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

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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

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About this report 

This report reviews compliance by members of the Parliament of New South Wales with certain requirements outlined in the Parliamentary Remuneration Tribunal’s (the Tribunal) 2024 Annual Determination (the Determination). 

Claims made by members for additional entitlements totalling $12.7 million were within the scope of our review. The remaining payments of $12.1 million were not reviewed as there are certain salaries and allowances that the Determination excludes from our compliance review requirements. 

Claims relating to annual basic and additional salaries, additional expense allowances, and electoral and committee allowances are excluded by the Determination from the scope of our compliance review.

Findings 

From a sample of 56 claims, our compliance review procedures identified 27 departures from requirements of the Determination and/or the administrative guidelines of the Department of Parliamentary Services (the Department). 

There were fewer departures this year than in previous years, however late submission of claims and declarations by members continued. The Department needs to provide clarity to members on expenditure claim requirements and processes.

Recommendations 

The Department should: 

• enhance its assessment as to whether members’ expenditure claims comply with requirements and advise members promptly about whether their claims are ineligible 
• improve its quality review processes when reporting the total number and dollar value of members’ additional entitlements claims for each year 
• ensure internal audits of members’ additional entitlements are adequately scoped and endorsed prior to their commencement and reflect the requirements of the Determination. These internal audits should be completed prior to the compliance review performed by the Audit Office 
• continue to work with members to provide them additional training or education and better help them comply.

This report reviews compliance by members of the Parliament of New South Wales with certain requirements outlined in the Parliamentary Remuneration Tribunal’s (the Tribunal) 2024 Annual Determination (the Determination).

The Determination establishes the annual salaries and additional entitlements allowed to members of the Parliament of New South Wales under the Parliamentary Remuneration Act 1989 and requires members’ claims for additional entitlements to also comply with requirements of the Department of Parliamentary Services’ (the Department) administrative guidelines. The Parliament of New South Wales, through the Department, administers payments of additional entitlements.

There were 32,244 payments made to members for entitlements under the Determination during the 2023–24 financial year totalling $24.8 million. Of these, 30,566 claims for payment of additional entitlements totalling $12.7 million were within the scope of our compliance review under the Determination. The remaining payments of $12.1 million made during the 2023-24 financial year were not reviewed as there are certain salaries and allowances within the Determination that are excluded from compliance review requirements. These payments include:

• annual basic salaries, additional salaries and additional expense allowances
• additional entitlements comprising electoral allowances and committee allowances.

The infographic below outlines which payments made to members for entitlements under the Determination are within the scope of our compliance review, and those which the Determination excludes from our compliance review.

There were fewer departures from requirements of the Determination and/or the administrative guidelines of the Department identified in our 2023–24 compliance review than in previous years. However late submission of claims and declarations by members continue, indicating a need for improved processes and greater clarity, training and education for members.

From a sample of 56 claims, our compliance review procedures identified 27 departures from requirements of the Determination and/or the administrative guidelines of the Department. These included:

• 21 claims for payment were not submitted within 60 days of receipt of invoice or incurring the expense (2022–23: 22 claims)
• 1 claim under the Communications Allowance related to a publication that did not include the required authorisation and attribution (2022–23: two claims)
• 5 members submitted their annual loyalty/incentive scheme declarations after the date specified in the Department’s administrative requirements (2022–23: seven members).

The table below shows the number of departures from requirements of the Determination and/or the administrative guidelines of the Department identified in the past three financial years’ compliance reviews.

* Blackout periods are applicable only to election years.

Members require further clarity to address the continued departures from the Determination

Our past compliance reviews identified departures from the Determination and the administrative requirements of the Department that indicate a need for greater clarity in the current processes and guidance, including increased training or education to help support members comply with the Determination.

Last year we recommended:

• the Tribunal provides greater clarity on current processes and implications of departures from the guidelines to members
• the Department works with members to provide them additional training or education and better help them comply with the Determination and/or the administrative guidelines of the Department.

While an improvement was observed in the number of departures from the Determination and the administrative requirements of the Department over the years, similar departures have been consistently identified in our compliance reviews. This suggests there is still a need for the Department to improve processes and provide greater clarity, training and education to members. It reconfirms the importance of our recommendation in section 3.3, which calls for the Department to be responsible in assessing the eligibility of claims for additional entitlements prior to payment.

Enhanced public reporting

Since 2016, our reports to Parliament have recommended the Tribunal consider requiring the Department regularly publish full details of members’ expenditure claims on its website in an accessible and searchable format.

In response, the Tribunal had developed a plan requiring greater public reporting of members’ expenditure from 1 July 2019. However, Crown Solicitor’s advice sought by the Tribunal confirmed it did not have the power to require the Department publish full details of members’ expenditure claims.

The Department responded to this recommendation by identifying that a significant investment in the required systems was necessary to allow for the detailed publishing of all members’ expenditure claims.

This recommendation has been considered by the Department and to date, there are no imminent plans for any change in the way it publishes the details of members’ expenditure claims during the year. Given our recommendation was to enhance public reporting of members’ expenditure claims, and there is no non-compliance with existing reporting, we will not be repeating this recommendation.

Appendix one - Response from the Department of Parliamentary Services

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About this report

Internal controls are key to the accuracy and reliability of agencies’ financial reporting processes. This report analyses the internal controls and governance of 26 of the NSW public sector’s largest agencies for the 2023–24 financial year.

Findings

There are gaps in key business processes, which expose agencies to risks. These gaps are identified in 121 findings across the 26 agencies—including 4 high risk, 73 moderate risk and 44 low risk findings. All four high-risk issues related to IT controls and 19% of control deficiencies were repeat issues. Thirty-five per cent of agencies had deficiencies in control over privileged access.

Shared IT services

Six agencies provide IT shared services to 120 other customer agencies. All six had control deficiencies—three of these were high risk. Four agencies provide no independent assurance to their customers about the effectiveness of their own IT controls.

Cyber security

Eighteen agencies assessed cyber risk as being above their risk appetite. Fourteen of these agencies had not set a timeframe to resolve these risks and two agencies have not funded plans to improve cyber security.

Fraud and corruption control

Agencies need to improve fraud and corruption control. Instances of non-compliance with TC18-02 NSW Fraud and Corruption Policy were identified, including gaps such as a lack of comprehensive employment screening policies and not reporting matters to the audit and risk committee.

Gifts and benefits

Management of gifts and benefits requires better governance and transparency. All agencies had policy and guidance but all had gaps in management and implementation—such as not publishing registers nor providing ongoing training.

Information Technology

Nine agencies did not effectively restrict or monitor user access to privileged accounts.

Recommendations

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

• organisational processes
• information technology
• cyber security
• fraud and corruption, and
• gifts and benefits.

Read the PDF report

Internal controls are processes, policies and procedures that help agencies to:

• operate effectively and efficiently
• produce reliable financial reports
• comply with laws and regulations
• support ethical government.

This chapter outlines the overall trends for agency controls and governance issues, including the number of audit findings, the degree of risk those deficiencies pose to the agency, and a summary of the most common deficiencies found across agencies.

This chapter outlines our audit observations, conclusions and recommendations arising from our review of agency controls to manage key financial systems.

This chapter outlines our audit observations, conclusions and recommendations arising from our review of agencies' cyber security.

This chapter outlines our audit observations, conclusions and recommendations from our review of agencies' fraud and corruption control framework, policies and practices. Our Internal Controls and Governance 2018 found a number of fraud and corruption control gaps in NSW Government.

The NSW Treasury Circular TC18-02 NSW Fraud and Corruption Control Policy (the Circular) requires NSW government agencies to develop, implement and maintain a fraud and corruption control framework. The Circular sets out minimum standards for a NSW Government agency’s fraud and corruption control framework.

Previous Audit Office report on agency fraud and corruption control

This chapter outlines our audit observations, conclusions and recommendations arising from our review of agencies' managing of gifts and benefits.

Under Section 27B(3) (c) of the Government Sector Audit Act 1983, the Special Minister of State has requested that the Audit Office perform a recurring performance audit of emergency relief grants commencing in 2024-25.  

Severe weather and flooding events occurred in NSW from 4 August 2022 to 14 September 2022. The NSW Government responded to these natural disasters by providing support to primary producers through the Rural Assistance Authority administered Special Disaster Assistance – September and October 2022 storms and floods program. This program was designed to reimburse primary producers for eligible expenditure related to the recovery from these events. The program was funded through the Disaster Recovery Funding Arrangements 2018, with the NSW Reconstruction Authority responsible for delivering New South Wales’ component of this agreement.  

This audit will assess whether the Rural Assistance Authority and NSW Reconstruction Authority have implemented the Special Disaster Assistance - storms and floods AGRN 1030 and AGRN 1034 program in line with the principles and mandatory requirements outlined in the Grants Administration Guide, and in line with the program guidelines.

This report will highlight themes and insights from the last six years of our audits focusing on cyber security. It will include analysis across our performance audits, compliance audits and the outcomes of financial audits.

The NSW Artificial Intelligence Ethics Policy and NSW Artificial Intelligence Assurance Framework describe the role of artificial intelligence to help the NSW Government free up the workforce for critical and frontline tasks, cut costs and enable delivery of better, more targeted services. 

This audit will examine the effectiveness of the governance of artificial intelligence and automation used to deliver services in NSW across a selection of agencies.

The Government Information (Public Access) Act 2009 authorises and encourages the proactive release of information by NSW public sector agencies and gives members of the public a legally enforceable right to access government information. 

This audit will examine a selection of agencies’ compliance with the Government Information (Public Access) Act 2009.

About this report

The Government Advertising Act 2011 requires the Auditor-General to undertake a performance audit of the activities of one or more government agencies in relation to government advertising campaigns in each financial year.

This year, we examined two campaigns run by Transport for New South Wales (TfNSW) - 'Don't trust your tired self' (DTYTS) and 'Saving lives on country roads' (SLCR).

The audit assessed whether they were carried out effectively, economically, and efficiently, and complied with regulatory and policy requirements.

Audit findings

The DTYTS campaign complied with all requirements set out in the Act, the Regulation, and Government Advertising Guidelines - except for the requirement to complete an approved and complying cost-benefit analysis (CBA), as per the Guidelines.

The campaign had a clear target audience. It achieved many of its stated objectives and other performance measures and represented an economical and efficient spend.

However, TfNSW has not measured the campaign's long-term impact and this, combined with the lack of a complying CBA, meant that TfNSW could not confidently demonstrate the campaign's effectiveness.

The SLCR campaign (which commenced in 2017) was last run fully in 2021–22. TfNSW could have improved the formal documentation of its decision-making process when it cancelled the SLCR campaign.

TfNSW continued to run state-wide advertising campaigns – with regional components - to address road safety in regional NSW.

Recommendations

By 31 October 2024, TfNSW should implement processes that ensure:

1. CBAs prepared for government advertising campaigns comply with the Government Advertising Guidelines
2. long-term impacts of advertising campaigns are evaluated
3. strategic and operational decision-making about advertising campaigns, such as starting, stopping or significantly changing a campaign, is well-documented and follows good practice.

The Government Advertising Act 2011 (the Act) sets out requirements that must be followed by a government agency when it carries out a government advertising campaign. The requirements prohibit any political advertising and require a peer review and cost-benefit analysis to be completed before the campaign commences. The accompanying Government Advertising Regulation 2018 (the Regulation) and 2012 NSW Government Advertising Guidelines (the Guidelines) address further matters of detail.

Section 14 of the Act requires the Auditor-General to conduct a performance audit on the activities of one or more government agencies in relation to government advertising campaigns in each financial year. The performance audit must assess whether a government agency (or agencies) has carried out activities in relation to government advertising campaigns in an effective, economical and efficient manner and in compliance with the Act, the Regulation, other laws and the Guidelines.

This audit examined Transport for NSW's (TfNSW) advertising campaigns 'Don't Trust Your Tired Self' and 'Saving Lives on Country Roads' for the 2022–23 financial year.

TfNSW is the NSW Government agency responsible for leading the development of safe, integrated and efficient transport systems for the people of New South Wales.

The Don't Trust Your Tired Self (DTYTS) campaign, which cost $3.04 million in 2022–23, aimed to educate drivers on how to avoid driving tired and encouraged them to consider how tired they were before driving.

The Saving Lives on Country Roads (SLCR) campaign, which commenced in December 2017, aimed to encourage country drivers¹ to re-think the common excuses used to justify their behaviour on the road. In early 2024, after the audit commenced, the Department of Customer Service (DCS) advised the audit team that TfNSW did not run the SLCR campaign in 2022–23. This was subsequently confirmed by TfNSW. Instead, the SLCR branding was used for the regional element of the state-wide drink driving campaign. As a result, this audit examined the reasons and decision-making process for its cancellation.

The SLCR campaign cost $3.11 million in 2021–22, the last full year in which it was run, and $17,038 in 2022–23.

This part of the report sets out key aspects of Transport for NSW's (TfNSW) compliance with the Government Advertising regulatory framework for Don't Trust Your Tired Self (DTYTS). It considers whether the agency complied with the:

• Government Advertising Act 2011 (the Act)
• Government Advertising Regulation 2018 (the Regulation)
• NSW Government Advertising Guidelines 2012 (the Guidelines) and other relevant policy.

This part of the report considers whether Transport for NSW's (TfNSW) advertising campaign Don't Trust Your Tired Self (DTYTS) was carried out in an effective, efficient and economical manner.

This part of the report examines the cancellation of the Saving Lives on Country Roads (SLCR) campaign. It focuses on the decision-making process and evidence for the cancellation of this campaign following its last delivery in 2021–22. It also draws out key implications.

Appendix one – Response from agencies

Appendix two – About the campaigns

Appendix three – About the audit

Appendix four – Performance auditing
 

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Parliamentary reference - Report number #396 released 25 June 2024.

What this report is about

In this report, we present findings and recommendations relevant to regulation from selected reports between 2018 and 2024.

This analysis includes performance audits, compliance audits and the outcomes of financial audits.

Effective regulation is necessary to ensure compliance with the law as well as to promote positive social and economic outcomes and minimise risks with certain activities.

The report is a resource for public sector leaders. It provides insights into the challenges and opportunities for more effective regulation.

Audit findings

The analysis of findings and recommendations is structured around four key themes related to effective regulation:

• governance and accountability
• processes and procedures
• data and information management
• support and guidance.

The report draws from this analysis to present insights for agencies to promote effective regulation. It also includes relevant examples from recent audit reports.

In this report, we also draw out insights for agencies that provide a public sector stewardship role.

The report highlights the need for agencies to communicate a clear regulatory approach. It also emphasises the need to have a consistent regulatory approach, supported by robust information about risks and accompanied with timely and proportionate responses.

The report highlights the need to provide relevant support to regulated parties to facilitate compliance and the importance of transparency through reporting of meaningful regulatory information.

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I am pleased to present this report, Regulation insights. This report highlights themes and generates insights about effective regulation from the last six years of audit.

Effective regulation is necessary to ensure compliance with the law. Effective regulation also promotes social, economic, and environmental outcomes, and minimises risks or negative impacts associated with certain activities. But regulation can be challenging and costly for governments to implement. It can also involve costs and impact on the regulated parties, including other public sector and private entities, and individuals. As such, effective regulation needs to be administered efficiently, and with integrity.

Having a clearly articulated and communicated regulatory approach is essential to achieving this outcome, particularly when this promotes voluntary compliance and sets performance standards that are informed by community expectations. A consistent approach to exercising regulatory powers is important: it should be supported by robust information about regulatory risks and issues, and accompanied with timely, proportionate responses. Providing relevant support to the regulated parties and coordinating activities to facilitate compliance and performance can generate efficiencies.

Finally, transparency matters. It matters so that government has oversight of and can be held accountable for its leadership of public sector compliance, and in regulating the activities of third parties. Transparency also matters because it can provide insights into the effective exercise of government power. To achieve this, meaningful regulatory information needs to be reported.

While these issues are most pertinent for government agencies that exercise traditional regulatory functions, they are also relevant to lead government agencies that provide a stewardship role in promoting compliance and performance by other government agencies in relation to particular areas of risk.

Over the past six years, our audit work has found many common and repeat performance gaps, creating risks, inefficiencies, and limiting outcomes of regulatory activities. In considering these gaps, this report provides public sector leaders with insights into the challenges and opportunities they may encounter when aiming for more effective regulation, including the good governance of regulatory activities. This includes insights for lead agencies that provide a public sector stewardship role. Through applying these insights and maximising regulatory effectiveness, unintended impacts on the people and sectors government serves and protects can be avoided or at the very least minimised.

Margaret Crawford PSM
Auditor-General for NSW

This report brings together key findings and recommendations relevant to regulation from selected performance and compliance audits between 2018 and early 2024 (19 in total), and from two reports that summarise results of financial audits during the same period. It aims to provide insights into the challenges and opportunities the public sector may encounter when aiming to enhance regulatory effectiveness.

The report is structured in two sections, each setting out insights from relevant audits and providing summaries as illustrative examples.

Section 3 is focused on insights from audits of agencies that administer regulatory powers and functions over other entities or activities (typically known as 'regulators'). The powers and functions of regulators are defined in law, and often relate to issuing approvals (e.g., licensing) for certain activities, and/or monitoring allowable activities within certain limits. Regulators often have compliance and enforcement powers that can be exercised in particular circumstances, such as when a regulated entity has not complied with relevant requirements.

Agencies may be primarily established as regulators or perform regulatory activities alongside other functions. Depending on the context, the regulated activity may relate to other state agencies, local government entities, non-government entities or individuals.

Section 4 summarises insights from a selection of audits of agencies that provide a stewardship role in promoting compliance by and performance of other state agencies and local government entities in relation to specific regulations or policies. These policies may or may not be mandatory and, unlike a more traditional regulator, the coordinating agency may not have enforcement powers to ensure compliance.

These policies, and accompanying guidelines and frameworks, are typically issued by ‘central agencies’ such as the Premier's Department that have a public sector stewardship role. They can also be issued by agencies with a leadership role in particular policy areas ('lead agencies'). While individual agencies and local government entities implementing these policies are responsible for their own compliance and performance, lead and central agencies have an oversight role including by promoting accountability and coordinating activities towards achieving compliance and performance outcomes across the public sector.

Readers are encouraged to view the full reports for further information. Links to versions published on our website are provided throughout this document, and a full list is in Appendix one. An overview of the rationale for selecting these audits and the approach to developing this report is in Appendix two.

The status of agencies' responses to audit recommendations

Findings from the audits referred to in this report were current at the time each respective report was published. In many cases, agencies accepted audit recommendations, as reflected in the letters from agency heads that are included in the appendix of each audit report.

The Public Accounts Committee of the NSW Parliament has a role in reporting on and ensuring that agencies respond appropriately to audit recommendations. Readers are encouraged to review the Public Accounts Committee's inquiries on agencies' implementation of audit recommendations, which can be found on the Committee's website.

Appendix one – Included reports 2018–2024 Regulation insights

Appendix two – About this report- Regulation insights