance schemes and establishing operational frameworks to supervise each insurance scheme within its remit. In the initial years of SIRA’s establishment, SIRA developed guidelines and standards around the management of workers compensation. For example, SIRA’s first Standards of Practice was issued in 2018 and contained broad claims management principles to guide insurer conduct and support the achievement of scheme legislative objectives. SIRA also first published an Insurer Supervision Model in 2017 which outlined SIRA’s approach to monitoring and supervising the performance across workers compensation insurers. The model contained compliance and performance indicators to help SIRA identify and address risks in the areas of conduct, claims management and financial sustainability. SIRA advises this supervision model assisted it to identify a significant decline in the performance of the NI in 2018, which led SIRA to commission its first independent review of the NI in 2018–19.

SIRA has become more active in its regulation of the NI but only recently started actively supervising the TMF

SIRA increased its monitoring and supervision of the NI following the findings of the 2019 review, with SIRA commencing quarterly compliance and performance audit of claims management of the NI from July 2020. SIRA’s reviews of the NI had a strong focus on compliance with specific legislative requirements, in response to concerns about a lack of capability among claims managers at the time. Some of SIRA's more recent reviews of the NI have selected a strategic focus area, such as compliance with the ‘early intervention’ requirements of claims management. This theme was selected based on research evidence indicating that the management of a claim in the first four weeks has a significant impact on return to work outcomes. SIRA advises that future audits will use a risk-based approach and focus on areas in which low compliance has been identified and there is evidence that the compliance requirement is based on better outcomes, such as injury management planning.

SIRA has issued two penalty notices as a result of its increased oversight on the NI:

• The penalty notice issued on 6 September 2019 totalled $132,000. The penalties were imposed for icare’s failure in 24 instances to commence weekly workers compensation payments within seven days of initial notification of the injury to the insurer.
• The penalty notice issued on 22 January 2020 totalled $82,500. The penalties were issued for icare’s failure in ten instances to ensure employer’s premium rate does not increase by more than 30% from the previous policy year, as required in SIRA’s premium guidelines. icare’s failure to comply with the capping requirement led to impacted policy holders paying an additional premium totalling over $700,000.

SIRA began regularly reporting to government on NI financial sustainability in 2016–17, with its first report provided to government in August 2018. The 2016–17 report noted generally that a new claims model had been implemented from January 2018 which may impact claims experience and make future treatment and costs more complicated. However, the report did not provide further details of these risks, such as potential impacts on the key areas of return to work or related cost impacts due to the transition. SIRA’s annual reports from the years up to and including 2018–19 did not draw attention to any performance concerns for the NI or the TMF and did not provide detailed information on SIRA’s supervision activities for the schemes. The reports focused mostly on other areas of SIRA’s responsibility, particularly the implementation of reforms to the compulsory third party insurance scheme during 2017.

In January 2020, SIRA commenced investigations into the management of three Corrective Services NSW (CSNSW) claims in the TMF following reports it received around claims mismanagement. The report outlined several actions, including that SIRA undertake a broader review of the compliance and performance of the TMF and a larger audit of CSNSW workers compensation claims with a focus on psychological injuries. In August 2022, SIRA commenced a review of 100 CSNSW claims to assess the compliance of these claims against legislative and regulatory requirements. During the audit, SIRA advised these reviews led to SIRA developing the evidence base for undertaking its broader review of the TMF in 2023. The 2023 TMF review has a focus on managing psychological injury claims.

The audit did not see evidence of SIRA taking a strategic approach to the regulation of the TMF in earlier years despite the outcomes of SIRA’s initial CSNSW investigations, deteriorating return to work performance, increasing costs, and the emerging strategic risk of the rise in psychological injury claims. Given these issues, a more active regulatory presence from SIRA would have been justified.

Any decline in return to work rates, even if only temporary, can have a long-term impact on outcomes for affected workers and for scheme costs. For example, research indicates that injured workers who are not working for a longer period become progressively less likely to ever return to work and are more likely to develop a secondary psychological injury associated with their initial injury. As a result, the poor performance of workers compensation schemes in previous years is having an ongoing impact on scheme performance today.

SIRA began focussing on improving compliance of employers with workers compensation obligations from 2020, but did not have a strategy or active program prior to this

In 2020, SIRA created an Employer Supervision and Return to Work Directorate as part of a broader organisational restructure. The Directorate was created to strengthen the focus and regulatory approach for employers and support the development of an employer supervision strategy and framework. The strategy and framework for employers were finalised in 2022. These are consistent with its organisation-wide regulatory framework and outlines SIRA’s approach to planning and conducting regulatory activities in identified areas of highest risk.

In December 2021, SIRA also established an inspectorate to undertake employer education activities and conduct reviews of employer compliance with workers compensation obligations, in addition to those conducted by SafeWork NSW. Prior to this, SIRA did not have a dedicated employer supervision and compliance strategy or function, although it did provide educational resources for employers. It relied on SafeWork inspectors to conduct workplace inspections on its behalf, which were guided by SIRA’s modelling work.

SIRA has legislative powers to enter workplaces to gather evidence, conduct audits and reviews, and impose penalties for non-compliance. SIRA targets its employer inspections primarily through a predictive data analysis tool, with a smaller number of inspections in response to complaints or referrals. The predictive tool assesses new workers compensation claims made and identifies those that are at higher risk of a poor return to work outcome, based on factors including the type of claim and employer or industry.

SIRA has not allocated sufficient resources to investigate and prosecute fraud

SIRA has a legislative responsibility to assist in measures to deter and detect fraud within workers compensation schemes. In February 2023, SIRA engaged an internal review to assess its capability and structure in enforcement and prosecution in all schemes it oversees, including the Compulsory Third Party scheme and the Home Building Compensation Fund. The review found there was a backlog of high-risk fraud referrals. This could indicate that cases of fraud in the workers compensation system may have gone undetected or unaddressed in recent years. The review recommended SIRA expand its investigations team to reduce the backlog of matters and ensure all icare referrals are investigated.

During the audit, SIRA advised that while it has not fully responded to these recommendations yet, it has engaged additional resources for the employer investigations team and will consider additional resourcing in 2024–25. SIRA also advised it had taken other actions to reduce fraud risks, including initiating regular meetings with icare to discuss new fraud referrals and working with icare on a Memorandum of Understanding to strengthen fraud investigations and prosecutions. However, these actions are unlikely to address the issues relating to resourcing that were identified in the review.

Some of SIRA's research and pilot programs duplicate or overlap with those of icare

SIRA has a legislative function to 'to initiate and encourage research to identify efficient and effective strategies for the prevention and management of work injury and for the rehabilitation of injured workers'. In 2019, SIRA commissioned a review of its research strategy on workers compensation and other insurance schemes which it oversees. The review found, among other things, additional work was needed to coordinate SIRA's research program to avoid duplication. The review recommended SIRA improve collaboration with icare, SafeWork and other stakeholders and develop a model for knowledge translation to ensure evidence informs practice.

SIRA and icare's research and pilot programs still overlap in several areas, especially workplace mental health-related research. For example:

• icare has a ‘Front of Mind’ program that is focussed on developing and testing mental health platforms, like development of apps and education programs. SIRA has a 'Recovery Boost' program which provides grants to universities and private service providers to research and develop programs related to mental health.
• icare has also developed a 'Design for Care' program in partnership with Curtin University to research work design impacting mental health. Similarly, SIRA has funded various research projects on workplace mental health, including Monash University's work-connected interventions for psychological injuries, and Black Dog Institute's two-year research fellowship on recovery after psychological injury.
• icare has reported it would be developing a mental health strategy and action plan in 2022–23. SIRA has also developed action plans and strategies on mental health.

SIRA revised its research strategy in response to the review's findings and recommendations. SIRA's Research Strategy 2022–25 outlines its research objectives, actions, and measures of success. Actions include working with stakeholders to co-design research projects and working with stakeholders to prioritise research based on level of impact. Measures of success include creating opportunities for CSPs and other stakeholders to engage with SIRA's programs and increasing the number of research partnerships targeting personal injury evidence gaps.

NSW Treasury’s role in overseeing icare is not clearly defined, limiting its ability to support performance improvements in workers compensation

NSW Treasury does not have a legislated role in the management of workers compensation. icare is directly accountable to the icare Board and the icare Board is accountable to the responsible minister for icare achieving its statutory objectives. The TMF is funded by the NSW Government and has a direct impact on the NSW budget, so NSW Treasury has a role in advising the Treasurer on the performance and operations of the TMF. NSW Treasury also supports the minister responsible for icare, so has a role in advising the responsible minister in relation to icare's management of the NI. This includes reviewing and advising the minister on icare’s annual Statement of Business Intent, which icare must submit to the responsible minister and the Treasurer.

NSW Treasury has monitored icare’s financial and operational performance and has reported regularly on this to the responsible Minister and the Treasurer. However, NSW Treasury has not taken action to address issues that it is aware of. For example, when reviewing icare’s Statement of Business Intent (SBI) in 2022–23, NSW Treasury stated that it had concerns about the performance and financial sustainability of workers compensation schemes. Its response was to advise the responsible minister and the Treasurer to note its concern about these issues. In this review, NSW Treasury also advised that icare had not achieved its own forecasts from previous years for improvements to the financial position of the NI but did not propose any action in response to this. Similarly, NSW Treasury noted in another ministerial brief that icare made changes to its targets for return to work rates in 2020–21 that only required performance to be maintained or improve marginally. It expressed concern that this represented an acceptance of ongoing performance at lower than historical levels but did not propose any actions. NSW Treasury’s lack of specific responses to these issues reflects its limited powers to influence icare’s actions.

Recent changes to icare’s governing legislation allow the Treasurer or the Secretary of NSW Treasury to require icare to provide information relating to its activities. This may help NSW Treasury to be more active in its oversight of icare’s key decisions and activities. In November 2023, icare’s responsible minister announced that NSW Treasury will conduct a review of icare focusing on its operational costs.

This audit has identified several gaps in icare’s management of workers compensation schemes. For example, icare proceeded with changes to its claims management model for the NI that involve a multi-billion dollar procurement process without completing detailed options or benefit-cost analysis, as discussed in Chapter 2. icare has also focused significant resources and attention on internal corporate improvement activities that do not directly contribute to the achievement of the key legislative objectives of workers compensation schemes. Both of these issues have led to significant increases in icare’s costs without improved return to work outcomes in recent years. Stronger engagement from NSW Treasury with the icare Board could help improve icare's performance by providing advice and challenge in areas in which icare has consistently under-performed.

Appendix one – Responses from audited agencies

Appendix two – About the audit

Appendix three – Performance auditing

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Parliamentary reference - Report number #393 - released 2 April 2024

What this report is about

WestInvest is a $5 billion funding program announced in September 2021 to provide ‘local infrastructure to help communities hit hard by COVID-19’ in 15 local government areas (LGAs) selected by the government. It was divided into three parts: $3 billion for NSW government agency projects; $1.6 billion for competitive grants to councils and community groups; and $400 million for non-competitive grants to councils.

Following the change of government at the 2023 election, the program was renamed the Western Sydney Infrastructure Grants Program. Funding decisions made for the community and local government grants were retained, but multiple funding decisions for the NSW government projects were changed.

The audit objective was to assess the integrity of the design and implementation of the program and the award of program funding.

Findings

The design of the program lacked integrity because it was not informed by robust research or analysis to justify the commitment of public money to a program of this scale.

The then government did not have sufficient regard to the implications for the state's credit rating. A risk to the credit rating arose because the government may have been perceived to be using proceeds from major asset sales to fund new expenditure, rather than pay down its debt.

Decisions about program design were made by the then Treasurer's office without consultation with affected communities. The rationale for these decisions was not documented or made public.

For the NSW government projects, funding allocations did not follow advice from departments. Many funded projects did not meet the objectives of the program.

The two other rounds of the program were administered effectively, except for some gaps in documentation and quality assurance. The program guidelines did not require an equitable or needs-based distribution of funding across LGAs and there was a significant imbalance in funding between the 15 LGAs.

Recommendations

Our recommendations for the administration of future funding programs included:

• considering whether competitive grants are the best way to achieve the program's purpose
• completing program design and guidelines before announcements
• ensuring adequate quality assurance.

We also recommended that when providing advice for submissions by Ministers to Cabinet, agencies should ensure that departmental advice is clearly identified and is distinct from other advice or political considerations. 

WestInvest is a $5 billion funding program that was announced in September 2021. The program was established with the stated aim of building ‘new and improved facilities and local infrastructure to help communities hit hard by COVID-19’.

WestInvest was divided into three funding streams:

• $3 billion NSW government projects round open to NSW government agencies
• $1.6 billion community projects competitive round administered as a competitive grant program that was open to local councils, non-government organisations, Local Aboriginal Land Councils, and educational institutions in the 15 eligible LGAs
• $400 million local government projects round administered as a non-competitive grant round only open to the 15 eligible councils, with each council receiving a pre-determined share of the $400 million.

The WestInvest program was administered by NSW Treasury and the Premier's Department (previously the Department of Premier and Cabinet). Decisions about funding allocations were made by the former Treasurer in his role as the statutory decision-maker and announced by the former government in the lead up to the March 2023 NSW State election, but no funding was paid prior to the election.

Following the change of government, the funding decisions for the community projects competitive round and local government projects round were confirmed and negotiation of funding deeds commenced. The current government reviewed the decisions for the NSW government projects round and made changes to multiple decisions as part of the 2023–24 NSW Budget process. The current government has also changed the name of the program to the Western Sydney Infrastructure Grants Program.

The objective of the audit was to assess the integrity of the design and administration of the WestInvest program. This included assessing the processes used in the design and implementation of the program and award of funding.

The audit did not re-assess the merits of individual projects that were submitted for funding consideration and did not examine the implementation of projects that were allocated funding.

Decisions about the objectives and focus areas for the program were made without advice or analysis from the agencies that administered the program

The WestInvest program involved the commitment of $5 billion as a stimulus measure linked to economic recovery from the COVID-19 pandemic. However, there was no business case or other economic analysis conducted to support consideration of the potential benefits and costs of the program. Media releases and the public guidelines for WestInvest stated that western Sydney was affected by the COVID-19 pandemic more severely than other parts of Sydney and regional NSW. These assertions were not supported by evidence or analysis.

Evidence from NSW Treasury provided for this audit indicates that it was asked to prepare the initial proposal for the WestInvest program within a very short timeframe. This limited its ability to conduct research, analysis and consultation that could have informed the development of the program. This is particularly important for the integrity of decisions involving large-scale spending. Staff from NSW Treasury and the Premier's Department advised the audit team that the areas of focus for WestInvest were decided by Ministers and their staff without advice from the audited agencies. There is no documented analysis justifying the decision to focus the program on community infrastructure, or the six ‘areas of focus’ that were selected. The Premier's Department commissioned research from Western Sydney University after the areas of focus for the program had been decided. This did not inform decisions about the program focus but aimed to provide baseline information about community infrastructure in the 15 eligible LGAs which could be used in program evaluation.

The rationale for making 15 LGAs eligible for the program was not clear

It is not clear how the government decided which LGAs would be eligible for WestInvest funding. Public communication about the program referred to the western Sydney region and commented on areas that had been ‘hit hard’ by the COVID-19 pandemic. The specific factors that were used to decide which LGAs were eligible were not explained publicly or documented.

In the 2019–20 NSW Budget papers, "western Sydney" was defined as 12 LGAs. All of these were included as eligible for the WestInvest program. The additional three LGAs that were made eligible for the WestInvest program (Burwood, Canterbury-Bankstown, and Strathfield) were not within the NSW Budget papers definition but were designated "areas of concern" during the COVID-19 pandemic, which meant they were subject to more restrictions than other LGAs at certain points.

Georges River and Bayside LGAs both made public statements that drew attention to the fact that they were not made eligible for the WestInvest program despite being designated areas of concern. Several of the 15 LGAs that were made eligible for WestInvest had not been designated areas of concern during the pandemic, including Penrith, The Hills, and Blue Mountains. 

There was no consultation with eligible councils or other key stakeholders before the program design was decide

The program design had not been subject to consultation with councils or other relevant organisations in western Sydney. This meant that the views of eligible councils and community organisations on strategic priorities in their respective communities were not considered before decisions on program design were made.

Staff from some councils interviewed by the audit team indicated that while funding for community infrastructure is welcome, some councils had other priority areas for infrastructure development that were at least as high as new community infrastructure. As independent entities, each council has its own strategic planning processes to identify and plan for infrastructure projects and other areas of need. These were not considered in the design of the WestInvest program.

Staff at several councils we spoke to highlighted delivery risks to the projects for which they had been allocated funding. These included:

• the short timetable set by the then government (considering the amount of funding available and the requirements for applications) meant that full project development and assurance processes were not completed for most applications when they were submitted
• difficulty complying with the government’s administrative and assurance requirements for funding recipients, such as detailed planning and reporting.

When early planning for WestInvest was being done, both NSW Treasury and the Premier's Department identified the risk that applicants may not be able to deliver funded projects on time or within budget. The absence of consultation, research and analysis before the program design was finalised meant that these factors were not considered before the government had committed to the program. We did not see evidence that the then government had considered the cumulative impact of an additional $5 billion in infrastructure projects on the costs of materials and skilled labour concentrated in the eligible LGAs.

The Premier's Department conducted an online survey (WestInvest 'Have Your Say'), between 23 February 2022 and 31 March 2022. This was open to the public and asked questions about which of the six ‘areas of focus’ were most important to them and what type of community infrastructure projects they would like to see. This found higher levels of community support for two of the six areas (community infrastructure and green and open space).

On 18 April 2022, the Premier's Department released a summary report on the findings of the WestInvest ‘Have Your Say’ Survey. The Premier's Department noted that the survey was for consultation purposes only and did not form part of the application process for the WestInvest program. The Premier's Department stated in its summary report that the survey results 'will feed into the assessment process across the WestInvest Program'.

However, the Premier's Department staff interviewed by the audit team told us that the survey results did not play any formal role in the assessment process or funding recommendations for projects. The survey did not provide data that could be used to inform assessment decisions because:

• responses could be submitted by any member of the public who accessed the survey, not just those living in the LGAs that were eligible for the program, so the data could not be taken as representative of the views of the residents of eligible LGAs
• many survey responses were ruled ineligible as they were deemed to be associated with a community campaign that related to projects outside the focus areas of WestInvest.

The government did not have sufficient regard to risks to the State's credit rating when establishing the WestInvest program

The NSW Government has a policy of maintaining a AAA credit rating for the State of New South Wales. This is codified in the Fiscal Responsibility Act 2012. The NSW Government did not have sufficient regard to the implications and risks of committing $5 billion of funding to the WestInvest program to its credit rating. A risk to the State's credit rating arose because the government may have been perceived to be using proceeds from major asset sales to fund new expenditure, rather than paying down State debt.

The $3 billion NSW government projects round was open to NSW government agencies and administration of the round was led by NSW Treasury. Funding allocated through this round was not subject to the NSW Grants Administration Guide. This is because the funding was awarded to NSW government agencies rather than organisations external to government, so it did not meet the definition of a grant program. Projects were submitted by NSW government agencies to NSW Treasury and were assessed against program criteria by staff from NSW Treasury and the Premier's Department. Each project received a score and advice on whether it was suitable for funding or not. The WestInvest steering committee considered these and provided advice to the then Treasurer.

NSW Treasury prepared guidelines for the $3 billion NSW government projects round, but these were not approved by the then Treasurer until after the program assessment had commenced

NSW Treasury prepared guidelines for the NSW government projects round in September 2021. These were submitted to the then Treasurer for approval in December 2021 but were not approved. This meant that the process for assessing applications for NSW government projects was not agreed between government agencies and the then Treasurer, who was the statutory decision-maker of the allocations of funding. NSW Treasury subsequently prepared an assessment plan based on the unapproved guidelines, which set out more details about the process to be used for assessing applications for the NSW government projects round. The program guidelines were not published, which meant there was no public information about the process for assessing the largest component of the WestInvest program.

In May 2022, the then Treasurer’s Office requested that NSW Treasury make changes to the unapproved guidelines so that projects that delivered 'business as usual' state government infrastructure such as schools, roads, and health infrastructure were no longer considered ineligible for the program. These revised guidelines were approved in June 2022, but were not published. The changes were not consistent with the initial purpose of the WestInvest program which was to fund ‘transformational’ community infrastructure.

The funding advice from the WestInvest steering committee was not followed by the then Treasurer and the justifications for the funding allocation decisions were not documented

One-third of the projects that were allocated funding (9 out of 27) had been assessed by the WestInvest steering committee as having low or moderate merit. These projects were allocated combined funding of $1.1 billion. Reasons that the steering committee gave for assessing these projects as not suitable for funding through the WestInvest program included the absence of completed business cases, incomplete project development, and poor alignment to the objectives and criteria for the WestInvest program as outlined in the original program guidelines.

Staff from NSW Treasury and the Premier's Department put considerable resources into preparing guidelines and assessing and providing advice on the merits and eligibility of applications against these guidelines, but in most cases the advice was not followed by the then Treasurer. There was no documentation of reasons for the departures from steering committee advice. The NSW government projects round was not subject to the NSW Grants Administration Guide, so the requirement under those guidelines for documenting reasons for departures from advice on funding decisions did not apply. However, when the WestInvest program was established, it was noted that any departures from the funding advice from the steering committee would be documented by the then Treasurer. This applied to the entire WestInvest program. None of the projects that were allocated funding through the NSW government projects round were actually given funding, as only allocations of funding were approved by the then Treasurer.

Most of the funding was allocated to projects that did not align with the purpose of WestInvest or meet the assurance requirements of the program

Of the 27 projects that were allocated funding (Exhibit 3), 12 were from the Department of Education and seven from Transport for NSW. This resulted in over $2 billion, or 69% of the funding available through the NSW government projects round, being allocated to state school and road projects. Most of these projects were not aligned with any of the six focus areas of the WestInvest program. In addition, these projects were examples of ‘business as usual’ activities of NSW government agencies that did not clearly align with the initial purpose of the program to deliver transformational community infrastructure that would improve liveability in the 15 eligible LGAs.

Source: NSW Treasury documents.

Conditions were attached to the approval of funding allocations for 21 of the 27 projects. Most of these conditions related to the completion of a business case and other project assurance requirements, which were required under the program guidelines.

Projects approved through the WestInvest program were to receive funding from the Community Services and Facilities Fund (CSFF), which is a legislative fund created under the NSW Generations Funds Act 2018 (the Act). The Act states that the purpose of the CSFF is to provide funding for ‘cost-effective facilities and services’ (s.12(1)). The absence of business cases and other assurance requirements from most of the projects approved created the risk of legislative non-compliance, as many of the projects that had been allocated funding could not clearly demonstrate that they would be cost-effective.

NSW Treasury and the Premier's Department’s assessment of the first group of projects submitted for the NSW government projects round indicated that agencies applying for funding did not understand the purpose or requirements of the program. NSW Treasury and the Premier's Department received 153 applications after the first call for proposals. Most did not align with the stated purpose of WestInvest or meet the assurance requirements that had been set for the program. For example:

• 90 project proposals (59% of those submitted) were assessed as ineligible. Thirty-five of the 90 did not include any infrastructure, which was the main purpose of the WestInvest program. The other 55 proposed infrastructure projects were not consistent with any of six areas of focus for the program.
• 118 proposals (77% of proposals submitted) did not have a business case, which was a requirement of the WestInvest program guidelines.

As the first request for project proposals did not generate enough suitable applications, the then Treasurer made a second request to NSW government agencies in August 2022 seeking additional project proposals. This occurred after the guidelines for the NSW government projects round had been broadened to allow more projects to be considered for funding (discussed above).

Multiple state school projects were allocated funding after being assessed by the WestInvest steering committee as ineligible or unsuitable for funding

The Westmead Education Campus project, valued at $308 million, was rated as ineligible by NSW Treasury and the Premier's Department because it did not address any of the six specified focus areas for the WestInvest program. This meant it did not go through a full assessment against the program criteria and was not submitted to the then Treasurer for funding consideration.

The project was later re-submitted and the then Treasurer subsequently approved it for funding allocation. This occurred after the guidelines for the NSW government projects round had been broadened (discussed above). NSW Treasury's advice on this submission noted that the project had not been fully developed, with key decisions about the delivery model not made, and it did not have a final business case.

The Box Hill (Terry Road) new school project, valued at $112 million was rated as ‘moderate – not suitable for funding consideration at this time’ by the WestInvest steering committee. It was subsequently approved for funding by the then Treasurer.

Nine school upgrade projects with a total value of $478 million were allocated funding by the then Treasurer. Each of these had been assessed as ineligible by NSW Treasury and the Premier's Department against the original program guidelines because they did not meet any of the WestInvest focus areas and were not considered 'transformational'. There were a further 14 similar proposals for school upgrades that were also assessed as ineligible but were not allocated funding.

Funding allocations from the WestInvest program were changed after the 2023 NSW State election

Following the change of government at the 2023 NSW state election, most of the funding decisions announced by the former government were changed. The new government had announced during the election campaign that, if elected, it would redirect some WestInvest funding 'to rebuild Western Sydney schools and Western Sydney hospitals'. Eleven of the 27 projects that had been announced by the former government were not funded by the new government. The combined value of these projects was at around $1.5 billion (Exhibit 4). The seven roads projects that had been allocated funding through WestInvest, valued at $1 billion, were also removed from the WestInvest funding allocation but these still received funding from a different source.

Source: NSW Treasury documents.

The funding was reallocated to 17 projects that the new government had announced as election commitments during the 2023 State election campaign. This comprised ten school infrastructure projects, five health infrastructure projects, and two transport infrastructure projects. All of these projects had a cost of more than $10 million each, which means they are subject to NSW Government business case and gateway assurance requirements. Business cases had been completed for the two transport projects. The other 15 projects did not have business cases.

Source: NSW Treasury documents.

After these changes, the $3 billion NSW government projects round funding distribution was:

• Nine school upgrades, valued at $478 million, that had been allocated funding by the former government (see Exhibit 3).
• 17 new projects, with a total value of around $2.3 billion, that had been announced as election commitments by the new government (Exhibit 5). All of these are state school, health, or transport infrastructure.
• Three projects that covered administrative costs associated with the WestInvest program, with a total value of around $230 million (not previously announced).

The $1.6 billion community project grants - competitive round was open to local councils, NGOs, Local Aboriginal Land Councils, and educational institutions, across 15 eligible LGAs in western Sydney. Exhibit 6 shows a timeline of key dates for the community project grants - competitive round.

The $400 million local government projects round was administered as a non-competitive grant round that was only open to the 15 eligible councils. Each council was allocated a portion of the $400 million funding via a formula that provided a base allocation and an additional amount based on the population of each LGA. Each council received between $21 million and $35 million.

Applications for funding were submitted to the Premier's Department for assessment. Proposed projects were required to be eligible for the program and be rated as having merit against the published program criteria, which were the same as those for the competitive round. Exhibit 12 shows a timeline of key dates for the Local government projects competitive round.

Appendix one – Responses from audited agencies

Appendix two – About the audit

Appendix three – Performance auditing

© 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 #391 - released 28 February 2024.

What this report is about

Results of the audit of the Consolidated State Financial Statements of the New South Wales General Government Sector (GGS) and Total State Sector (TSS) for the year ended 30 June 2023.

Findings

The audit opinion on the 2022–23 Consolidated State Financial Statements was qualified in relation to two issues and included an emphasis of matter.

The first qualification matter is a continuation of the prior year limitation of scope on the audit relating to the Catholic Metropolitan Cemeteries Trust (CMCT), a controlled state entity, who continued to deny access to its management, books and records for the purposes of a financial audit. As a result, the Audit Office was unable to obtain sufficient appropriate audit evidence to support the assets, liabilities, income and expenses relating to CMCT recorded in the TSS and the equity investment recognised in the GGS relating to the net assets of CMCT.

The second qualification matter relates to the limitations on the accuracy and reliability of financial information relating to Statutory Land Managers (SLMs) and Common Trust entities (CTs) controlled by the State and were either exempted from requirements to prepare financial reports, or who were required to submit financial reports and have not done so. The Audit Office was unable to obtain sufficient appropriate audit evidence to determine the impact on the value of non-land assets and liabilities, income and expenses that should be recognised in the 2022–23 Consolidated State Financial Statements and which have not been recorded in the Consolidated State Financial Statements.

The independent audit opinion also includes an emphasis of matter drawing attention to key decisions made by the NSW Government regarding the future of the Transport Asset Holding Entity of New South Wales (TAHE).

Recommendations

The report includes recommendations for NSW Treasury to address several high-risk findings, including:

• ensuring accurate and reliable financial information is available to recognise the non-land balances of SLMs and CTs
• ensuring the CMCT, SLMs and CTs meet their statutory reporting obligations
• conducting a broader review of the financial reporting exemption framework
• continued monitoring of TAHE's control over its assets
• providing timely guidance to the sector relating to legislative or policy changes that impact financial reporting
• developing an accounting policy for the reimbursement of unsuccessful tender bid cost contributions.

Pursuant to section 52A of the Government Sector Audit Act 1983, I am pleased to present my Report on State Finances, for the year ended 30 June 2023. 

The report highlights the maturity of financial reporting across the sector, with most New South Wales (NSW) government agencies that consolidate into the whole-of-government accounts having unqualified audit reports.  

This report also highlights important areas for improvement. Improving the timely completion of the NSW Government's consolidated financial statements, and resolving matters on the quality of the Total State Sector Accounts that have resulted in modifications to the independent audit opinion, should be a key focus.  

Colleagues in NSW Treasury and key agencies, along with staff of the Audit Office, have worked extremely hard and collaboratively throughout the year to resolve significant accounting and audit matters, and address recommendations from past audits. I thank them for their diligence and commitment to ensuring the quality and timeliness of financial management and reporting in the NSW public sector.  

This level of professionalism needs to be sustained in view of the significant challenges that lie ahead, including embedding sustainability reporting and the disclosure of climate-related financial information. The State and the Audit Office are well placed to meet these challenges.  

As this is the last report I will present on State Finances during my term as Auditor-General, I would like to conclude by saying what an honour it has been to serve the Parliament of NSW in such an important role. A commitment to independent assurance and transparent reporting on the activities of government have been a hallmark of NSW for two centuries. We should all take pride in and protect this commitment to good government.

Margaret Crawford PSM 

Auditor-General for New South Wales

The Independent Auditor's report was qualified 

The audit opinion on the Consolidated State Financial Statements of the New South Wales General Government Sector (GGS) and Total State Sector (TSS) for the year ended 30 June 2023 was qualified in relation to two issues and included an emphasis of matter. These matters are detailed below. 

From here on, the Consolidated State Financial Statements are referred to as the Total State Sector Accounts (TSSA), in line with NSW Treasury's naming convention. 

The audit opinion continued to be qualified due to a limitation on the scope of the audit relating to the Catholic Metropolitan Cemeteries Trust 

The first qualification matter is a continuation of the prior year limitation of scope relating to the Catholic Metropolitan Cemeteries Trust (CMCT), who continued to deny access to its management, books and records for the purposes of a financial audit. 

NSW Treasury's position remains that CMCT is a controlled entity of the State for financial reporting purposes. This means CMCT is a GSF agency and is obliged under Section 7.6 of the Government Sector Finance Act 2018 (GSF Act) to prepare financial statements and give them to the Auditor-General for audit. 

To date, CMCT has not met its statutory obligations under the GSF Act. CMCT has not submitted its financial statements to the Auditor-General for audit despite repeated requests and has not provided access to its books and records for the purposes of a financial audit. As a controlled entity, NSW Treasury is required by Australian Accounting Standards to consolidate the CMCT into the TSSA. 

Consequently, the Audit Office was unable to obtain sufficient appropriate audit evidence on the carrying amount of assets and liabilities recognised in the TSS as at 30 June 2023 and of the amount of income and expenses for the year then ended. The value of the net assets of CMCT consolidated into the TSS is $321 million, and the total comprehensive income of CMCT consolidated into the TSS for the year is $25.8 million. The GGS financial statements for the year ended 30 June 2023 also recognised an equity investment in the net assets of CMCT ($321 million). 

This limitation of scope resulted in a qualified audit opinion being issued on the TSS and the GGS. 

Section 3 of this report titled 'Limitation of scope relating to CMCT' discusses this matter in further detail. 

The audit opinion was qualified due to a limitation on the scope of the audit relating to the non-land assets, liabilities, income and expenses of controlled entities that manage crown land and associated assets and for which reliable financial information is not available 

There are 579 Category 2 Statutory Land Managers and 119 Commons Trust entities controlled by the State. 

A category 2 Statutory Land Manager (SLM) is a type of Crown Land Manager that is controlled by the State. It excludes other Crown Land Managers such as councils, metro cemeteries and Crown Holiday Parks land managers. Commons Trusts (CT) are responsible for the care, control and management of commons for which the trust is established. A common is a parcel of land that has been set aside by the Governor or the Minister for specific use in a certain locality, such as grazing, camping or bushwalking.

NSW Treasury has determined that SLMs and CTs are controlled entities of the State. Consequently these should be recognised in the TSSA as required by Australian Accounting Standards. However, the non-land assets, liabilities, income and expenses of SLMs and CTs have not been recognised in the TSSA. 

Most of these entities have not prepared financial statements, upon which to consolidate the non-land assets, liabilities, income and expenses of SLMs and CTs into the TSSA. This is because they have either not complied with their financial reporting obligations under section 7.6 of the GSF Act, or they were not required to prepare financial statements as they met the prescribed reporting exemption criteria set out in the Government Sector Finance Regulation 2018. 

In 2022–23 NSW Treasury reviewed available financial information to estimate the aggregate value of non-land assets, liabilities, income and expenses relating to SLMs and CTs that were not recognised in the TSSA. 

NSW Treasury estimates the aggregate value of non-land assets not recognised in the TSSA to be in the range of $351.6 million to $382.4 million. However, there are significant limitations on the accuracy and reliability of financial information that support these estimates. Only 12 entities were supported by what NSW Treasury defined as ‘highly reliable financial data’. Two hundred and eighty-four entities provided self-reported information and 288 entities had not submitted any financial data. The balances of the remaining entities were supported by what NSW Treasury defined as ‘somewhat reliable financial data’. This included ‘lower-quality’ financial statements and assessments of asset values performed by the former Department of Planning and Environment (DPE). 

Because of the limitations on the accuracy and reliability of financial information relating to SLMs and CTs, the Audit Office was unable to obtain sufficient appropriate audit evidence to determine the impact on the value of non-land assets and liabilities that should be recognised in the TSSA as at 30 June 2023 and of the amount of income and expenses that should be recognised in the TSSA for the year then ended. 

Accordingly, this limitation of scope resulted in a qualified audit opinion being issued on the TSSA. 

Section 4 of this report titled 'Limitation of scope relating to Category 2 Statutory Land Managers and Commons Trusts' discusses this matter in further detail. 

The audit opinion included an emphasis of matter drawing attention to key decisions regarding the future of the Transport Asset Holding Entity of New South Wales (TAHE) 

The Independent Auditor’s Report also includes an emphasis of matter, drawing attention to key decisions made by the government in August 2023 regarding the future of TAHE. 

The decisions are likely to have a significant impact on TAHE's financial position and future operating model, including converting TAHE from a for-profit State Owned Corporation (SOC) to a non-commercial Public Non-Financial Corporation (PNFC). 

These decisions may impact the future commercial agreements with the public rail operators and the future valuation of TAHE’s assets that are consolidated in the TSS. The decisions also mean that cash contributions made to TAHE are treated as grant expenses, rather than equity investments, the audit matter that has previously been reported. 

Section 5 of this report titled 'Investment in TAHE' discusses this matter in further detail. 

Other significant matters relating to the TSSA audit are covered in Section 6 titled 'Key audit findings'.

The number of identified errors increased in 2022–23 

In 2022–23, agency financial statements presented for audit contained 29 errors, where each error exceeded $20 million (20 errors in 2021–22). The total value of these errors was $2.5 billion, an increase from the previous year ($973 million in 2021–22). 

The following graph shows the number of reported errors (both corrected and uncorrected), exceeding $20 million over the past five years in agencies’ financial statements presented for audit. 

Most errors related to: 

• the incorrect application of Australian Accounting Standards and NSW Treasury policies 
• issues with the data, judgements and assumptions used when valuing non-current physical assets and liabilities 
• non-recognition of provisions related to the enhanced paid parental leave scheme that became effective 1 October 2022.

CMCT continues to deny the NSW Government and the Auditor-General access to its management, books and records 

NSW Treasury has reconfirmed the CMCT is a controlled entity of the State. The Audit Office accepts the position of NSW Treasury. 

The reaffirmation of this position means CMCT is a GSF agency under the provisions of the GSF Act. Section 7.6 of the GSF Act places an obligation on CMCT to prepare financial statements and give them to the Auditor-General. Further, section 34 of the Government Sector Audit Act 1983 (the GSA Act) requires the Auditor-General to furnish an audit report on these financial statements. 

The Audit Office recommended in the ‘State Finances 2022’ report that NSW Treasury and DPE should ensure CMCT meets its statutory reporting obligations. CMCT continues to contest NSW Treasury’s determination and asserts they are not a controlled entity of the NSW Government. 

To date, CMCT has not met its statutory obligations to prepare financial statements under the GSF Act and provide them to the Auditor-General for audit. CMCT has not submitted their financial statements to the Auditor-General for audit despite repeated requests and has not provided access to its books and records for the purposes of a financial audit. There continued to be correspondence between the Audit Office of NSW, CMCT, NSW Treasury and DPE in 2022–23 regarding this matter.

Category 2 Statutory Land Managers and Commons Trusts should be consolidated in the TSSA 

A category 2 Statutory Land Manager (SLM) is a type of Crown Land Manager that is controlled by the State. It excludes other Crown Land Managers such as councils, metro cemeteries and Crown Holiday Parks land managers. SLMs are persons or entities appointed by the Minister to be responsible for the care, control and management of Crown reserves on behalf of the people of New South Wales. 

Commons Trusts (CTs) are responsible for the care, control and management of commons for which the trust is established. A common is a parcel of land that has been set aside by the Governor or the Minister for specific use in a certain locality, such as grazing, camping or bushwalking. CTs are considered to be controlled entities of the Minister who administers the Commons Management Act 1989. CTs are not SLMs. 

Category 2 SLMs and CTs are controlled entities of the State and should be consolidated in the Total State Sector Accounts as required by Australian Accounting Standards. 

Most of these entities have not prepared audited financial statements, upon which to consolidate the non-land assets, liabilities, income and expenses of SLMs and CTs into the Total State Sector Accounts. This is because they have either not complied with their financial reporting obligations under section 7.6 of the GSF Act or they were not required to prepare audited financial statements as they met the prescribed reporting exemption criteria set out in the Government Sector Finance Regulation 2018. Further information on this compliance matter is included in Section 6 of this report titled 'Key audit findings'. 

Insufficient financial information is available to estimate the value of non-land assets, liabilities, revenues and expenses of SLMs and CTs that should be consolidated in the TSSA 

In 2022–23, NSW Treasury reviewed the available financial information to estimate the aggregate value of assets, liabilities, income, and expenses relating to SLMs and CTs that should be consolidated in the TSSA. 

Land managed by the SLMs and CTs is valued each year by the former Department of Planning and Environment (DPE) and included in the TSSA in aggregate ($466 million, 2021–22: $318 million). However, there were significant issues with the accuracy and reliability of financial information to support non-land assets, liabilities, income and expenses of SLMs and CTs. 

NSW Treasury considered the financial statements of 30 of the largest SLMs and CTs, self-reported financial information for around 400 SLMs and CTs, asset valuations, aerial photography, review of business operations, risks, legal claims, insurance arrangements and limitations imposed due to the scale and bespoke nature of the operations. DPE facilitated further engagement with SLMs and CTs to identify additional information.

NSW Treasury estimates the aggregate value of non-land assets not recognised in the TSSA to be in the range of $351.6 million to $382.4 million. However, there are significant limitations on the accuracy and reliability of financial information that support these estimates. Only 12 entities were supported by what NSW Treasury defined as ‘highly reliable financial data’. Two hundred and eighty-four entities provided self-reported information and 288 entities had not submitted any financial data. The balances of the remaining entities were supported by what NSW Treasury defined as ‘somewhat reliable financial data’. This included ‘lower-quality’ financial statements and assessments of asset values performed by DPE. 

Although the review provided some information about the SLMs and CTs, NSW Treasury concluded that there were significant limitations in the financial information available from the SLMs and CTs, and limited information to support compliance with accounting policies and relevant Treasurer’s directions. 

The TSSA audit opinion was qualified in relation to SLMs and CTs 

The opinion in the TSSA’s audit report was qualified due to the limitations on the accuracy and reliability of financial information relating to SLMs and CTs. This is a new audit qualification for 2022–23. 

This limitation was appropriately disclosed in Note 1 'Statement of Significant Accounting Policies' of the TSSA. The Statement of Compliance signed by the Secretary of NSW Treasury and the Treasurer on 18 January 2024 was also updated to acknowledge the disclosure in Note 1 regarding SLMs and CTs.

In September 2023, the NSW Government announced its intention to convert TAHE into a non-commercial PNFC. 

TAHE’s new operating model is expected to be implemented in three phases: 

• Phase 1: the government expects to transition TAHE to not-for-profit status by taking administrative actions under the State Owned Corporations Act 1989. 
• Phase 2: the government expects to introduce an initial wave of legislative changes to allow for the introduction of the new operating model. 
• Phase 3: the government expects to introduce further legislative changes to remove TAHE’s status as a SOC. The corporation is expected to be renamed. 

Cash contributions from NSW Treasury to TAHE in 2022–23 have been expensed and are no longer treated as equity contributions 

In prior years the cash transfers from NSW Treasury (an entity in the GGS) to TAHE, an entity controlled by the State that is classified in the PNFC sector, were treated as equity contributions. 

The equity contributions were recognised on the basis there was a reasonable expectation to earn a sufficient rate of return of 2.5% (including recovering any holding losses) on the investment in TAHE. The exception to this treatment is if there is no reasonable expectation of a sufficient rate of return on the contribution, in which case, the transfer should be recorded as a capital transfer expense. Returns include dividends, income tax equivalents and holding gains or losses. 

The accounting treatment of the cash contributions to TAHE has been an area of significant audit focus in previous years, and significant audit findings reported to Parliament. The significant uncertainty relating to the assumptions and estimates used to forecast a 2.5% return on GGS investments into TAHE, that supported the recognition of an equity contribution in the prior year, was reported as an emphasis of matter in the 2021–22 TSSA audit report. 

In 2022–23 the government changed the intent and expectations in relation to the future operating model of TAHE. This change in direction meant the government will no longer account for cash contributions to TAHE as equity, but rather will treat such contributions as an expense. This is because the government is no longer demonstrating that there is a reasonable expectation of a sufficient rate of return on the contributions made by the GGS to TAHE. 

As a result, from 1 July 2022, the capital funding of $1.6 billion provided to TAHE in 2022–23 has been recorded as a capital transfer expense in the GGS Statement of Comprehensive Income. 

The emphasis of matter included in last year’s TSSA audit report relating to the significant uncertainty relating to the assumptions and estimates used to forecast returns on GGS investments into TAHE is no longer relevant this year. However, the Audit Office have included a new emphasis of matter in the 2022–23 TSSA audit report, drawing attention to the key decisions made by the government in August 2023 regarding the future of TAHE. 

'Emphasis of matter' paragraphs are included in an agency's Independent Auditor's Report for matters that have been presented or disclosed by the agency in its certified financial statements. Whilst they do not constitute an audit qualification, they do highlight matters that are, in our judgment, relevant to the users' understanding of the financial statements. 

Further information on last year's audit of the government's investment in TAHE can be found in our ‘State Finances 2022’ report.

Valuation of TAHE assets in TAHE's accounts

At 30 June 2023, TAHE reported $16.5 billion in property, plant and equipment and related intangibles within the cash generating units (CGUs) – a $2.8 billion or 15% decrease from the same time last year (2021–22: $19.3 billion). The fair value of these assets at balance date is determined using the income approach – appropriate for TAHE given its current for-profit status. Such an approach is reliant on, and is sensitive to TAHE’s judgements, estimates and assumptions. 

The reduction in the carrying value of reported assets was largely driven by the uncertainty of TAHE's future operating model under the new government, which increased the risk and discount rates applied to the valuation model. 

Given the uncertainty over the future of TAHE, NSW Treasury and TAHE will need to assess whether the income approach remains an appropriate basis of valuation going forward. 

Control of TAHE assets 

TAHE's position on control of assets for the current year was accepted 

TAHE assessed that it maintains control of its assets as it has exercised authority and power over its assets during the year, as well as continuing to operate as an independent SOC. 

Consistent with the prior year, the audit did not find evidence that the assets held by TAHE are not controlled by TAHE. However, given the constraints that can be imposed through the operating licence, there is a risk that limitations could be placed on the operations or functions of TAHE. Future limitations to the degree of control TAHE, and its board, can exercise over it functions may impact the degree of control TAHE has over its assets going forward. The current operating licence issued by the Minister for Transport expires on 30 June 2024. 

Furthermore, the government’s decision to change the operating model for TAHE in future years could impact the control TAHE has over its assets. The control of these assets by TAHE will be a continued area of audit focus.

Performance audit on the design and implementation of TAHE 

In January 2023, the Auditor-General tabled a performance audit on the 'Design and implementation of the Transport Asset Holding Entity', which assessed the effectiveness of NSW government agencies' design and implementation of TAHE. The audit included TAHE, Transport for NSW and NSW Treasury. 

The audit found the design and implementation of TAHE, which spanned seven years, was not effective. 

The process was not cohesive or transparent. It delivered an outcome that is unnecessarily complex in order to support an accounting treatment to meet the NSW Government's short-term Budget objectives, while creating an obligation for future governments.

The budget benefits of TAHE were claimed in the 2015–16 NSW Budget before the enabling legislation was passed by Parliament in 2017. This committed the agencies to implement a solution that justified the 2015–16 Budget impacts, regardless of any challenges that arose. 

Rail safety arrangements were a priority throughout TAHE's design and implementation, and risks were raised and addressed. 

Agencies relied heavily on consultants on matters related to the creation of TAHE, but failed to effectively manage these engagements. Agencies failed to ensure that consultancies delivered independent advice as an input to decision-making. A small number of firms were used repeatedly to provide advice on the same topic. The final cost of TAHE-related consultancies was $22.6 million compared to the initial estimated cost of $12.9 million.

Deficit of $10.6 billion compared with a budgeted deficit of $11.3 billion 

The General Government Sector (GGS) comprises of 210 entities and provides public services or carries out policy or regulatory functions. Agencies in this sector are funded centrally by the State. 

A principal measure of the government's overall activity and policies is its net operating balance (budget result). This is the difference between the cost of general government service delivery and the revenue earned to fund these sectors. 

Outside the GGS, a further 104 government-controlled entities are included within the TSSA. These entities form part of the PNFC (32) and PFC (72) sectors, and generally provide goods and services for which consumers pay for directly (including water and electricity). 

The GGS's budget result for the 2022–23 financial year was a deficit of $10.6 billion compared to an original forecast of a budget deficit of $11.3 billion.

Revenues increased $6.6 billion to $113.2 billion 

The State’s total revenues increased $6.6 billion to $113.2 billion, an increase of 6.2% compared to the previous year. Total revenue growth in 2021–22 was 18.2%. The State's increase in revenue was mostly from $2 billion in sale of goods and services, $1.5 billion in fines, regulatory fees and other revenue, and $1.4 billion in interest. 

Sale of goods and services increased by 14.8% 

Sale of goods and services revenue increased by $2 billion, mainly due to the return of the State's operations and services post the COVID-19 pandemic, including the: 

• return of elective surgery, increased patient services and sale of high-cost drugs under the Pharmaceutical Benefits Scheme co-payment for Section 100 Highly Specialised Drugs for both private and public patients 
• increased user demand for public transport 
• re-opening of schools contributing to higher revenue from student fees, sports and extracurricular activities. 

Fines, regulatory fees and other revenue increased by 19.8% 

Fines, regulatory fees and other revenue increased by $1.5 billion, mainly due to higher mining royalties collected by the State of $949 million. Extracted volume and weight of coal, gold and copper increased in 2022–23, as the COVID-19 pandemic lockdown restrictions eased, increasing the demand for export commodities. 

Interest revenue increased by 137.6% 

Interest revenue increased by $1.5 billion because of the strong interest rate environment and increases in the cash rate impacting securities, investment deposits and government agencies. As a result, this is passed on to new client loans as TCorp’s own borrowing costs increase.

Assets grew by $75.1 billion to $651 billion 

The State’s assets include physical assets such as land, buildings and infrastructure systems, and financial assets such as cash, and other financial instruments and equity investments. The value of total assets increased by $75.1 billion or 13.1% to $651 billion. The increase was largely due to increases in the carrying value of land, buildings and infrastructure systems. 

Valuing the State’s physical assets 

The State’s physical assets were valued at $489 billion 

The value of the State’s physical assets increased by $52.6 billion to $489 billion in 2022–23 ($46.7 billion increase in 2021–22). The State’s physical assets include land and buildings ($214 billion), infrastructure systems ($256 billion) and plant and equipment ($19.4 billion). 

The movement in physical asset values between years includes additions, disposals, depreciation and valuation adjustments. Other movements include assets reclassified to held for sale.

Appendix one – Prescribed entities

Appendix two – TSS sectors and entities

© 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.

What this report is about

Result of the Treasury portfolio of agencies’ financial statement audits for the year ended 30 June 2023.

The results of the audit of the NSW Government’s consolidated Total State Sector Accounts (TSSA), which are prepared by NSW Treasury, will be reported separately in our report on ‘State Finances 2023’.

The audit found

Unqualified audit opinions were issued on all general purpose financial statement audits.

Qualified audit opinions were issued on two of the 24 other engagements prepared by portfolio agencies. These related to payments made from Special Deposit Accounts that did not comply with the relevant legislation.

The number of monetary misstatements identified in our audits increased from 29 in 2021–22 to 39 in 2022–23.

The new parental leave policy impacted agencies across all portfolios. NSW Treasury should perform annual assessments to identify changes in legislation and regulation and provide timely guidance to the sector.

Transport for NSW and Sydney Metro have capitalised over $300 million of tender bid costs paid to unsuccessful tender bidders relating to significant infrastructure projects. Whilst NSW Treasury policy provides clarity on the reimbursement of unsuccessful bidders’ costs, clearer guidance on how to account for these costs in agencies’ financial statements is required.

The key audit issues were

Five high-risk issues were reported in 2022–23. Three were new findings on contract management, accounting treatments for workers compensation renewal premium adjustments and the management and oversight of a Special Deposit Account. Two repeat issues referred to the need to improve quality review processes over financial reporting and the timely approval of administration costs.

Portfolio agencies should prioritise and action recommendations to address internal control deficiencies.

This report provides Parliament and other users of the Treasury portfolio of agencies’ financial statements with the results of our audits, analysis, conclusions and recommendations in the following areas:

• financial reporting
• audit observations.

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 Treasury portfolio of agencies (the portfolio) for 2023.

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 Treasury portfolio.

Appendix one – Misstatements in financial statements submitted for audit

Appendix two – Early close procedures

Appendix three – Timeliness of financial reporting

Appendix four – Financial data

Appendix five – Acquittals and other opinions

© 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.

What this report is about

This report draws together the financial impact of natural disasters on agencies integral to the response and impact of natural disasters during 2021–22.

What we found

Over the 2021–22 financial year $1.4 billion from a budget of $1.9 billion was spent by the NSW Government in response to natural disasters.

Total expenses were less than the budget due to underspend in the following areas:

• clean-up assistance, including council grants
• anticipated temporary accommodation support
• payments relating to the Northern Rivers Business Support scheme for small businesses.

Natural disaster events damaged council assets such as roads, bridges, waste collection centres and other facilities used to provide essential services. Additional staff, contractors and experts were engaged to restore and repair damaged assets and minimise disruption to service delivery.

At 30 June 2022, the estimated damage to council infrastructure assets totalled $349 million.

Over the first half of the 2022–23 financial year, councils experienced further damage to infrastructure assets due to natural disasters. NSW Government spending on natural disasters continued with a further $1.1 billion spent over this period.

Thirty-six councils did not identify climate change or natural disaster as a strategic risk despite 22 of these having at least one natural disaster during 2021–22.

What the report is about

This audit assessed how effectively NSW government agencies procure and manage consultants. It examined the role of the NSW Procurement Board and NSW Procurement (a unit within NSW Treasury) in supporting and monitoring agency procurement and management of consultants.

The audit used four sources of data that contain information about spending on consultants by NSW government agencies, including annual report disclosures and the State's financial consolidation system (Prime). It also reviewed a sample of consulting engagements from ten NSW government agencies.

What we found

Our review of a selection of consulting engagements indicates that agencies do not procure and manage consultants effectively.

We found most agencies do not use consultants strategically and do not have systems for managing or evaluating consultant performance. We also found examples of non-compliance with procurement rules, including contract variations that exceeded procurement thresholds.

NSW Procurement has made improvements to the information available about spending on consultants, including additional analysis and reporting. However, there is no single data source that accurately captures spending on consultants.

Our analysis of data on whole-of-government spending on consultants, drawn from agency annual reports, indicates that four large professional services firms accounted for about a quarter of consultancy expenditure from 2017–18 to 2021–22. This concentration increases strategic risks, including over-reliance on a limited number of providers and potential reduction in the independence of advice.

It is also highly unlikely that NSW government agencies will meet the government's 2019 policy commitment to reduce consultancy expenses by 20% each year, over four years, from 2019–20. NSW Treasury advised that to implement this commitment, agency budgets were reduced in Prime in line with the savings targets. However, actual spending on consulting in NSW Treasury's Reports on State Finances 2020–21 and 2021–22 was almost $100 million higher than the savings targets over the first three years since 2019–20.

What we recommended

The report made seven recommendations which aim to improve:

• the quality and transparency of data on spending on consultants
• monitoring of strategic risks and agency compliance with procurement and recordkeeping rules
• agencies' strategic use of consultants, including evaluation and knowledge retention.

Between 2017–18 and 2021–22, NSW government agency annual reports disclosed total spending of around $1 billion on consultants across more than 10,000 engagements. More than 1,000 consulting firms provided services to NSW government agencies during this period. Consulting is a classification of professional services that is characterised by giving advice or recommendations on a specific issue. The NSW Procurement Board Direction PBD-2021-03 defines a consultant as a person or organisation that provides 'recommendations or professional advice to assist decision-making by management'. PBD-2021-03 notes that the advisory nature of the work of consultants is the main factor that distinguishes them from other providers of professional services.

The NSW Procurement Board is responsible for setting procurement policy, issuing directions to support policies, and monitoring and reporting on agency compliance with policies and directions. NSW Procurement, a division within NSW Treasury, supports agencies to comply with the NSW Procurement Board’s policies and directions. A 'devolved governance model' is used for procurement in New South Wales. This means the heads of government entities that are covered by the NSW Procurement Board’s directions are responsible for managing the entity's procurement, including managing risks, reporting and ensuring compliance, in line with procurement laws and policies.

This audit assessed how effectively NSW government agencies procure and manage consultants. It assessed the role of the NSW Procurement Board and NSW Procurement in supporting and monitoring agency procurement and management of consultants. It also reviewed a sample of consulting engagements from ten NSW government agencies to examine how agencies procured, managed and reported on their use of consultants. The ten NSW government agencies were:

• NSW Treasury
• Department of Communities and Justice
• Department of Customer Service
• Department of Education
• Department of Planning and Environment
• Department of Premier and Cabinet
• Department of Regional NSW
• Infrastructure NSW
• Sydney Metro
• Transport for NSW

There are four different sources of data that contain information about spending on consultants by NSW government agencies: the State's financial consolidation system (Prime), disclosures of spending on consultants in agency annual reports, and two systems operated by NSW Procurement (the Business Advisory Services (BAS) dashboard and Spend Cube). Each of these data sources serves a different purpose, and collects and categorises information differently. None of these provide a complete source of data on spending on consultants, either in their own right or collectively.

NSW Treasury considers Prime to be the 'source of truth' on consulting expenditure across the NSW public sector. An account within Prime records recurrent spending on consultants, but this account does not include capital expenditure (that is, spending on consultants that has from a financial reporting perspective been 'capitalised' to a project on the balance sheet). As the State's financial consolidation system, Prime captures all financial information. However, capitalised consulting expenditure is recorded within various capital accounts, and is not identifiable within these accounts. While this is appropriate for accounting purposes, it means that the Prime account that records recurrent consulting expenditure does not reflect total spending on consultants by NSW government agencies. We used the data in Prime to assess whether NSW government agencies met the NSW Government's policy commitment—stated before the 2019 election and costed by the Parliamentary Budget Office—to reduce recurrent expenditure on consulting by 20% each year, over four years, from 2019–20. We did this because, while the Prime account for recurrent consulting expenditure does not reflect all spending on consultants, it does capture the recurrent spending that was subject to the policy commitment.

Most NSW government agencies are required by legislation to disclose spending on consultants (as defined in PBD-2021-03) in their annual reports. These disclosures include both recurrent and capital expenditure. For consulting engagements that cost more than $50,000, the disclosures also provide itemised information, including the names of the individual projects and the consultants used. While this data is more complete than Prime because it includes capital expenditure, it also has some gaps. Some entities are excluded from public reporting requirements on consultant use. For example, NSW Local Health Districts (LHD) are not required to produce annual reports, and the Ministry of Health does not include LHD consulting expenditure in its annual report.¹ We used annual report disclosure data to report on total expenditure on consultants, and the concentration of suppliers of consulting services to NSW government agencies.

The BAS dashboard and Spend Cube are systems created by NSW Procurement to collect information about spending on suppliers of professional services. This includes consultants, but also includes other professional services providers. The systems were not designed for reporting on spending on consulting as defined in PBD-2021-03. However, we have used this data to assess specific aspects of NSW Procurement's monitoring of the use of consultants by NSW government agencies.

In 2018, we conducted an audit titled 'Procurement and reporting of consultancy services'. This assessed how 12 NSW government agencies complied with procurement requirements and how NSW Procurement supported the functions of the NSW Procurement Board. The 2018 audit found that none of the 12 agencies fully complied with NSW Procurement Board Directions on the use of consultants and that the NSW Procurement Board was not fully effective in overseeing and supporting agencies’ procurement of consultants. Specific findings from the 2018 audit included: 

• Agencies applied the definition of consultant inconsistently, which affected the accuracy of reporting on consultancy expenditure.
• There was inadequate guidance from NSW Procurement for agencies implementing the procurement framework, with a need for additional tools, automated processes, and other internal controls to improve compliance.
• NSW Procurement had insufficient data for effective oversight of procurement and did not publish any data on the procurement of consultancy services by NSW government agencies.

This chapter outlines our findings on the role of NSW Procurement in overseeing the use of consultants by NSW government agencies.

This chapter outlines our findings on the use of consultants by the ten NSW government agencies that were included in this audit.

Appendix one – Responses from auditees

Appendix two – About the audit

Appendix three – 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 #378 - released 2 March 2023

What the report is about

The Transport Asset Holding Entity (TAHE) is the State's custodian of rail assets. It is a state owned corporation and commenced operating on 1 July 2020.

This audit assessed the effectiveness of NSW Government agencies' design and implementation of TAHE. We audited TAHE, Transport for NSW (TfNSW) and NSW Treasury.

Separate and related audits on TAHE are reported in 'State Finances 2022', 'State Finances 2021' and 'Transport and Infrastructure 2022' reports.

What we found

The design and implementation of TAHE, which spanned seven years, was not effective.

The process was not cohesive or transparent. It delivered an outcome that is unnecessarily complex in order to support an accounting treatment to meet the NSW Government's short-term Budget objectives, while creating an obligation for future governments.

The benefits of TAHE were claimed in the 2015–16 NSW Budget before the enabling legislation was passed by Parliament in 2017. This committed the agencies to implement a solution that justified the 2015–16 Budget impacts, regardless of any challenges that arose.

Rail safety arrangements were a priority throughout TAHE's design and implementation, and risks were raised and addressed.

Agencies relied heavily on consultants on matters related to the creation of TAHE, but failed to effectively manage these engagements. Agencies failed to ensure that consultancies delivered independent advice as an input to decision-making. A small number of firms were used repeatedly to provide advice on the same topic. The final cost of TAHE-related consultancies was $22.6 million compared to the initial estimated cost of $12.9 million.

What we recommended

We recommended that the audited agencies should:

• improve accountability and transparency for major new fiscal transformation initiatives
• ensure entities do not reflect the financial impact of significant initiatives in the Budget when there is uncertainty, or it creates perverse incentives
• review record keeping practices, systems and policies to ensure compliance with the State Records Act 1998, and the NSW Government Information Classification, Labelling and Handling Guidelines
• review procurement policies to ensure that consultant use complies with all NSW Government policy requirements.

The NSW Government established the Transport Asset Holding Entity (TAHE), a statutory State Owned Corporation (SOC), on 1 July 2020 to replace the former rail infrastructure owner – RailCorp. It is the State's custodian of rail network assets, including rail tracks and other infrastructure, rolling stock, land, train stations and facilities, retail space, and signal and power systems, within metropolitan and regional New South Wales. It is responsible for $2.8 billion of major capital projects in 2022–23.

TAHE was established under Part 2 of the Transport Administration Act 1988 and is governed by a decision-making board. The Treasurer and the Minister for Finance and Employee Relations are the Shareholding Ministers of TAHE, and they annually agree performance expectations articulated in a Statement of Corporate Intent.

Whereas TAHE is the custodian of rail assets, Sydney Trains and NSW Trains operate public rail services. TAHE does not have responsibility for the operation of the heavy rail network or train services, nor does it have network control functions. TAHE, Sydney Trains and NSW Trains are in the Transport and Infrastructure cluster in the public sector (formerly the Transport cluster and renamed in April 2022), which also includes Sydney Metro and Transport for NSW (TfNSW).

TfNSW leads the Transport and Infrastructure cluster. Its role is to set the strategic direction for transport across the State. This involves the shaping of planning, policy, strategy, regulation, resource allocation and other service and non-service delivery functions for all modes of transport.

TAHE's Operating Licence is granted by the Portfolio Minister and authorises the entity to perform the functions required to acquire, develop, finance, divest and hold assets, pursuant to the Transport Administration Act 1988. The Portfolio Minister also issues a Statement of Expectations which outlines the government’s expectation for the business for the next three to five years.

TAHE's original Portfolio Minister was the Minister for Transport who approved, on 30 June 2020, the issuing of an interim 12-month Operating Licence to enable TAHE to commence operating on 1 July 2020. The Portfolio Minister then granted TAHE's current Operating Licence in 2021. After TAHE requested a 12-month extension to its current Operating Licence, its next Operating Licence is due on 1 July 2024. The current Portfolio Minister is the Minister for Infrastructure, Cities and Active Transport.

About this audit

This audit assessed the effectiveness of NSW Government agencies' design and implementation of TAHE. In making this assessment, we considered whether: 

• the process of designing and implementing TAHE was cohesive and transparent, and delivered an effective outcome
• agencies' roles and responsibilities were clear in the planning of TAHE
• agencies effectively identified and managed certain risks.

Appendix one – Responses from audited agencies, and Audit Office clarification of matters raised in the TAHE formal response 

Appendix two – Classification of government entities 

Appendix three – About the audit 

Appendix four – 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 #372 - released 24 January 2023

What the report is about

Results of the Treasury cluster agencies' financial statement audits for the year ended 30 June 2022.

The results of the audit of the NSW Government's consolidated Total State Sector Accounts (TSSA), which is prepared by NSW Treasury, are reported separately in our report on 'State Finances 2022'.

What we found

Unmodified audit opinions were issued on all 30 June 2022 general purpose financial statement audits.

Qualified audit opinions were issued on three of the 25 other engagements prepared by cluster agencies. These related to payments made from Special Deposit Accounts (SDA) that did not comply with the relevant legislation.

What the key issues were

Commercial agreements were signed between TAHE, the operators and Transport for NSW in June 2022, which reflected an expected rate of return of 2.5% on contributed equity. However, it remains critical that the government continue to provide sufficient funding to the operators so they can pay for access and use TAHE assets. These findings are reported in our report on 'State Finances 2022'.

Eight high-risk issues were raised in 2021–22, of which five relate to NSW Treasury.

A number of previously reported audit findings and recommendations with respect to icare continue to be ongoing issues. This includes the Workers Compensation Nominal Insurer continuing to hold less assets than the estimated present value of its future payment obligations, when measured in accordance with the accounting framework.

What we recommended

Our report on 'State Finances 2022' made several recommendations to improve NSW Treasury's processes.

In this report, we recommended icare should ensure:

• it has sufficient controls in place over claim payments, including an effective quality assurance program, to minimise claim payment errors
• that documentation to support PIAWE calculations is appropriately maintained, and that the minimum documentation requirements are set out in a policy.

This report provides Parliament and other users of the Treasury cluster’s financial statements with the results of our audits, analysis, conclusions and recommendations in the following areas:

• financial reporting
• audit observations.

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 Treasury cluster (the cluster) for 2022.

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 Treasury cluster.

Appendix one – Misstatements in financial statements submitted for audit

Appendix two – Early close procedures

Appendix three – Timeliness of financial reporting

Appendix four – Financial data

Appendix five – Acquittals and other opinions

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.