Reports
Transport 2020
1. Financial Reporting |
|
| Audit opinion | Unmodified audit opinions issued for the financial statements of all Transport cluster entities. |
| Quality and timeliness of financial reporting | All cluster agencies met the statutory deadlines for completing the early close and submitting the financial statements. Transport cluster agencies continued to experience some challenges with accounting for land and infrastructure assets. The former Roads and Maritime Services and Sydney Metro recorded prior period corrections to property, plant and equipment balances. |
| Impact of COVID-19 on passenger revenue and patronage | Total patronage and revenue for public transport decreased by approximately 18 per cent in 2019–20 due to COVID-19. The Transport cluster received additional funding from NSW Treasury during the year to support the reduced revenue and additional costs incurred such as cleaning on all modes of public transport and additional staff to manage physical distancing. |
| Completion of the CBD and South East Light Rail | The CBD and South East Light Rail project was completed and commenced operations in this financial year. At 30 June 2020, the total cost of the project related to the CBD and South East Light Rail was $3.3 billion. Of this total cost, $2.6 billion was recorded as assets, whilst $700 million was expensed. |
2. Audit Observations |
|
| Internal control | While internal controls issues raised in management letters in the Transport cluster have decreased compared to the prior year, control weaknesses continue to exist in access security for financial systems. We identified 56 management letter findings across the cluster and 43 per cent of all issues were repeat issues. The majority of the repeat issues relate to information technology controls around user access management. There were three high risk issues identified - two related to financial reporting of assets and one for implementation of TAHE (see below). |
| Agency responses to emergency events | Transport for NSW established the COVID-19 Taskforce in March 2020 to take responsibility for the overall response of planning and coordination for the Transport cluster. It also implemented the COVIDSafe Transport Plan which incorporates guidance on physical distancing, increasing services to support social distancing and cleaning. |
| RailCorp transition to TAHE | On 1 July 2020, RailCorp was renamed Transport Asset Holding Entity of New South Wales (TAHE) and converted to a for-profit statutory State-Owned Corporation. TAHE is a commercial for-profit Public Trading Entity with the intent to provide a commercial return to its shareholders. A plan was established by NSW Treasury to transition RailCorp to TAHE which covered the period 1 July 2015 to 1 July 2019. A large portion of the planned arrangements were not implemented by 1 July 2020. As at the time of this report, the TAHE operating model, Statement of Corporate Intent (SCI) and other key plans and commercial agreements are not finalised. The State Owned Corporations Act 1989 generally requires finalisation of an SCI three months after the commencement of each financial year. However, under the Transport Administration Act 1988, TAHE received an extension from the voting shareholders, the Treasurer and Minister for Finance and Small Business, to submit its first SCI by 31 December 2020. In accordance with the original plan, interim commercial access arrangements were supposed to be in place with RailCorp prior to commencement of TAHE. Under the transitional arrangements, TAHE is continuing to operate in accordance with the asset and safety management plans of RailCorp. The final operating model is expected to include considerations of safety, operational, financial and fiscal risks. This should include a consideration of the potential conflicting objectives of a commercial return, and maintenance and safety measures. This matter has been included as a high risk finding in our management letter due to the significance of the financial reporting impacts and business risks for TAHE. Recommendation: TAHE management should:
Resolution of the above matters are critical as they may significantly impact the financial reporting arrangements for TAHE for 2020–21, in particular, accounting policies adopted as well as measurement principles of its significant infrastructure asset base. |
| Completeness and accuracy of contracts registers | Across the Transport cluster, contracts and agreements are maintained by the transport agencies using disparate registers. Recommendation (repeat): Transport agencies should continue to implement a process to centrally capture all contracts and agreements entered. This will ensure:
|
This report provides parliament and other users of the Transport cluster’s financial statements with the results of our audits, our observations, analysis, conclusions and recommendations in the following areas:
- financial reporting
- audit observations
- the impact of emergencies and the pandemic.
Financial reporting is an important element of good governance. Confidence and transparency in public sector decision making are enhanced when financial reporting is accurate and timely.
This chapter outlines our audit observations related to the financial reporting of agencies in the Transport cluster for 2020, including any financial implications from the recent emergency events.
Section highlights
|
Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision making.
This chapter outlines our:
- observations and insights from our financial statement audits of agencies in the Transport cluster
- assessment of how well cluster agencies adapted their systems, policies and procedures, and governance arrangements in response to recent emergencies.
Section highlights
|
Appendix one – List of 2020 recommendations
Appendix two – Status of 2019, 2018 and 2017 recommendations
Appendix three – Management letter findings
Appendix four – Financial data
Copyright notice
© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.
Stronger Communities 2020
This report analyses the results of our audits of financial statements of the agencies comprising the Stronger Communities cluster for the year ended 30 June 2020. The table below summarises our key observations.
1. Financial reporting |
|
| Quality of financial reporting | Unqualified audit opinions were issued for all agencies' 30 June 2020 financial statements. |
| Compliance with financial reporting requirements |
The Treasury extended the statutory deadline for the submission of the 2019–20 financial statements. For agencies subject to Treasurer's Directions, Treasury required agencies to submit their 30 June 2020 financial statements by 5 August 2020. For other agencies, the deadline was extended to 31 October 2020. All agencies in the cluster met the revised statutory deadlines. Cluster agencies substantially completed the mandatory early close procedures set by NSW Treasury. However, nine agencies including the Department of Communities and Justice (the department) did not complete one or more mandatory requirements, such as assessing the impact of new and updated accounting standards. |
| Financial implications of recent emergencies |
Emergency events significantly impacted cluster agencies in 2019–20. Our review of seven cluster agencies most affected highlighted some had incurred additional expenditure because of the bushfires and floods. Others lost revenue due to the COVID-19 pandemic. During the year these agencies collectively received additional funding of $1.1 billion from the State to respond to:
The Sydney Cricket Ground Trust, Venues NSW and Office of Sport lodged insurance claims of $51.3 million with the Treasury Managed Fund with respect to lost revenues from the pandemic. The losses were mainly due to event cancellations and covered various periods ranging from mid-March to 31 December 2020. The change in economic conditions caused by the COVID-19 pandemic resulted in the NSW Government cancelling the refurbishment of Stadium Australia it had previously approved in August 2019. Venues NSW wrote off $16.8 million of redevelopment costs during 2019–20. |
| Restatement of the Sydney Cricket Ground valuation | The valuation of the Sydney Cricket Ground (the Stadium) included costs of $28.6 million which were not eligible for capitalisation. The financial statements were restated to reflect the reduction in the value of the Stadium and the asset revaluation reserve. |
| Unresolved data quality issues in the VS Connect system |
The department continues to address significant data quality issues resulting from its implementation of the VS Connect system (the System) in 2019. The issues relate to the completeness and accuracy of the data transferred from the legacy system. The System is used by the department to manage its Victims Support Services (VSS) and for financial reporting purposes. An independent actuary helps the department estimate its liability for VSS claims. The actuary's valuation at 30 June 2020 was again impacted by the data quality issues. Consequently, the actuary adopted a revised valuation methodology compared to previous years. Recommendation (repeat issue): The department should resolve the data quality issues in the VS Connect System before 31 March 2021. |
| AASB 16 'Leases' resulted in significant changes to agencies' financial position |
Cluster agencies implemented three new accounting standards for the first time in 2019–20. Adoption of AASB 16 'Leases' resulted in cluster agencies collectively recognising right-of-use assets and lease liabilities of $1.7 billion and $1.1 billion respectively on 1 July 2019. Significant misstatements in how lease related balances had been calculated were found in 17 of the 29 cluster agencies. The cluster outsources the management of most of its owned and leased property portfolio to Property NSW, but cluster agencies remain responsible for any deliverables under that arrangement. The misstatements were mainly caused by late revisions of key assumptions and issues with the accuracy and completeness of Property NSW's lease information. |
2. Audit observations |
|
| Internal control deficiencies |
Our 2019–20 financial audits identified 191 internal control issues. Of these, two were high risk and almost one-third were repeat findings from previous audits. While repeat findings reduced by 5.7 percentage points in 2019–20, the number remains high. Recommendation (repeat issue): Cluster agencies should action recommendations to address internal control weaknesses promptly. Focus should be given to addressing high risk and repeat issues. |
| Agencies response to recent emergencies |
The severity of the recent bushfires and floods meant natural disaster expenses incurred by emergency services agencies rose from $67.4 million in 2018–19 to $497 million in 2019–20. The COVID-19 pandemic presented unprecedented challenges for the cluster. Social distancing and other infection control measures disrupted the traditional means of delivering services. Agencies established committees or response teams to respond to these challenges. The department introduced measures to minimise the risk of the spread of COVID-19 amongst inmates in custodial settings. |
| Managing excess annual leave |
Managing excess annual leave was a challenge for cluster agencies directly involved in the government's response to the emergency events. Employees in frontline cluster agencies deferred leave plans and many have taken little or no annual leave during the reporting period. Annual leave liabilities rose at the department, NSW Police Force, Fire and Rescue NSW, Office of the NSW Rural Fire Service, the Legal Aid Commission of New South Wales and the Office of the Director of Public Prosecutions. The combined liabilities increased from $620 million to $692 million or 11.6 per cent between 30 June 2019 and 30 June 2020. |
| Implementation of Machinery of Government (MoG) changes |
Administrative Arrangement Orders effective from 1 July 2019, created the department of Communities and Justice and transferred functions and staff, together with associated assets and liabilities into the department from the former departments of Justice and Family and Community Services. The department continues to establish its governance arrangements following the MoG changes. Recommendation: The department should finalise appropriate governance arrangements for its new organisational structure as soon as possible. This includes:
|
| Delivery of the Prison Bed Capacity Program |
The department continued to expand prison system capacity through the NSW Government's $3.8 billion Prison Bed Capacity Program. The department reported it spent $480 million on the Program in 2019–20. Six prison expansion projects were completed during the year, which added 1,660 new and 395 refurbished beds to the NSW prison system. Data from the department shows the number of adult inmates in the NSW prison system reached a maximum of 14,165 during the year. Operational capacity was 16,096 beds on 19 August 2020. |
This report provides parliament and other users of the financial statements of agencies in the Stronger Communities cluster with the results of our audits, our observations, analysis, conclusions and recommendations.
Agencies in the Stronger Communities cluster were significantly impacted by the bushfires, floods and the COVID-19 pandemic in 2019–20. Our 2019–20 financial audits of the seven cluster agencies most significantly impacted by the recent emergency events considered:
- the financial implications of the emergency events
- changes to agencies' operating models and control environments
- delivery of new or expanded projects, programs or services at short notice.
Our findings on these seven agencies' responses to the recent emergencies are included throughout this report. These agencies are:
- Department of Communities and Justice
- Fire and Rescue NSW
- NSW Police Force
- Office of the NSW Rural Fire Service
- Office of the NSW State Emergency Service
- Sydney Cricket and Sports Ground Trust
- Venues NSW.
The Department of Communities and Justice is the principal agency of the cluster. The names of all agencies in the Stronger Communities cluster are included in Appendix one.
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 Stronger Communities cluster for 2020, including any financial implications from the recent emergency events.
Section highlights
|
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 Stronger Communities cluster
- assessment of how well cluster agencies adapted their systems, policies and procedures, and governance arrangements in response to recent emergencies
- review of how the cluster agencies managed the increased risks associated with new programs aimed at stemming the spread of COVID-19 and stimulating the economy.
Section highlights
|
Appendix one – Timeliness of financial reporting by agency
Appendix two – Management letter findings by agency
Appendix three – List of 2020 recommendations
Appendix four – Status of 2019 recommendations
Appendix five – Selected agencies for review of response to emergency events
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.
Family and Community Services 2018
The Auditor-General for New South Wales, Margaret Crawford released her report today on the Family and Community Services cluster. The report focuses on key observations and findings from the most recent financial audits of agencies in the cluster. Cluster entities received unqualified audit opinions for their 30 June 2018 financial statements. Opportunities to improve the quality of financial reporting were identified and reported to management.
This report analyses the results of our audits of financial statements of the Family and Community Services cluster for the year ended 30 June 2018. The table below summarises our key observations.
This report provides NSW Parliament and other users of the financial statements of Family and Community Services' agencies with the results of our audits, our observations, analysis, conclusions and recommendations in the following areas:
- financial reporting
- audit observations
- service delivery.
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 Family and Community Services cluster for 2018.
| Observation | Conclusions and recommendations |
| 2.1 Quality of financial reporting | |
| Unqualified audit opinions were issued for all cluster agencies' financial statements. | Conclusion: Sufficient audit evidence was obtained to conclude the financial statements were free of material misstatement. |
| Agencies complied with NSW Treasury’s mandatory early close requirements. Completing other early close procedures was inconsistent and not always supported by adequate evidence. |
Conclusion: There are opportunities for agencies to improve the quality of financial reporting by:
|
| 2.2 Timeliness of financial reporting | |
| Agencies completed revaluations of property, plant and equipment and submitted 31 March 2018 financial statements by the due date as required by NSW Treasury. Agencies submitted year-end financial statements by the statutory deadline. |
Conclusion: Early revaluations of property, plant and equipment contributes to agencies meeting the year-end statutory reporting deadline. |
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 Family and Community Services cluster for 2018
- the areas of focus identified in the Audit Office annual work program.
The Audit Office Annual Work Program provides a summary of all audits to be conducted within the proposed time period as well as detailed information on the areas of focus for each NSW Government cluster.
| Observation | Conclusions and recommendations |
| 3.1 Internal controls | |
| The 2017–18 audits reported 47 internal control weaknesses. While none were high risk, there were 15 repeat issues. |
Conclusion: Management accepted audit findings and advised they are actioning recommendations. Timely action is important to ensure internal controls operate effectively. |
| Twenty-two of these internal control weaknesses related to information technology processes and control environment. | Conclusion: Control weaknesses in information systems may compromise the integrity and security of financial data used for decision making and financial reporting. Recommendation: Agencies should strengthen user access administration to prevent inappropriate access to key IT systems by:
|
| The Department, NSW Land and Housing Corporation (LAHC) and three other cluster agencies’ contract registers are incomplete and/or inaccurate. | Recommendation: Agencies should ensure their contract registers are complete and accurate so they can more effectively govern contracts and manage compliance obligations. |
| 3.2 Audit Office annual work program | |
| Financial impact of the commissioning approach. The transfer of disability services to the National Disability Insurance Scheme and other commissioning of service delivery has contributed to a 36 per cent decrease in frontline employee numbers since 2015–16. Similarly, corporate services’ employee numbers reduced by 34 per cent. The Department’s salary costs have reduced by $232 million or 18 per cent from 2016–17. |
Conclusion: The ratio of corporate services employee numbers to support frontline and support services has remained at 1:10 since 2015–16, which indicates restructures have been planned to align with the transfer of disability services. |
| Impact of the new social housing maintenance contract Maintenance expenses have increased by about 40 per cent since the new maintenance contract commenced in April 2016. LAHC measures the benefits of the new maintenance contract such as improved tenant satisfaction. |
Conclusion: The new maintenance contract has contributed to some positive social outcomes such as tenants being employed by the contractors to conduct maintenance, as call centre operators and in administration. However, more can be done to ensure value for money is being achieved. |
| ChildStory IT Project Whilst phase one of the ChildStory IT project went 'live' in 2017–18, the planned timetable has not been met and the revised date for full implementation is end of 2018. According to the 2014–15 NSW Budget, the budget for ChildStory was $100 million over a four-year period. During the design and implementation stage, this amount was revised to $128 million, with approval of the Expenditure Review Committee. The actual cost incurred over the four years until 30 June 2018, is approximately $131 million. We identified issues with the data migration from the legacy systems to ChildStory. |
Conclusion: To inform future IT projects, we understand the Department is capturing our findings, along with the findings from the Department of Finance, Services and Innovation’s ‘Healthchecks’. |
This chapter outlines certain service delivery outcomes for 2017–18. The data on activity levels and performance is provided by Cluster agencies. The Audit Office does not have a specific mandate to audit performance information. Accordingly, the information in this chapter is unaudited.
In our recent performance audit, Progress and measurement of Premier's Priorities, we identified 12 limitations of performance measurement and performance data. We recommended that the Department of Premier and Cabinet ensure that processes to check and verify data are in place for all agency data sources.
Transport 2018
The Auditor-General for New South Wales, Margaret Crawford released her report today on key observations and findings from the 30 June 2018 financial statement audits of agencies in the Transport cluster. Unqualified audit opinions were issued for all agencies' financial statements. However, assessing the fair value of the broad range of transport related assets creates challenges.
This report analyses the results of our audits of financial statements of the Transport cluster for the year ended 30 June 2018. The table below summarises our key observations.
This report provides Parliament and other users of the Transport cluster’s financial statements with the results of our audits, our observations, analysis, conclusions and recommendations in the following areas:
- financial reporting
- audit observations.
Financial reporting is an important element of good governance. Confidence and transparency in public sector decision making are enhanced when financial reporting is accurate and timely.
This chapter outlines our audit observations related to the financial reporting of agencies in the Transport cluster for 2018.
| Observation | Conclusions and recommendations |
| 2.1 Quality of financial reporting | |
| Unqualified audit opinions were issued for all agencies' financial statements | Sufficient audit evidence was obtained to conclude the financial statements were free of material misstatement. |
| 2.2 Key accounting issues | |
| Valuation of assets continues to create challenges. Although agencies complied with the requirements of the accounting standards and Treasury policies on valuations, we identified some opportunities for improvements at RMS. |
RMS incorporated data from its asset condition assessments for the first time in the valuation methodology which improved the valuation outcome. Overall, we were satisfied with the valuation methodology and key assumptions, but we noted some deficiencies in the asset data in relation to asset component unit rates and old condition data for some components of assets. Also, a bypass and tunnel were incorrectly excluded from RMS records and valuation process since 2013. This resulted in an increase for these assets’ value by $133 million. The valuation inputs for Wetlands and Moorings were revised this year to better reflect the assets' characteristics resulting in a $98.0 million increase. |
| 2.3 Timeliness of financial reporting | |
| Residual Transport Corporation did not submit its financial statements by the statutory reporting deadline. | Residual Transport Corporation remained a dormant entity with no transactions for the year ended 30 June 2018. |
| With the exception of Residual Transport Corporation, all agencies completed early close procedures and submitted financial statements within statutory timeframes. | Early close procedures allow financial reporting issues and risks to be addressed early in the reporting and audit process. |
| 2.4 Financial sustainability | |
| NSW Trains and the Chief Investigator of the Office of Transport Safety Investigations reported negative net assets of $75.7 million and $89,000 respectively at 30 June 2018. | NSW Trains and the Chief Investigator of the Office of Transport Safety Investigations continue to require letters of financial support to confirm their ability to pay liabilities as they fall due. |
| 2.5 Passenger revenue and patronage | |
| Transport agencies revenue growth increased at a higher rate than patronage. | Public transport passenger revenue increased by $114 million (8.3 per cent) in 2017–18, and patronage increased by 37.1 million (5.1 per cent) across all modes of transport based on data provided by TfNSW. |
| Negative balance Opal Cards resulted in $3.8 million in revenue not collected in 2017–18 and $7.8 million since the introduction of Opal. A total of 1.1 million Opal cards issued since its introduction have negative balances. | Transport for NSW advised it is liaising with the ticketing vendor to implement system changes and are investigating other ways to reduce the occurrences. |
| 2.6 Cost recovery from public transport users | |
| Overall cost recovery from users has decreased. | Overall cost recovery from public transport users (on rail and bus services by STA) decreased from 23.2 per cent to 22.4 per cent between 2016–17 and 2017–18. The main reason for the decrease is due to expenditure increasing at a faster rate than revenue in 2017–18. |
Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision making.
This chapter outlines our observations and insights from:
- our financial statement audits of agencies in the Transport cluster for 2018
- the areas of focus identified in the Audit Office annual work program.
The Audit Office Annual Work Program provides a summary of all audits to be conducted within the proposed time period as well as detailed information on the areas of focus for each of the NSW Government clusters.
| Observation | Conclusions and recommendations |
| 3.1 Internal controls | |
| There was an increase in findings on internal controls across the Transport cluster. | Key themes related to information technology, employee leave entitlements and asset management. Eighteen per cent of all issues were repeat issues. |
| 3.2 Audit Office Annual work program | |
| The Transport cluster wrote-off over $200 million of assets which were replaced by new assets or technology. |
Majority of this write-off was recognised by RMS, with $199 million relating to the write-off of existing assets which have been replaced during the year. |
| RailCorp is expected to convert to TAHE from 1 July 2019. | Several working groups are considering different aspects of the TAHE transition including its status as a for-profit Public Trading Enterprise and which assets to transfer to TAHE. We will continue to monitor developments on TAHE for any impact to the financial statements. |
| RMS' estimated maintenance backlog at 30 June 2018 of $3.4 billion is lower than last year. Sydney Trains' estimated maintenance backlog at 30 June 2018 increased by 20.6 per cent to $434 million. TfNSW does not quantify its backlog maintenance. | TfNSW advised it is liaising with Infrastructure NSW to develop a consistent definition of maintenance backlog across all transport service providers. |
| Not all agencies monitor unplanned maintenance across the Transport cluster. | Unplanned maintenance can be more expensive than planned maintenance. TfNSW should develop a consistent approach to define, monitor and track unplanned maintenance across the cluster. |
This chapter outlines certain service delivery outcomes for 2017–18. The data on activity levels and performance is provided by Cluster agencies. The Audit Office does not have a specific mandate to audit performance information. Accordingly, the information in this chapter is unaudited.
We report this information on service delivery to provide additional context to understand the operations of the Transport cluster and to collate and present service information for different modes of transport in one report.
In our recent performance audit, Progress and measurement of Premier's Priorities, we identified 12 limitations of performance measurement and performance data. We recommended that the Department of Premier and Cabinet ensure that processes to check and verify data are in place for all agency data sources.
Volume Eight 2011 Focus on Transport and Ports
The report includes comments on financial audits of government agencies in the Transport and Ports sectors. The audit of corporations’ financial statements for the year ended 30 June 2011 resulted in unmodified audit opinions within the Independent Auditor’s Reports. A key recommendation from the report is that Sydney Ports Corporation should continue working with other government authorities and industry stakeholders to improve the effectiveness of program initiatives for increasing container freight movements by rail. The Corporation should review the underlying causes hindering growth in the rail mode and develop and implement strategies to address the unfavourable trend.
