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12 December 2017

Published

Industry 2017

Industry

Asset valuation

Compliance

Internal controls and governance

Procurement

Project management

Risk

The following report highlights the results of the financial audits of NSW Government entities in the Industry cluster. The report focuses on key observations and findings from the most recent audits of these entities.

The report notes that TAFE NSW will continue to incur extra costs each year to produce reliable financial information due to deficiencies in its student administration system. TAFE NSW plans to replace its Student Administration and Learning Management system in 2018-19 at an estimated cost of $89 million.

1. Financial reporting and controls

Financial reporting	Unqualified audit opinions were issued for 44 out of 48 financial statement audits with four audits incomplete. Early close procedures continue to promote earlier and better quality financial reporting.
Financial performance	The cluster recorded a net deficit of $107 million in 2016–17 ($78.0 million in 2015–16). Contributing to the overall cluster net deficit was the Department's $226 million net deficit offset by net surpluses at Water NSW and the Forestry Corporation of New South Wales.
TAFE NSW continues to experience system issues	TAFE NSW incurs extra costs each year to produce reliable financial information due to deficiencies in its student administration system. TAFE NSW plans to replace its Student Administration and Learning Management system in 2018–19 at an estimated cost of $89 million.
Internal controls	We identified 180 internal control issues, including 61 repeat issues across the cluster. We rated four of these issues as 'high' risk, 98 as ‘moderate’ risk and 78 as ‘low’ risk. Of the 180 issues raised, 37 related to financial reporting and 52 related to controls over processes such as procurement and fixed assets. Some internal control issues and recommendations identified in previous years, have been repeated and should be addressed promptly to reduce risks and improve processes.
Deficient user administration access	Agencies need to strengthen user access administration to critical financial systems.

2. Service delivery

Premier and State Priorities

Australian Bureau of Statistics data shows the Premier's priority for job creation has been achieved.

While performance has declined for the State priority to increase the proportion of people completing apprenticeships and traineeships, the Department advises it has initiatives in place to achieve this State priority, and the State priority for New South Wales to lead Australia in business confidence.

Crown land

The Department is working to respond to the recommendations from a Parliamentary Inquiry into Crown Land and to implement the revised framework contained in the Crown Land Management Act 2016.

Aboriginal land claims

Despite a continued focus, the Department has been unsuccessful in reducing the number of unprocessed Aboriginal land claims.

The Department should continue to implement measures to reduce the backlog of unprocessed Aboriginal land claims.

This report focuses on agencies in the Industry cluster. The report focuses on audit results, observations, conclusions and recommendations for financial reporting and controls, and service delivery.

This cluster leads the State's promotion of New South Wales as the place to invest and produce goods and services. Significant cluster agencies deliver services in the following areas:

Confidence in public sector decision-making and transparency is enhanced when financial reporting is accurate and timely. Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies.

This chapter outlines audit observations, conclusions and recommendations for the financial reporting and controls of agencies in the cluster for 2016–17.

Observation	Conclusion or recommendation
2.1 Quality of financial reporting
Unqualified audit opinions were issued for 44 out of 48 financial statement audits. Four audits are continuing.	Ongoing improvements in the preparation of financial statements helped identify and resolve material issues.
The number of misstatements within the cluster fell from 104 in 2015–16 to 70 in 2016–17.	The ‘early close procedures’ initiative introduced by the Treasury in 2011–12 has reduced the number of misstatements each year.
2.2 Timeliness of financial reporting
Most agencies complied with the Treasury’s early close procedures and the timetable for the preparation and audit of financial statements.	Greater focus on financial reporting and effective early close procedures has improved the timeliness of financial reporting, but further improvements are required.
2.3 Key financial issues from cluster agencies
The Department of Industry completed a revaluation of Crown land and continues work on improving the accounting for Crown land.	The value of Crown land recognised in the Department's financial statements at 30 June 2017 was $5.3 billion. The revaluation was carried out using a revised mass valuation approach which reduced complexity and subjectivity and improved transparency.
There is no process in place to ensure agencies recognise all the Crown land they manage and control.	Recommendation: The Department should confirm the completeness and accuracy of the Crown land database with other organisations that manage and control Crown land to improve the reliability of its records.
TAFE NSW incurred approximately $6 million of direct costs to deal with issues in its student administration system and establish the integrity of its financial data for 2016–17.	TAFE NSW will continue to incur extra costs each year to produce reliable financial information. TAFE NSW advises it intends to replace the Student Administration and Learning Management system it jointly implemented with the Department of Education three years ago at a cost $40.2 million. TAFE plans to implement the new system in 2018–19 at an estimated cost of $89 million.
2.4 Key financial information
The cluster recorded a net deficit of $107 million in 2016–17 ($78.0 million in 2015–16).	The overall cluster net deficit included the Department's $226 million net deficit which was partly offset by net surpluses in a number of other agencies, including Water NSW and the Forestry Corporation of New South Wales. Most agencies in the cluster, including the Department, but excluding the State owned corporations, are dependent on the NSW Government for the majority of their revenue.
2.5 Financial performance and sustainability
We assessed the performance of certain agencies against key financial sustainability indicators. This identified four agencies with adjusted net deficits and two agencies with liquidity ratios below one.	Overall, based on our analysis these agencies are not at high risk of sustainability concerns.
2.6 Internal controls
A significant number of repeat internal control issues were again raised with management for certain agencies in the cluster.	Recommendation (repeat issue): Internal control issues and recommendations from previous years should be addressed promptly to reduce risks and improve processes.
User access administration over financial systems needs to be improved. 17 moderate risk issues related to user access administration across nine agencies were identified.	Recommendation: Agencies should ensure administration of user access to critical systems retains documentation of approvals to create, modify and deactivate user access allocates appropriate access rights performs and documents regular user access reviews logs and monitors privileged/super user account activity deactivates terminated user access on a timely basis does not allow shared generic user accounts, instead of unique user accounts for staff performing administration tasks.

Government outcomes can be achieved by delivering services through a mix of the public, private or not-for-profit sectors. Service delivery reform is most successful if there is clear accountability for service delivery outcomes, decisions are aligned to the government's strategic direction, and performance and value for money are monitored and evaluated.

This chapter outlines our audit observations, conclusions and recommendations for the service delivery of agencies in the cluster for 2016–17.

Issues	Conclusion or recommendation
3.1 Measuring and reporting on performance
The Department is responsible for two State priorities (increasing apprenticeships and business confidence) and the Premier's priority of creating jobs. The Department also supports four state priorities.	Australian Bureau of Statistics data shows the Premier's priority for job creation continues to be achieved. The Department reported that the number of people completing apprenticeships and traineeships had declined to 59 per cent against a 2019 target of 65 per cent, while the State was ranked first or second on a range of business confidence indicators.
3.2 Improvements required in the administration of Crown land
The Department faces many challenges in the administration of Crown land. These challenges range from inadequate systems and processes through to satisfying competing commercial, environmental, and community interests.	The Department has implemented, or is implementing the recommendations from a performance audit on the Sale and Lease of Crown land and the Parliamentary Inquiry into Crown land. It is also implementing the revised framework for Crown land contained in the Crown Land Management Act 2016.
3.3 Aboriginal land claims over Crown land
The number of unprocessed Aboriginal land claims continues to increase. Work on finalising Aboriginal Land Agreements, which may help address the claims backlog, is continuing.	Recommendation (repeat Issue): The Department should continue to implement measures to reduce the number of unprocessed Aboriginal land claims.
3.4 Skills development
Eleven contracted Smart and Skilled service providers had their contracts cancelled for quality issues. There were 391 providers of Smart and Skilled qualifications as at October 2017.	The Department of Industry spent $1.4 billion on the provision of vocational education and training. The Department has controls in place to monitor the performance of contracted service providers to ensure quality delivery of training.

Appendix one - List of 2017 recommendations

Appendix two - Status of 2016 recommendations

Appendix three - Agencies selected for this volume

Appendix four - Timeliness of financial and audit reporting

Appendix five - Financial audit reporting

Appendix six - Financial analysis

28 November 2017

Published

Justice 2017

Justice

Asset valuation

Compliance

Financial reporting

Fraud

The following report focuses on key observations and findings from the most recent audits of law and order and emergency services agencies in the Justice cluster.

No qualified audit opinions were issued on Justice agencies' financial statements. However, agencies that used the Department of Justice as their service provider experienced difficulties finalising their accounts. This was due to issues with the department’s implementation of a new financial accounting and reporting system and the continued establishment of its Business Support Centre. The Department is working to remediate the new finance system.

Financial reporting	Unqualified audit opinions were issued for all agencies' 30 June 2017 financial statements. However, some agencies' year end financial reporting procedures were impacted by the implementation of a new finance system and processes at the Department.
Early Close	Early close procedures continue to help agencies present audited financial statements on time, but there is room for further improvement.
NSW Police Force Death and Disability Scheme	The cost of the NSW Police Force Death and Disability Scheme was higher than the statutory target.
Fire and Rescue NSW Death and Disability Scheme	The Fire and Rescue NSW Death and Disability Scheme liability was $179 million, but is projected to reach $257 million by 30 June 2022.
Internal Controls	The Department experienced significant, but avoidable internal control issues in its payroll and finance functions following implementation of a new IT finance system (Justice SAP) and continued establishment of its Business Support Centre. We found 94 internal controls issues, including 28 findings repeated from the previous year.
Human Resources	Agencies have not met State targets for managing annual leave balances.

2. Service Delivery

Domestic violence reoffending	The Department reports decreases in domestic violence reoffending rates, but they remain above the Premier's target
Rates of reoffending	Adult reoffending rates remain above the State's priority target. Last year, more than half had returned to prison or Corrective Services within two years of release. The Department has introduced initiatives to reduce reoffending, but their impact will not be known for several years
Road Fatalities	New South Wales' road fatalities decreased slightly in 2016–17, but remains slightly above the State priority target..
NSW crime trends	NSW Bureau of Crime statistics and Research data shows the trend in most crime categories in New South Wales has been better than national trends over the last five years.
Adult inmate numbers	Departmental data shows that NSW prisons remained overcrowded in 2016–17, but the rate of growth in inmate numbers slowed.
Adult inmate resources	Data from the Department and the Justice Heath and Forensic Mental Health Network shows inmate access to some resources and services has not kept pace with increases in prison populations.
NSW District Court case backlog	After falling last year, the backlog of cases in the NSW District Court again increased but the age of backlog cases decreased, according to Departmental data.
Hazard Reduction works	The Office of the NSW Rural Fire Service advise adverse weather conditions reduced the total hectares of completed hazard reduction works by 50.7 per cent in 2016–17 compared to 2015–16.

Financial reporting is an important element of good governance. Confidence in public sector decision making and transparency is enhanced when financial reporting is accurate and timely. 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 audit observations, conclusions and recommendations for financial reporting and controls of Justice cluster agencies.

Observation	Conclusion or recommendation
2.1 Financial reporting
Unqualified audit opinions were issued for all agencies' financial statements.	Unqualified audit opinions were issued for all agencies' 30 June 2017 financial statements. The Department and agencies that used the Department as their service provider, were impacted by the Department's Justice SAP, and Business Support Centre implementations.
2.2 Timeliness of financial reporting
Most agencies complied with the statutory timeframes for completion of early close procedures and preparation and audit of financial statements.	Early close procedures continue to facilitate the timely preparation of financial statements and completion of audits. Early close procedures for some agencies was diminished by the Department's Justice SAP and Business Support Centre implementations.
2.3 Death and disability schemes
The cost of the NSW Police Blue Ribbon scheme reportedly decreased, but remains above the statutory target of 4.6 per cent of total NSW Police Officer's remuneration. The Fire and Rescue Death and Disability Scheme liability has almost doubled over the past five years.	The Blue Ribbon Scheme cost $12.7 million or 10.4 per cent less in 2016–17 following an improvement in claims' experience. The was reflected in the cost of the scheme, which decreased from 6 per cent to 5.45 per cent of total NSW Police Officers’ remuneration. The Scheme’s liability was $179 million at 30 June 2017, almost double the $92 million recorded at 30 June 2013. A five-year period has been used due to the sensitivity of annual movements in the liability to changes in discount rates. According to Fire and Rescue NSW projections the liability will reach $257 million by 30 June 2022.
2.5 Internal Controls
There were significant payroll and general finance related issues resulting from the Department's Justice SAP system implementation and establishment of the Business Support Centre.	Recommendation: The Department should reinstate controls over financial information as soon as possible, and capture and apply lessons learned from recent project implementations, including LifeLink, in any relevant future implementations.
2.7 Human Resources
More than a third of Justice cluster employees have annual leave balances above the State's target.	Recommendation: Cluster agencies with annual leave balances above the State's target should proactively manage their leave balances. Particular focus should be given to employees who have taken little or no leave in the last 12 months.

Achievement of government outcomes can be improved through effective delivery of the right mix of services, whether from the public, private or not for profit sectors. Service delivery reform will be most successful if there is clear accountability for service delivery outcomes, decisions are aligned to strategic direction and performance is monitored and evaluated.

The Justice cluster is an integrated cluster with key service delivery inter-dependencies. Achieving State priorities and ensuring communities are safe requires both upstream and downstream agencies to be adequately resourced. This is a delicate balance. Increases in frontline policing can subsequently impact the court system. Court backlogs can in turn increase prison overcrowding, and limit the opportunities for inmate rehabilitation. Failure to successfully rehabilitate prisoners and prevent reoffending could impact future police resourcing.

This chapter outlines our audit observations, conclusions and recommendations related to service delivery by agencies in the Justice cluster for 2016–17.

Observation	Conclusion or recommendation
Data from the NSW Bureau of Crime Statistics and Research shows that domestic violence reoffending decreased from 15.9 per cent in 2014–15 to 15.5 per cent in 2015–16, but remains 4.8 percentage points above the Premier's target.	Reducing domestic violence reoffending is challenging. While there was a marginal improvement in 2015–16, the Justice cluster needs to continue efforts to reduce reoffending rates, if the Premier's priority target is to be met by 2019.
Productivity Commission data shows that in the year to 30 June 2016, 50.7 per cent of released prisoners had returned to prison and 55.1 per cent to Corrective Services, within two years of release.	There has been a consistent increase in reoffending rates over the last five years. Recommendation: The Department should reassess the sufficiency and effectiveness of measures aimed at reducing reoffending, including the recently announced initiatives, if the State priority target is to be met by 2019. A $237 million program to reduce reoffending was announced in August 2016. While new initiatives were introduced in 2016–17, their impact on reoffending rates will not be known for several years.
New South Wales' road fatalities per 100,000 people slightly exceeded the 2016–17 target.	Statistics from the NSW Centre for Road Safety shows that New South Wales' road fatalities decreased to 4.6 deaths per 100,000 people in 2016–17, slightly above the State priority target of 4.3 deaths. This is better than the 5.1 deaths recorded in 2015–16, but worse than the 4.0 deaths in 2014–15.
Between 31 December 2012 and 31 December 2016, the number of crimes has trended down in most crime categories, except for sexual assault, which has increased in each of the last five years.	The downward trend in most crime categories indicates the cluster is effectively achieving the State’s priority to prevent and reduce crime. However, the Department should assess whether the mix of offered programs is consistent with crime trends.
Department data shows that the NSW prison system remained overcrowded in 2016–17. Overcrowding of correctional centres can negatively impact all aspects of custodial life, and ultimately higher reoffending rates.	Data from the Department shows that the inmate population reached 13,253, compared to an operational capacity of 13,402 beds on 27 August 2017. This equates to an operational vacancy rate of 1.1 per cent, which is significantly less than the recommended 5.0 per cent buffer. However, the rate of inmate growth slowed to 5.1 per cent, from 11.8 per cent in 2015–16. The Department should ensure that measures aimed at reducing reoffending are not compromised by continued overcrowding. Reoffending, will in the long term contribute to further overcrowding.
Adult inmate resources.	Inmate access to some resources and services has not kept pace with increases in prison populations, such as the ratio of nurses to inmates. In addition, Productivity Commission information on out-of-cell hours in 2015–16 shows New South Wales prisoners' average time out-of-cell of 7.8 hours was the lowest of any Australian jurisdiction.
After falling in 2015–16, the backlog of cases in the NSW District Court increased again in 2016–17. The age of cases however decreased in 2016–17 compared to 2015–16.	A working group which includes the Department and the Chief Judge of the District Court has identified a number of new measures to address the backlog. The Department needs to assess whether these measures will be sufficient, given that the backlog increased again in 2016–17. As noted in financial reporting and controls chapter, staffing levels in a number of just cluster agencies increased in 2016–17, in response to the backlog.
Department data shows the annual cost of a juvenile detainee decreased from $355,444 to $335,840 (5.5 per cent) in the three-year period between 2014–15 and 2016–17.	The Department has been analysing the Juvenile Justice division's operating costs in the context of declining custodial numbers, and has achieved some cost savings. The savings in part reflect decreases in the number of detainees.
The Office of the NSW Rural Fire Service data shows that completed hazard reduction works decreased in 2016–17.	The total hectares of completed hazard reduction works decreased 50.7 per cent in 2016–17 compared to 2015–16. The Office of the NSW Rural Fire Service attributes the decrease to adverse weather conditions during the peak burning period

Appendix one - List of 2017 recommendations

Appendix two - Status of 2016 recommendations

Appendix three - Agencies selected for this volume

Appendix four - Financial audit reporting

23 November 2017

Published

Agency compliance with NSW Government travel policies

Education

Community Services

Finance

Health

Industry

Justice

Local Government

Planning

Premier and Cabinet

Transport

Treasury

Universities

Whole of Government

Compliance

Internal controls and governance

Procurement

Overall, agencies materially complied with NSW Government travel policies.

However, the Auditor-General found some agencies:

did not always book official travel through the approved supplier
had weaknesses in their travel approval processes
had travel policies that were inconsistent with the NSW Government policy
did not adequately manage their travel records.

Last year the NSW Government spent almost $250 million on travel. The government’s travel policies aim to help agencies make better travel decisions and reduce costs. The Department of Finance, Services and Innovation (DFSI) is responsible for the government’s travel policy and manages the government contract with an approved private sector provider to procure travel services.

This audit assessed how effective agency processes were to ensure compliance with:

the ‘Policy on Official Travel within Australia and Overseas’ issued by the Department of Premier and Cabinet in Circular OFS-2014–07 ‘Official Travel in Australia and Overseas’ (the former policy)
the ‘NSW Government Travel and Transport Policy’ issued by DFSI (the new policy), effective from 28 September 2016.

We examined 15 agencies from different NSW Government clusters with significant travel expenditure. For a list of participating agencies, refer to the Appendix two.

Conclusion

We found that overall, agencies materially complied with NSW Government travel policies. However, some agencies:

did not always book official travel through the approved supplier
had weaknesses in their travel approval processes
had travel policies that were inconsistent with the government policy
did not adequately manage their travel records.

Self-assessments indicate agencies comply with most aspects of the new policy. Agencies also believe more guidance from DFSI about certain aspects of the policy would increase compliance.

We asked the 15 participating agencies to complete a self assessment of the processes they have implemented to comply with the new policy. The key observations are summarised below.

Appendix one - Responses from agencies

Appendix two - List of selected agencies

21 November 2017

Published

Central Agencies 2017

Finance

Premier and Cabinet

Asset valuation

Compliance

Financial reporting

Fraud

Information technology

Internal controls and governance

Project management

This report highlights the results of the financial audits of NSW Government central agencies. The report focuses on key observations and findings from the most recent financial statement audits of agencies in the Treasury, Premier and Cabinet, and Finance, Services and Innovation clusters.

The report includes a range of findings in respect to service delivery. One repeat finding is that while the Government regularly reports on the 12 Premier's priorities, there is no comprehensive reporting on the 18 State priorities.

1. Financial reporting and controls

Audit Opinions	Unqualified audit opinions were issued for all agencies' 30 June 2017 financial statements.
Early close	Early close procedures continue to facilitate the timely preparation of financial statements and completion of audits, but agencies can make further improvement.
Deficient user administration access	User access administration over financial systems remains an area of weakness. Agencies need to strengthen user access administration to critical systems.
Transitioning to outsourced service providers	Transitioning of services to outsourced service providers can be improved. Outsourcing services can lead to better outcomes, which may include lower transaction costs and improved services, but it also introduces new risks.

2. Service delivery

Premier and State Priorities	A comprehensive report of performance against the 18 State Priorities is yet to be published. While some measures are publicly reported through agency annual reports or other sources, a comprehensive report of performance against the 18 State Priorities would ensure all State Priorities are publicly reported, provide a single and easily accessible source of reference and improve transparency.
ICT and digital government	The Digital Government Strategy was released in May 2017. Targets will need to be set to assess and monitor progress against the Strategy.
Digital information security	Not all agencies are complying with the NSW Government's information security policy. This increases the risk of noncompliance with legislation, information security breaches and difficulty restoring data or maintaining business continuity in the event of a disaster or disruption.
Property and asset utilisation	Property NSW's performance reporting would be enhanced by developing and reporting on customer satisfaction, reporting against set targets and benchmarking cost of service to the private sector.

3. Government financial services

Prudential oversight of NSW Government superannuation funds	Prudential oversight of SAS Trustee Corporation Pooled Fund and Parliamentary Contributory Superannuation Fund has not been prescribed. Structured and comprehensive prudential oversight of these funds remains important as they operate in a specialised, complex and continuously changing investment market sector, have over 106,000 members and manage investments in excess of $42.4 billion.
Green slip scheme affordability	Currently, Green Slips in NSW are the most expensive in Australia. However, CTP reforms are expected to reduce the cost of Green Slips.

This report sets out the results of the 30 June 2017 financial statement audits of NSW Government's central agencies and their cluster agencies.

Central agencies play a key role in ensuring policy coordination, good administrative and people management practices and prudent fiscal management. The central agencies and their key responsibilities are set out below.

Confidence in public sector decision‑making and transparency is enhanced when financial reporting is accurate and timely. Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. This chapter outlines our audit observations, conclusions or recommendations related to financial reporting and controls of agencies for 2016–17.

Observation	Conclusion or recommendation
2.1 Quality of financial reporting
Unqualified audit opinions were issued for all agency financial statements.	The quality of financial reporting continues to remain strong across the clusters.
2.2 Timeliness of financial reporting
Most agencies complied with the statutory timeframes for completion of early close procedures and preparation and audit of financial statements.	Early close procedures continue to facilitate the timely preparation of financial statements and completion of audits, but agencies can make further improvement.
2.3 Financial performance and sustainability
We assessed the performance of agencies listed in Appendix six against some key financial sustainability indicators. This highlighted two agencies with negative operating margins of more than ten per cent and one agency with a liquidity ratio of less than 0.5.	These agencies have strategies in place to remain financially sustainability and manage their liquidity. Our analysis found that, overall, the agencies are not at high risk of sustainability concerns.
2.4 Internal Controls
User access administration over financial systems remains an area of weakness. Sixteen moderate risk and ten low risk issues related to user access administration across eight agencies were identified.	Recommendation: Agencies should review user access administration to critical systems to ensure: policies for user access creation, modification and deactivation are documented approval is being obtained to establish, modify or delete user accounts regular user access reviews are performed and highly privileged user account activity is logged and monitored evidence of review is maintained.
Transitioning of services to outsourced service providers can be improved. Our 2016–17 audits identified one high risk issue relating to Property NSW's outsourcing of property and facility management services to the private sector. While a high risk issue was identified in 2015–16 from the Department of Finance, Services and Innovation's outsourcing of transactional and information technology services to GovConnect there has been an improvement in GovConnect's internal control environment throughout 2016–17.	Outsourcing services can lead to better outcomes, which may include lower transaction costs and improved services, but it also introduces new risks. The transition needs to be carefully managed and requires thorough planning and effective project governance. This should be supported by oversight and direction from senior management and independent project assurance.
2.5 Human Resources
The percentage of full‑time equivalent staff with annual leave greater than 30 days in the Finance, Services and Innovation, Premier and Cabinet and the Treasury clusters is 7.9 per cent, 17.1 per cent and 18.4 per cent respectively.	Agencies have strategies in place to reduce annual leave balances that are greater than 30 days. The effectiveness of these strategies will need to be monitored to ensure they are helping to achieve the desired outcome.

This chapter outlines our audit observations, conclusions and recommendations relating to service delivery for 2016–17.

Observation	Conclusion or recommendation
3.1 Premier and State priorities
The Department of Premier and Cabinet monitors the achievement of targets and the implementation of initiatives to deliver the 12 Premier’s Priorities. Responsible ministers and agencies manage the 18 State Priorities. A comprehensive report of performance against the 18 State Priorities is yet to be published.	While some measures are publicly reported through agency annual reports or other sources, a comprehensive report of performance against the 18 State Priorities would ensure all State Priorities are publicly reported, provide a single and easily accessible source of reference and improve transparency. Where possible, independent sources are used to measure performance, however without independent assurance there is an increased risk that the target measures are inaccurate, not relevant or do not fairly represent actual performance.
Performance against the State Priority to make NSW the easiest state to start a business is not currently published. A key aspect of making NSW the easiest state to start a business is making regulatory obligations easier to understand and implement.	Initiatives, such as easy to do business and red tape reduction are in place to help achieve this priority. The regulatory policy framework is under review following an October 2016 performance audit on ‘Red tape reduction’ that found the regulatory burden of legislation had increased.
3.2 Financial management
Revenue NSW earned record crown revenue of $30.0 billion in 2016–17 to support the state's finances.	Record crown revenue has been driven by the sustained increase in duties revenue, which has increased by 93.7 per cent over the last five years. This is a consequence of the continued strength in the property market over this time and large one off NSW Government business asset sales and leases.
3.3 ICT and digital government
The Digital Government Strategy (the Strategy) was released in May 2017 to build on reforms set out in previous ICT strategies.	The Strategy’s priorities and enablers aim to support digital innovation. Targets and measures will need to be set to assess and monitor progress against the Strategy.
The Digital Information Security Policy (DISP) is a key tool that helps ensure a minimum set of information security controls are implemented across NSW Government agencies. A review of 2016 annual reports found 15 agencies (13 in 2015) did not attest to compliance with the DISP and of the agencies that attested to compliance, 34 reported issues associated with their compliance.	The Strategy’s priorities and enablers aim to support digital innovation. Targets and measures will need to be set to assess and monitor progress against the Strategy. Failure to comply with the DISP increases the risk of noncompliance with legislation, information security breaches and difficulty restoring data or maintaining business continuity in the event of a disaster or disruption.
3.4 Property and asset utilisation
Property NSW's performance reporting could be improved. M2012-20 'Government Property NSW and Government Property Principles' required Property NSW to set key performance indicators to measure property and asset utilisation performance.	Property NSW's performance reporting would be enhanced by developing and reporting on customer satisfaction, reporting against set targets and benchmarking cost of service to the private sector.

This chapter outlines our audit observations, conclusions and recommendations specific to NSW Government agencies providing financial services.

Observation	Conclusion or recommendation
4.1 Key issues
The SAS Trustee Corporation (STC) Pooled Fund and the Parliamentary Contributory Superannuation (PCS) Fund are not required to comply with the prudential and reporting standards issued by the Australian Prudential Regulation Authority (APRA). Amendments to relevant legislation allows the Minister for Finance, Services and Property to prescribe applicable prudential standards and audit requirements.	Structured and comprehensive prudential oversight of these funds remains important as they operate in a specialised, complex and continuously changing investment market sector, have over 106,000 members and manage investments of more than $42.4 billion. Recommendation: The Treasury should liaise with the respective Trustees to implement appropriate prudential standards and oversight arrangements for the exempt public sector superannuation funds.
Currently, Green Slips in NSW are the most expensive in Australia. Average premiums for Sydney Metropolitan vehicles increased by 10.4 per cent between 1 January 2016 and 31 December 2016.	CTP reforms are expected to reduce the cost of Green Slips. The State Insurance Regulatory Authority will need to ensure it has appropriate processes in place to track and report against the expected benefits.
4.2 Financial performance and sustainability
Net unfunded superannuation liabilities were $15.0 billion at 30 June 2017. Under the Fiscal Responsibility Act 2012, the NSW Government’s target is to eliminate unfunded superannuation liabilities by 2030.	The superannuation funds’ strategic asset allocation and investment strategies are monitored and adjusted to help achieve a fully funded position by 2030.
The Home Warranty Scheme commenced in 2011. Over this time total premiums collected have not been sufficient to cover expected claim costs.	Funding arrangements introduced during 2016–17 allow the Home Building Compensation Fund to apply to the Crown for reimbursement of unfunded realised losses from under-pricing of premiums. Other reforms are planned to address the long term sustainability of the home building compensation scheme.
4.3 Investment performance
The NSW Government’s main superannuation funds have maintained the management expense ratio (MER) at consistent levels over the past two years. The Parliamentary Contributory Superannuation (PCS) Fund does not set an MER target.	MER is an industry recognised ratio to measure the performance of funds and investment managers. Recommendation: The Fund Secretary for the PCS Fund, in conjunction with the Trustee, should consider establishing an appropriate management expense ratio target to measure performance.

Appendix one - List of 2017 recommendations

Appendix two - Status of 2016 recommendations

Appendix three - Agencies selected for this volume

Appendix four - Timeliness of financial reporting and audit reporting

Appendix five - Financial audit reporting

Appendix six - Financial analysis

2 November 2017

Published

Government Advertising: Campaigns for 2015–16 and 2016–17

Premier and Cabinet

Justice

Local Government

Compliance

Internal controls and governance

Management and administration

Procurement

The 'Stronger Councils, Stronger Communities' and the 'Dogs deserve better' government advertising campaigns complied with the Government Advertising Act and most elements of the Government Advertising Guidelines.

However, some advertisements were designed to build support for government policy and used subjective or emotive messages. This is inconsistent with the requirement in the Government Advertising Guidelines for 'objective presentation in a fair and accessible manner'.

Advertisements in the 'Stronger Councils, Stronger Communities' campaign used subjective statements such as 'the system is broken' and 'brighter future'. While advertisements in the 'Dogs deserve better' campaign used confronting imagery such as gun targets, blood smears and gravestones.

The Government Advertising Act 2011 (the Act) requires the Auditor-General to conduct a performance audit in relation to at least one government advertising campaign in each financial year. The performance audit assesses whether advertising campaigns were carried out effectively, economically and efficiently and in compliance with the Act, the regulations, other laws and the Government Advertising Guidelines (the Guidelines). In this audit, we examined two campaigns:

the ‘Stronger Councils, Stronger Communities’ campaign run by the Office of Local Government and the Department of Premier and Cabinet
the ‘Dogs deserve better’ campaign run by the Department of Justice.

Section 6 of the Act details the specific prohibitions on political advertising. Under this section, material that is part of a government advertising campaign must not contain the name, voice or image of a minister, member of parliament or a candidate nominated for election to parliament or the name, logo or any slogan of a political party. Further, a campaign must not be designed so as to influence (directly or indirectly) support for a political party.

The ‘Stronger Councils, Stronger Communities’ government advertising campaign was run by the Office of Local Government and the Department of Premier and Cabinet in four phases from August 2015 to May 2016. The total cost of the campaign was over $4.5 million. See Appendix 2 for more details on this campaign.

The ‘Stronger Councils, Stronger Communities’ advertising campaign has not breached the specific provisions of Section 6 of the Act which prohibits political advertising.

Two factors potentially compromised value for money for the campaign. The request for quotes for the design of the Phase 1 advertisement did not reflect the full scale of work to be undertaken, which was substantially greater than initially quoted. Further, the department did not meet all recommended timeframes to minimise media booking costs for all phases of the campaign.

The campaign did not comply with all administrative requirements in all phases. Advertising for Phase 1 commenced before the compliance certificate was signed. There was no evidence that a compliance certificate was signed for Phase 2 extension. The cost benefit analyses for Phase 2 and Phase 2 extension did not sufficiently consider alternatives to advertising, as is required by the Government Advertising Guidelines.

Advertisements adopted subjective messages designed to build public support for council mergers and directed audiences to websites for more detailed information. Campaign research identified statements that were most likely to reduce resistance to mergers. Some advertising content used subjective language, which we consider inconsistent with the requirement for ‘objective presentation’. Evaluations of advertising effectiveness also measured the success of the advertisements in increasing public support for council mergers.

No breach of specific prohibitions in the Act

Section 6 of the Act prohibits the use of government advertising for political advertising. A government advertising campaign must not:

be designed to influence (directly or indirectly) support for a political party
contain the name, voice or image of a minister, any other member of parliament or a candidate nominated for election to parliament
contain the name, logo or any slogan of, or any other reference relating to, a political party.

We did not identify any breach of the specific prohibitions listed above in the advertising content of this campaign.

Request for quotes to design advertisement did not reflect the full scope required

The request for quotes for the design of the Phase 1 advertisement did not reflect the full scale of work that was to be undertaken, and this created a risk to achieving value for money. The Office of Local Government sought quotes for design of a television advertisement only. It did not request an estimate for radio, online advertisements, or translation for linguistically diverse audiences, which were ultimately required for the campaign.

A full and fair assessment of which supplier could provide the best value for money could not be made given that the quotes obtained did not reflect the full scope of work. The final amount paid for the design of Phase 1 was 2.7 times the original quote. It is possible that another supplier that provided a quote could have provided overall better value for money.

The Office of Local Government continued to use the Phase 1 supplier for Phase 2 and Phase 2 extension (Exhibit 4). Where there are other suppliers that could feasibly compete for a contract, direct negotiation increases the risk the agency has not obtained the best value for money. The department advised that it continued with the same agency to avoid costs involved in briefing a new agency on the campaign.

The ‘Dogs deserve better’ government advertising campaign was run by the Department of Justice from August 2016, after the government announced its decision to prohibit greyhound racing, and was terminated in October 2016 after a change of government policy. The campaign had a budget of $1.6 million, with an actual spend of $1.3 million. See Appendix 2 for more details on this campaign.

The ‘Dogs deserve better’ advertising campaign has not breached the specific provisions of Section 6 of the Act which prohibits political advertising.

The Secretary of the department determined that urgent circumstances existed that required advertising to commence prior to completing a cost benefit analysis and peer review. There was a concern that industry participants may make impulse decisions to destroy greyhounds without further information on support services; there was also an identified need to promote public greyhound adoptions.

Phase 1 advertisements focused on explaining the reasons for the prohibition on greyhound racing with a reference to a website for further information. While industry participants were identified as the primary audience, media expenditure was not specifically targeted to this group. Phase 2 advertisements more effectively addressed the originally identified ‘urgent needs’ of providing information on support services for greyhound owners and information on how the public could adopt a greyhound.

The urgency to advertise potentially compromised value for money. The department did not use price competition when selecting a creative supplier due to a concern this would add to timeframes. Further, the department did not meet recommended timeframes to minimise media booking costs.

We identified three other areas in Phase 1 advertisements that were inconsistent with government advertising requirements. Advertisements used provocative language and confronting imagery, which we consider to be inconsistent with the requirement for ‘objective presentation’. Two statements presented as fact based on the Special Commission’s Inquiry report were inaccurate; one of these was due to a calculation error. Radio advertisements did not clearly identify that they were authorised by the New South Wales Government for the first few days of the campaign.

No breach of specific prohibitions in the Act

Section 6 of the Act prohibits the use of government advertising for political advertising. A government advertising campaign must not:

be designed to influence (directly or indirectly) support for a political party
contain the name, voice or image of a minister, any other member of parliament or a candidate nominated for election to parliament
contain the name, logo or any slogan of, or any other reference relating to, a political party.

We did not identify any breach of the specific prohibitions listed above in the advertising content of this campaign.

Animal welfare concerns were identified as the reason for urgent advertising

A brief prepared by the department in July 2016 raised concerns about the welfare of greyhounds following the NSW Premier’s announcement that the government would prohibit greyhound racing. The brief raised the risk that industry members may make impulse decisions to destroy their greyhounds without information on support that was being offered.

The department used the provisions in Sections 7(4) and 8(3) of the Act to expedite the release of advertising due to ‘other urgent circumstances’. This provision allows advertising to commence prior to completing the peer review process and cost benefit analysis.

In introducing the Government Advertising Bill to parliament in 2011, the then Premier noted that exceptional circumstances would cover situations ‘such as a civil emergency or sudden health epidemic’. There is no other guidance on when it is appropriate to use this section. It is at the discretion of a government agency head to determine whether a campaign is urgent.

Phase 1 advertisements did not focus on the urgent needs

This advertising campaign had three overarching objectives:

to increase public awareness of the animal welfare reasons for the closure of the greyhound racing industry
to change the behaviour of dog owners from potentially harming their greyhounds to treating them humanely, by accessing the support options and packages available
to promote greyhound adoptions by the public.

Alongside advertising, the department took other steps to engage with the greyhound racing industry. This included direct mail, face to face meetings around the State, setting up a call centre and community consultation through an online survey. Other government agencies and animal welfare agencies were also engaged to reach out to affected stakeholders.

Phase 1 advertising content focused on providing information about the reasons for the closure of the industry. The department’s radio and television advertisements did not refer to support packages or encourage the public to adopt a greyhound. While print advertisements did mention these things, this was only presented in fine print. In all advertisements, audiences were referred to a website for further information.

The focus of advertisements on the reasons for industry closure was not consistent with the identified needs to urgently commence advertising to influence the behaviour of dog owners and encourage the public to adopt a greyhound.

The content in Phase 2 advertisements, which began around four weeks after the first phase, was more explicit in highlighting the services and support for industry members such as offering business and retraining advice. These advertisements also referred audiences to a call centre number as well as the website.

Peer review process limited to influencing second phase of advertisements

In urgent circumstances, the Act allows for peer review to be completed after advertising has commenced. For this campaign, the peer review process was completed on 19 August 2016, two weeks after advertising had commenced. Where advertising commences before the peer review process is completed, the usefulness of peer reviewers’ recommendations is limited to informing subsequent phases of advertising and the post-campaign evaluation.

The peer review report found the messages in Phase 1 advertisements were not clearly defined, and the role of advertising was not clearly defined amongst other campaign activities. These recommendations informed the second phase of advertising, which ran from 27 August 2016 until the campaign was terminated in October 2016.

The department could not demonstrate value for money was achieved for creative work

The department provided a fixed budget for creative work when requesting quotes from creative agencies to develop advertising material. This is not consistent with the quotation requirements in the government’s Guidelines for Advertising and Digital Communication Services. This approach creates risks to achieving value for money as creative agencies are not required to compete on price for their services. The department advised that it had pre-set the creative costs based on a comparative government campaign of a similar size. This was done due to a concern that requiring agencies to compete on price would affect the short timeframe given to develop creative material.

Three creative agencies accepted the opportunity to present design ideas for the campaign. The department was unable to provide evidence of how it chose the preferred supplier out of these three agencies. Records are important for accountability and allow a procurement decision to be audited after an urgent decision.

Short notice did not allow for cost-efficient media booking for all phases

Placement of advertisements in various media channels was done through the State’s Media Agency Services contract. This contract achieves savings as the government can use its aggregated media spend to gain discounts from the media supplier.

The Department of Premier and Cabinet provides guidance to ensure cost efficient media booking. For example, media time for a television advertisement should be booked at least 6 to 12 weeks in advance. Radio advertisements should be booked at least 2 to 8 weeks in advance.

The peer review report noted that the department did not have adequate time to look for the most cost-efficient way to advertise. In its response to the peer reviewers, the department acknowledged this to be due to the urgency to start advertising. The media booking authority was signed by the department one day before the campaign commenced.

The department used a wide public campaign for a narrow target audience

The campaign identified greyhound industry participants as the primary target audience. In 201516 there were 1,342 greyhound trainers, 1,695 owner/trainers, 983 attendants and 1,247 breeders in New South Wales. The department’s advertising submission identified ‘concerns that industry members could make impulsive decisions, potentially jeopardising the welfare of a large number of dogs, prior to the shutdown of the industry’.

The submission’s evidence of advertising effectiveness focused on increasing the level of wider community support for the ban rather than stopping industry members from making impulse decisions. It used an early opinion poll to show that total support for the ban on greyhound racing rises by 17 points and opposition drops by four points following explanation of the findings of the Special Commission of Inquiry report.

The peer review report noted that the role of advertising was not clearly defined amongst the department’s range of other direct and targeted communications and consultations held with industry members.

No demonstrated basis for use of confronting imagery and provocative language

The Guidelines require ‘objective presentation in a fair and accessible manner’. Neither the Guidelines or Handbook further explain what objective presentation means. We have used an ordinary definition of this term as ‘not influenced by personal feelings or opinions in considering and representing facts’. This is synonymous with terms like ‘impartial’, ‘neutral’, and ‘dispassionate’ and opposite to ‘subjective’. We consider that to meet the current requirements in the Guidelines for objectivity, advertising content should contain accurate statements or facts, and avoid subjective language.

Phase 1 focussed on the ongoing consequences if no action was taken to close the industry. The advertisements used provocative language, for example ‘Up to 70 per cent of dogs are deemed wastage by their own industry. Wastage! Slaughtered just for being slow’. Advertisements used confronting imagery like gravestones, blood smears and gun targets.

Our literature review into this area highlighted mixed findings on the effectiveness of confrontational advertising materials. In some cases, shock campaigns may cause an audience to reject or ignore the message, and may even encourage people to do the opposite of the intended behaviour. In other cases, such as in road safety campaigns, this style of advertising can be successful. This shows the importance of conducting pre-campaign research before adopting a confrontational or emotive approach in advertising.

The Government Advertising Handbook recommends that an agency explain the rationale and the evidence for their chosen advertising approach. There was no evidence that the department researched the effectiveness of its advertising approach with its target audience. The department had planned to undertake creative concept testing as part of a strategy to ensure the creative material was understood by its audience. The department advised that due to the urgency of the campaign, it did not have time to conduct this testing.

Not all Phase 1 radio advertisements clearly identified that they were authorised by the New South Wales Government

For the first few days on air, Phase 1 radio advertisements ended by referring the audience to a government website, instead of clearly identifying that it had been authorised by the New South Wales Government. Government authorisations and logos ensure the work and the programs of the NSW Government are easily identifiable by the community.

The department’s cost benefit analysis did not consider alternatives to advertising

For government advertising campaigns that cost over $1.0 million, the Act requires the advertising agency to carry out a cost benefit analysis and obtain approval from the Cabinet Standing Committee on Communications, prior to commencing the campaign.

The department engaged with audiences through direct mail, face to face forums, and a telephone helpline in addition to advertising. However, the department’s cost benefit analysis did not meet the requirements in the Guidelines to specify the extent to which expected benefits could be achieved without advertising, and to compare costs of options other than advertising that could be used to successfully implement the program (see Exhibit 6).

The cost benefit analysis made optimistic assumptions about the impact of the campaign on greyhound adoptions. It estimated that 2,360 greyhounds would be adopted if the campaign was run. This is significantly higher than the ‘most optimistic outcome’ of re-homing in the Special Commission Inquiry report (we calculated this to be 1,467 greyhounds). There was insufficient evidence to support the higher number of adoptions in the cost benefit analysis.

The sensitivity analysis shows that using the Special Commission’s ‘most optimistic outcome’ figure of re-homing would reduce the net present value of advertising to be negative. Further, the cost benefit analysis also assumed that increased government funding would be made available to animal welfare and rehoming organisations to support more adoptions, but did not estimate or include this cost when calculating the net present value of advertising.

There were two factual inaccuracies in key messages used for Phase 1 advertisements

Section 8(2) of the Act requires the head of a government agency to certify that the proposed campaign ‘contains accurate information’. The Secretary of the Department of Justice signed the compliance certificate on 29 July 2016, before advertisements commenced.

We examined the accuracy of factual claims in this advertising campaign, by comparing the key statements to the report of Special Commission of Inquiry into the Greyhound Racing Industry (the Commissioner report). The Commissioner report was quoted by the NSW Government as the basis for its policy to transition the greyhound racing industry to closure.

We identified that two of the key statements used in Phase 1 advertisements to support the animal welfare reasons for industry closure were inaccurate (Exhibit 7).

Appendix one - Responses from agencies

Appendix two - About the campaigns

Appendix three - About the Audit

Appendix four - Performance Auditing

Parliamentary reference - Report number #294 - released 2 November 2017

19 September 2017

Published

Energy rebates for low income households

Planning

Industry

Compliance

Fraud

Internal controls and governance

Management and administration

The Department of Planning and Environment provides more than $245 million in energy rebates to around 27 percent of NSW households. This report highlights that the department is not monitoring the rebate schemes to understand whether they are delivering the best outcomes.

Most rebates are ongoing payments applied directly to energy bills reducing the amount payable by the householder. The structure of these rebates is complex and can be inequitable. Some households are eligible for four different rebates, each with its own eligibility criteria. Also, some households in very similar circumstances receive different levels of support depending on what type of energy is used in their home or which adult in the house is the energy account holder. For example, a household using both electricity and gas receives more assistance than a household with electricity alone even if total energy bills are the same.

The Department of Planning and Environment (Department) administers five energy rebate schemes targeted to low-income households. The five rebates are of two key types:

1. Ongoing support to pay energy bills
2. Crisis Support

More than one million rebates are paid each year to over 800,000, or around 27 per cent, of NSW households. Households learn about rebates from a variety of sources including: Service NSW, government and energy retailer websites, energy retailer welcome packs, Department marketing efforts, information on energy bills, and Centrelink.

The budget for energy rebates is increasing every year and in 2017–18 is more than $245 million. The Department delivers most rebates through a network of partnership arrangements with:

energy retailers, who apply rebates directly onto energy bills
more than 340 charities and other NGOs who assess households' eligibility for crisis support and distribute support through the Energy Accounts Payment Assistance scheme (EAPA)
Service NSW, who informs NSW households about rebates through their call centre.

The energy rebates budget is substantial and the distribution arrangements are complex. The objective of the audit was to assess whether the current design and distribution of energy rebates schemes is effective.

Conclusion

The Department administers the rebate schemes using partners to ensure funds are directed towards energy bills as intended. Ongoing support schemes provide assistance to low-income households as intended, but have no measurable objectives or outcome measures and therefore can't be assessed for their effectiveness. Crisis support (EAPA) has a clear objective, to keep households experiencing financial crisis connected to energy services, but the Department does not monitor the performance of EAPA against this objective.

The structure of rebates providing ongoing support is complex and can be inequitable for some households. Reducing the number of separate schemes and simplifying eligibility requirements offers the most scope for improving effectiveness of ongoing support schemes.

The growth of embedded networks¹ represents a future administrative risk to the Department.

Partnering with energy retailers, charities and NGOs delivers advantages, but stronger oversight is required over partner organisations.

The Department and partner organisations administer the rebate schemes as designed

The Department oversees a complex package of rebate schemes in partnership with 25 retailers and around 340 charities and NGOs. The partnership arrangements ensure that funds are distributed directly to energy bills as intended. The schemes provide support to recipients and are administered in line with government decisions about eligibility.

Communication about rebates does not reach all eligible households

Households learn about rebate schemes through a mix of communication channels including retailer websites and call centres, Department websites, Centrelink, financial counsellors, EAPA Providers, the Energy and Water Ombudsman and Service NSW. Some low-income groups, such as those with poor English language skills, do not find out about energy rebates.

Scheme objectives are not measurable

Rebate schemes that provide ongoing support do not have measurable objectives or outcome measures. Without clear and measurable objectives, the Department cannot report to government on whether the schemes are achieving the intended policy outcomes, nor recommend improvements to ensure the schemes deliver the greatest benefit to the most financially vulnerable households.

The EAPA crisis support scheme has a clearer objective in that it aims to keep households experiencing financial crisis connected to energy services. However, the Department does not measure outcomes from providing this type of support, and does not know if the crisis support achieves this objective.

The structure of rebate schemes for ongoing support is complex

The Low Income Household Rebate accounts for 80 per cent of the budget for ongoing support rebates. The remaining 20 per cent of the budget is administered through four separate schemes: Gas Rebate, Medical Energy Rebate, Family Energy Rebate and Life Support Rebate.

Each of these rebates has its own eligibility criteria and some require separate application processes. The Family Energy Rebate is complex to access and apply for, and around one third of households do not reapply each year. Eligible households that receive energy through embedded networks apply directly to the Department for rebates, which are paid by the Department into bank accounts. Embedded networks are energy supply arrangements where the manager of a residential facility such as a caravan park, retirement village or apartment block, buys energy in bulk and then on-sells it to residents. The Department is yet to develop strategies to address a forecast increase in such households.

The design of the rebate schemes creates some inequities

Households in similar circumstances can receive different levels of assistance depending on which adult in the house is the energy account holder, the mix of energy types used in the home, or the EAPA Provider they turn to when in financial crisis.

Households with both gas and electricity connections receive more assistance than those with only electricity. Households in rural and regional areas receive the same value rebate as households closer to Sydney, despite higher distribution charges. Family Energy Rebate is a two-tier payment, with a higher amount available to families with greater means. Lower-income families receive a much smaller Family Energy Rebate on the assumption that they already receive Low Income Household Rebate. Charities and NGOs distributing EAPA crisis support apply inconsistent standards when assessing household need, which leads to inequitable levels of assistance.

Departmental oversight of energy retailers and EAPA Providers is not strong enough

While partnering with energy retailers and EAPA Providers delivers advantages, stronger management is needed to ensure that partners follow Departmental guidelines and to minimise the potential for fraud. The Department's accreditation process for potential EAPA Providers does not consider the applicant's financial governance standards and the most recent audit of EAPA Providers was 2013.

[1] Embedded networks are energy supply arrangements where the manager of a residential facility such as a caravan park, retirement village or apartment block, buys energy in bulk and then on-sells it to residents.

By September 2018, the Department of Planning and Environment should:

Ensure effective strategies are in place to make information about rebates available to all eligible, low-income households
Evaluate alternative models and develop advice for government to reduce complexity and improve equity of ongoing rebates
Establish measurable objectives for schemes that provide ongoing support, and monitor and measure performance of all schemes against objectives and outcome measures
Assess the impacts of the forecast increase in embedded networks and develop strategies to manage any increased administrative risk
Strengthen assurance that EAPA is being provided in accordance with its objectives and guidelines by implementing accreditation and compliance programs
Ensure those eligible for EAPA financial support are not disadvantaged by inflexible payments, inconsistent provider practices, or inability to access an EAPA provider in a timely manner. Options include:
- moving from a fixed-value voucher to a flexible payment based on need irrespective of energy type
- establishing a ‘Provider of Last Resort’ facility for households that cannot access an EAPA Provider.

Parliamentary reference - Report number #292 - released 19 September 2017

8 June 2017

Published

NorthConnex

Premier and Cabinet

Treasury

Transport

Compliance

Infrastructure

Internal controls and governance

Management and administration

Procurement

The processes used to assess NorthConnex adequately considered value for money for taxpayers.This report also found that the impact of tolling concessions on road users and the motorway network was consistent with policy objectives described in the 2012 NSW Long Term Transport Master Plan.

By December 2017, the Department of Premier and Cabinet should:

1. publish an updated ‘Unsolicited Proposals – Guide for Submission and Assessment’ which clarifies obligations with requirements in other NSW Government policies such as the NSW PPP guideline and Infrastructure Investor Assurance Framework. The update should require:

a) a business case to be prepared, and a business case gateway review completed, as part of the assessment of the detailed proposal (currently stage 2)

b) probity reports must be completed and considered before the decision to proceed to the next stage.

The Department of Premier and Cabinet and NSW Treasury should immediately:

2. improve record keeping to ensure compliance with the State Records Act 1998 and the NSW Government Standard on Records Management.

Parliamentary reference - Report number #287 - released 8 June 2017

11 May 2017

Published

Mining Rehabilitation Security Deposits

Planning

Industry

Environment

Infrastructure

Management and administration

Project management

The Department of Planning and Environment requires mining companies to rehabilitate sites according to conditions set in the mining development approval. The Department holds mining rehabilitation security deposits that are meant to cover the full cost of rehabilitation if a mining company defaults on its rehabilitation obligations.

This audit was undertaken when the Department of Industry, Skills and Regional Development was responsible for ensuring land disturbed by mining activities is rehabilitated in accordance with the relevant development approval, including the administration of mining rehabilitation security deposits. On 1 April 2017, this responsibility was transferred to the Department of Planning and Environment (the Department).

This audit assessed whether the Department maintains adequate security deposits to cover the liabilities associated with mine closures, including rehabilitation. Companies authorised by the Department to undertake mining activities must provide a security deposit to cover the full costs of rehabilitation in the event of default by the company. Rehabilitation is the treatment of disturbed land or water to establish a safe, stable, non-polluting and sustainable environment.

Mining companies must provide an estimate of rehabilitation costs for each site. The Department provides a Rehabilitation Cost Calculation tool to assist companies calculate the deposit amount. Companies are also required to ensure that the cost estimate is in accordance with the approved Mining Operations Plan (MOP). The MOP is intended to be a mine rehabilitation and closure plan, and forms the basis for the estimation of the security deposit. The Department reviews the estimates and determines the deposit for each site.

Security deposits are an option of last resort. The Department has other legislative and regulatory tools which it normally uses to promote compliance with rehabilitation requirements before accessing a security deposit. It can direct action by the mining company, issue fines and even have the Minister revoke a mining lease. To date, the Department has never had to access a security deposit for a state significant development mine site.

Conclusion

The Department holds security deposits for mining rehabilitation consistent with the amounts it has requested from mining companies, and it should be able to claim on a deposit if a mining company defaults on its rehabilitation obligations. The total value of deposits has increased from $500 million in 2005 to around $2.2 billion in 2016, covering around 450 mine sites. The Department’s management of the security deposit process has improved in recent years, and it has well advanced plans for further improvement, including a revised cost calculation tool.

The Department’s policy is that each mine’s security deposit should cover the full costs of rehabilitation for that mine. The security deposits the Department holds are not likely to be sufficient to cover the full costs of each mine’s rehabilitation in the event of a default. The rates and allowances in the current cost calculation tool have not been updated since 2013 and some activities required for effective rehabilitation are not covered, or not covered adequately.

Security deposits also do not include sufficient contingency given the substantial risks and uncertainties associated with mine rehabilitation and closure, particularly in the absence of a detailed closure plan. This risk is exacerbated by the limited independent verification of mining company claims about the size of the outstanding rehabilitation task, which remains the case despite recent improvements to monitoring and review procedures and practices.

There is also no financial assurance held over the risk of significant unexpected environmental degradation in the long-term after a mine is deemed to be rehabilitated and the security deposit is returned. A security deposit is not an appropriate vehicle for covering this risk.

Security deposits are close to calculated value and should be accessible if needed

The value of securities held by the Department aligns with the latest approved rehabilitation cost estimates. This contrasts with the situation found by investigations in Victoria and Queensland, where deposit amounts held fell below the calculated costs.

The security deposits are usually in the form of a bank guarantee or cash. The Department has obtained legal advice indicating that it should be able to claim on these bank guarantees if the need arises. As the guarantee is between the financial institution and the Department, if a mining company goes into liquidation the Department should still be able to access the funds.

When the latest estimate of rehabilitation costs is higher than the existing deposit, the Department will request additional security. It has experienced extensive delays in obtaining additional security for some sites, increasing the risk that available funds will be insufficient if needed.

Rehabilitation cost estimates are not yet adequate, but improvements are planned

The Department’s policy is for security deposits to cover the full cost of rehabilitation. No discounts are provided to mining companies for past good behaviour or low likelihood of default, unlike in some other states. Discounting could undermine the policy position.

Current security deposits are unlikely to cover the full cost of rehabilitation on each mine site. The Department provides a rehabilitation cost calculation tool to help mining companies calculate the cost of rehabilitation and the required deposit amount, but:

several activities required to effect closure are not included and others underestimated
it does not make provision for industry cost changes over time
the rates used in the tool have not been updated since 2013
it was not able to provide the basis for the rates and allowances in the tool.

The Department reviews cost estimates provided by mining companies, but its verification of the extent of rehabilitation work on which these estimates are based is limited. It relies instead on section 387C of the Mining Act 1992 which makes it an offence for mining companies to provide false or misleading information. It is not evident how the Department would establish that information provided was false or misleading without more verification work, and six of the 14 cost estimates we reviewed were not signed by the mine manager, making enforcement more difficult.

The Department has developed a new calculation tool, and recently released it for industry consultation. The new tool should improve rehabilitation estimates. It updates rates and allowances, and includes additional items to better cover required rehabilitation tasks. While a substantial improvement, the new tool could be further improved by providing additional coverage for stakeholder engagement, additional planning approvals, insurance costs, and any additional design, research and verification work required for successful closure.

There is no financial assurance over long-term environmental risks

The Department does not hold any financial assurance to cover the costs associated with mitigating any future environmental degradation once a mine closes and the security deposit is relinquished to the mining company. Security deposits are probably not the appropriate mechanism to cover these long-term risks but the risk of potential post-closure environmental degradation still needs to be costed and covered. A fund to cover the state-wide risk, to which all mines would contribute, is a possible mechanism.

Rehabilitation and closure outcomes are vague, particularly for unplanned closure

Rehabilitation outcomes in the MOPs we reviewed were generally not specific. Any lack of specificity in MOPs translates into uncertainty about rehabilitation work required if a mining company defaults. Part of the problem is that rehabilitation outcomes established in planning approvals are usually not specific and may not address all closure requirements. The Department has recognised there is scope to improve the clarity and specificity of rehabilitation requirements in planning approvals, and has started a review focusing on open-cut mines.

Rehabilitation outcomes are even less specific in the event of an unexpected early closure because they will probably be different from that achievable from a planned closure.

MOP guidelines do not cover management of some key closure matters, such as the requirements of environment protection licences issued by the Environment Protection Authority and the management of heritage sites during closure.

There were significant variations in quality of MOPs we reviewed and the way closure risks and uncertainties were identified and addressed. The Department plans to improve the quality of rehabilitation programs through enhanced guidance and oversight.

Monitoring is not adequate to effectively gauge rehabilitation progress

The Department was not able to show it has been monitoring operational mine sites effectively to gauge the progress of ongoing site rehabilitation and the management of closure risks. There was no protocol for site inspections and limited evidence of inspections for the sites we reviewed.

The Department receives annual environmental management reports from mining companies, with most describing the areas of disturbance and rehabilitation occurring at each mine site. The Department recently established procedures for reviewing these annual reports, and has developed a risk-based process for prioritising reviews.

Most annual reports we reviewed did not explain environmental changes over time, nor the risks to mine closure and the measures required to mitigate them. For example, analysis of changes to surface water and groundwater quality was limited despite its relevance for assessing future contamination risks.

The Department does not currently have adequate processes in place to effectively verify the reported areas of disturbance and rehabilitation. It is developing geographic information system-based tools to better measure areas of disturbance and rehabilitation, new rehabilitation guidelines, and a procedure for determining whether rehabilitation has been successful. These initiatives should improve the monitoring and reporting of rehabilitation progress at mine sites.

There is no mechanism to prevent a mine being in ‘care and maintenance’ indefinitely

The Department does not have a clear policy on the length of time and circumstances under which a mine can remain in ‘care and maintenance’. Indefinite postponement of rehabilitation and closure is therefore possible. 'Care and maintenance' is the period following temporary cessation of operations when infrastructure remains largely intact and the site continues to be managed. There are a range of valid reasons for a mining company to put a mine in ‘care and maintenance’, but it is also reasonable for the community to expect a limit to how long it has to wait for proper rehabilitation.

We recommend that the Department should, by January 2018:

1. Improve the quality of rehabilitation and closure plans by:

ensuring plans submitted by mining companies include robust mine rehabilitation and closure risk assessments
clarifying the level of detail required in plans at each stage of a mine’s operation
specifying how requirements set under other legislative instruments (e.g. environment protection licences, heritage assets) should be addressed.

2. Improve assurance that security deposits are sufficient by:

ensuring its new cost calculation tool adequately covers all works needed for rehabilitation and closure
increasing the contingency for uncertainties associated with mine rehabilitation and closure, at least until the mining company provides a detailed closure plan
verifying the cost estimates for a sample of high risk sites annually
ensuring that when mining companies are required to provide increased security deposits, they do so with minimal delay.

3. Enhance oversight of mine rehabilitation by:

developing a protocol to ensure sufficient and adequate site inspections
ensuring mining companies report performance against rehabilitation targets and environmental changes clearly, including an analysis of long-term surface water and groundwater trends in terms of levels, flow and quality
improving how it determines the progress and success of mine rehabilitation
developing clear policy and procedures for ensuring a mine cannot be put into ‘care and maintenance’ indefinitely.

4. Collaborate with relevant agencies to establish a financial assurance mechanism, such as a sinking fund, to cover the risk of long-term environmental degradation after mines are closed and security deposits returned.

Parliamentary reference - Report number #285 - released 11 May 2017

3 May 2017

Published

Therapeutic programs in prisons

Justice

Management and administration

Service delivery

Corrective Services NSW should ensure eligible prisoners receive timely programs to reduce the risk they will reoffend on release.

When a prisoner enters custody in New South Wales, there is an expectation that they will be offered therapeutic programs that reduce their risk of reoffending. Relative to the costs of providing them, these programs have wide-ranging benefits for prisoners and the broader community, and provide significant savings to the justice system. Corrective Services NSW has lead responsibility for ensuring relevant and effective programs are provided, and for the Premier’s Priority of reducing reoffending by five per cent by 2019.

In New South Wales, a significant majority of people convicted of an offence will eventually be reconvicted. Of those convicted of an offence in 2004, 79 per cent had been reconvicted of another offence by 2014 – half within the first year of their initial offence. The total cost to the community of reoffending is difficult to fully quantify. However, the potential to reduce costs to the prisons system alone by reducing reoffending is significant given the average costs of a prison stay is $167 per prisoner per day over an average 218 day sentence. Total prison system costs in New South Wales were $720 million in 2016.

To help achieve its mandate to reduce reoffending, Corrective Services NSW delivers therapeutic programs in prison and the community, along with a range of vocational, education, supervision, case management and health and wellbeing general services. These programs and services contribute to the central goal of reducing the likelihood that prisoners will return to prison. This audit assessed whether selected therapeutic programs are available, accessible and effective in reducing the risk of reoffending. More detailed information on the programs selected is in Appendix 3.

Conclusion

Corrective Services NSW does not ensure that eligible prisoners receive timely programs to reduce the risk they will reoffend on release. Most prisoners who need programs do not receive one before their earliest release date. These prisoners can be released with no intervention or held in prison longer awaiting a program. Additionally, programs have not been systematically evaluated to confirm they are helping to reduce reoffending in NSW.

In 2015–16, 75 per cent of prisoners who needed programs reached their earliest release date without receiving one. These prisoners are often released with incomplete or no intervention in prison, or are refused parole and held in custody for longer than their minimum term. Corrective Services NSW prioritises prisoners for programs based on their risk of reoffending. However, the 20 per cent increase in the prison population between 2011–12 and 2015–16 has put a significant strain on program resources. While program staffing has increased by 20 per cent over the past two years, the overall proportion of prisoners receiving programs before release has not.

Since 2015, there has been increased roll out of moderate-intensity EQUIPS programs, which reach greater numbers of prisoners. However, over the same period, the number of programs to meet the higher-intensity therapeutic needs of sex offenders and serious violent offenders has decreased or remained the same despite increased numbers of prisoners entering custody that may benefit from them. Corrective Services NSW does not collect and act on information to ensure that coverage of specific program needs among sex offenders and serious violent offenders is sufficient given the increases in these prisoner types.

Corrective Services NSW bases its programs on international evidence and has worked in partnership with independent evaluators to evaluate some programs. However, these evaluations have mostly been inconclusive due to small sample sizes and data quality issues. Further evaluations are proposed, including as a result of an additional $237 million investment in reducing reoffending, which will also see the role out of additional programs and case management initiatives.

75 per cent of prisoners who needed programs did not complete them before the earliest date they could have been released for parole

In 2015–16, 75 per cent of prisoners with an identified program need did not complete a program prior to the earliest date they could have been paroled. If prisoners do not complete programs before their earliest parole date, they can be released having had no, or incomplete, interventions while in prison to address their offending. They can also be refused parole by the State Parole Authority, adding unnecessary length to the time spent in jail and exacerbating overcrowding. Parole refusal data from the State Parole Authority indicates that non-completion of programs was a factor in 84 per cent of 302 parole refusals in 2015.

Program resourcing at the prison level is inadequate to meet increased demand

Lack of availability of programs to meet demand is a key factor preventing prisoners from completing programs in time for release. The 20 per cent increase in the prison population between 2011–12 and 2015–16 has placed a significant strain on resources. While more programs are being delivered, the overall proportion of prisoners receiving them before release has not. Prisoner case management is not performed in a timely and consistent way, resulting in prisoners missing opportunities to be referred to programs, particularly if they have shorter sentences. For example, 27 per cent of prisoners with more than six months to serve had not completed an assessment required to determine eligibility for an EQUIPS program in the past four years.

The mix of available programs may be out of step with the needs of some prisoners

Since 2012, Corrective Services NSW has increased the number of moderate-intensity EQUIPS domestic violence and aggression programs provided and more prisoners overall are now able to participate in programs. Over the same period, the number of intensive programs delivered for sex offenders has decreased and the number of intensive programs for serious violent offenders has remained the same. This is despite increasing proportions of prisoners sentenced for sexual assault and related offences, and serious violent offences.

Corrective Services NSW uses a risk-assessment model to determine which prisoners are eligible for existing programs, but does not regularly review whether there are gaps or insufficient program coverage of some therapeutic needs.

Corrective Services NSW does not collect robust and comparable information on program quality and outcomes

Program performance reporting at the prison level focuses on program throughput, such as the number of programs delivered and the number of prisoners participating. Corrective Services NSW does not routinely collect information on program implementation that would provide insights at the prison level into whether programs are being run effectively, and are achieving their intended goals.

Corrective Services NSW has not systematically evaluated its therapeutic programs to confirm they are effective in reducing reoffending

Programs being delivered in New South Wales prisons are based on international evidence about the success of the specific methods and approaches used. This is a good foundation, but Corrective Services NSW is unable to show that its programs are effective in the New South Wales context, and that they are having an impact in achieving the Premier’s target of reducing reoffending by five per cent. Evaluations of some programs have been conducted, but these were mostly inconclusive because of challenges with data collection, such as developing significant enough sample sizes. A lack of consistent forward planning has also affected the rigour of some evaluations.

With the roll out of an additional $237 million investment in reducing reoffending, Corrective Services NSW proposes to focus efforts on evaluating the effectiveness of its programs by engaging external experts and increasing resourcing in its own evaluation unit. A systematic forward program for independent evaluation, which identifies solutions to existing data gaps and builds on past studies, is needed to support this.

Challenges for Corrective Services NSW

Corrective Services NSW, a division of the Department of Justice, operates 34 custodial correctional centres across New South Wales, including two that are managed by private companies. It is responsible for delivering correctional services and programs that reduce reoffending and enhance community safety. Corrective Services NSW has lead responsibility for the Premier’s Priority of reducing adult reoffending by five per cent by 2019. To assist in achieving this target, Corrective Services NSW delivers therapeutic programs in prisons that aim to reduce the likelihood that prisoners will reoffend once released.

Prison overcrowding

Prior to 2011, the prison population had been decreasing, which resulted in the closure of Berrima, Parramatta and Kirkconnell Correctional Centres, the downsizing of Grafton Correctional Centre, and a reduction in total capacity of 900 beds. However, since 2011–12 the prison population has increased by approximately 30 per cent, reaching a record of around 12,900 prisoners in March 2017 (latest available data).

Corrective Services NSW should by December 2017:

1. Implement a systematic approach to the use of convictions, sentencing and case management data to ensure that gaps in program offerings can be identified and addressed.

By June 2018:

2. Clearly establish program delivery staff resourcing benchmarks, based on individual prison profiles, that would meet demand and ensure prisoners receive timely assessments, comprehensive case management and relevant programs before the earliest date they can be released.

3. Establish consistent program quality and outcomes performance indicators at the prison-level, and monitor and respond to these quarterly.

4. Develop and implement a detailed forward program of independent evaluations for all prison-based therapeutic programs, that includes identified data requirements for prisons to collect and provide.

Parliamentary reference - Report number #283 - released 3 May 2017

27 April 2017

Published

Contingent workforce - management and procurement

Industry

Management and administration

Procurement

Workforce and capability

The Department of Industry, Transport for NSW and the Department of Education were not able to demonstrate that the use of contingent labour is the best resourcing strategy to meet their business needs or deliver value for money.

NSW Government agencies use contingent labour to help deliver services to the community. The NSW Public Service Commission (PSC) defines contingent labour as people employed by a recruitment agency and hired by government agencies to provide labour or services. Agencies use contingent labour to fill a gap in skills or capability, for example, to fill a position while a staff member is on leave or where specialist knowledge may be needed on a short-term basis. The PSC estimated that in 2016 the contingent workforce represented 2.3 per cent of the public sector workforce, equivalent to 7,571 full-time employees.

The PSC recommends that contingent labour only be used when it is the most efficient and effective option available to respond to an agency’s business needs. It also recommends that agencies’ use of contingent labour be informed by workforce planning.

Government spending on contingent labour has increased significantly over the last five years, from $503 million in 2011–12 to $1.1 billion in 2015–16. To reduce spend in this area, the NSW Government has introduced the Contingent Workforce Renewal Strategy, overseen by NSW Procurement. The Strategy aims to achieve greater efficiency and effectiveness in the use of contingent labour. It has four pillars:

prequalification scheme – a list of approved contingent labour suppliers
vendor management system – an information system to manage contingent workers
managed service provider – a recruitment agency broker
contractor management organisations – organisations that manage a contingent labour database, which agencies can source labour from.

The prequalification scheme is mandatory for public sector agencies. Agencies are progressively rolling out the other pillars. The vendor management system and managed service provider are together called ‘Contractor Central’.

Within the context of sector reform aimed at promoting efficiency and effectiveness, the objective of this audit is to assess whether agencies’ approach to purchasing and managing their contingent workforce meets business needs and delivers value for money. In making this assessment, we reviewed three agencies each at a different stage of the reform:

Department of Education (Education) – Contractor Central introduced in August 2015
Department of Industry (Industry) – Contractor Central introduced in November 2016, after our review
Transport for NSW (Transport) – Contractor Central not in place.

Conclusion

None of the three agencies we reviewed were able to demonstrate that contingent labour is the best resourcing strategy to meet their agencies’ business needs or delivers value for money. There are three reasons for this. First, agencies’ use of contingent labour was not informed by workforce planning at an agency level, with limited work undertaken in this area. Second, two of the three agencies have limited oversight of their contingent workforce. Information is not reliable or accurate, reports are onerous to produce, and there is limited reporting to the agency’s executive. Finally, none of the agencies routinely monitor and centrally document the performance of contingent workers to ensure services are delivered as planned. Together, these factors make it difficult for agencies to ensure contingent labour is engaged only when needed, at reasonable rates, and delivers quality services.

Some of these issues will be addressed by Contractor Central, which had only been introduced at Education at the time of our review. The new software program enables staff to easily obtain real-time reports on its contingent workforce. The recruitment broker also has the potential to improve value through better negotiation and benchmarking of pay rates. However, Contractor Central will only address some of the issues highlighted above. Better workforce planning and performance monitoring are needed to ensure an agencies’ workforce, including contingent workers, meets its business needs and represents value for money.

The use of contingent labour neither informs nor is informed by agency level workforce plans

None of the three agencies we reviewed had an agency level workforce plan in place. Agencies could not demonstrate that they had analysed their use of contingent labour at an agency level, including how it is being used to address any skills gaps. An agency’s executive is responsible for ensuring that an agency level workforce plan is in place. An agency level workforce plan helps hiring managers to make decisions on the best resource strategy to meet their business needs. This is important because contingent labour should only be engaged after considering all other recruitment options and the agency’s workforce plan.

Contingent workforce data is not always reliable or accurate

The accuracy and reliability of contingent workforce data varied significantly across the three agencies we reviewed. In Industry and Transport, information on contingent labour is difficult to obtain because it must be drawn from different data sources, affecting its accuracy, reliability and timeliness. This information is also incomplete, with these agencies not having a full picture of their contingent workforce. Quality data is important because it improves an agency’s capacity to plan and monitor its use of contingent labour to ensure it meets business needs.

At the time of our review, only Education, through Contractor Central, was able to obtain timely and accurate data on its use of contingent labour. Contractor Central has also improved its reporting capability, with the agency’s executive now receiving quarterly reports on its contingent workforce. In contrast, executives in Industry and Transport received ad-hoc reports on the use of contingent labour that only gave them limited oversight of their contingent workforce.

Long tenure of contingent workers is an issue in agencies

We found that the maximum tenure of contingent labour varied across agencies from nine to more than 20 years. In Education and Transport, staff reported that hiring managers assume contingent workers are automatically renewed at the end of their contract, with no formal consideration about whether contingent labour is still needed. Also, contingent labour is used for significant capital projects in the information technology and infrastructure areas where a project may run for several years.

None of the agencies reviewed undertook an analysis to determine how to reduce tenure while ensuring business needs are met. This is particularly important for long-term use of contingent labour for large capital projects. Understanding whether contingent labour represents best value compared to other recruitment options, such as secondments or temporary employment, is essential. Contingent workers are engaged under different working conditions to employees. Long tenure can pose an industrial relations risk to agencies because contingent workers may believe they are entitled to the same working conditions as employees.

On and off-boarding processes could be strengthened

Agencies have processes to engage and release contingent labour, also called on boarding and off-boarding. This includes access to IT systems, building access, and the return of property. However, not all agencies had on boarding or off-boarding checklists with specific requirements for engaging or releasing contingent labour. In addition, agencies’ off boarding guidelines did not always provide for knowledge transfer. This was identified as a key risk by staff because it is important to ensure that critical skills and knowledge are retained.

Risk that agencies are being overcharged when engaging contingent labour

We found that in agencies without Contractor Central, there is limited assurance that recruitment agencies charge in line with the prequalification scheme fees. NSW Procurement estimates that the government was overcharged $1.3 million in 2015–16. In addition, there is a risk that hiring managers do not have sufficient information to benchmark pay rates when negotiating contingent labour engagements. Agencies with Contractor Central may be more likely to get reasonable rates by using a recruitment broker who has specialised market knowledge.

No system in place to monitor the performance of contingent workers

None of the agencies we reviewed had a system in place to monitor the performance of their contingent workforce at an agency level to ensure it delivers value for money. Hiring managers are not required to evaluate whether contingent labour delivers the services for which they are hired. For example, hiring managers do not routinely assess and centrally document the quality of services provided, including whether services are delivered on time and within budget. This means contingent workers who are not performing may be re-hired by other managers or agencies. With the implementation of Contractor Central, there is the means to capture agency-wide information on the performance of contingent workers.

Contractor Central has the potential to improve value for money

Contractor Central has the potential to improve value for money. This is because the recruitment broker has specialised market knowledge and is able to promote competition, and benchmark and negotiate pay rates. In addition, the new software can streamline invoice processing and ensure correct supplier rates are charged. Education reports that it achieved a net saving of $944,600 from August 2015 to May 2016 due to the introduction of Contractor Central. Industry also expects to achieve similar results with Contractor Central, which it advised was implemented in November 2016.

The Department of Industry and Transport for NSW should, by December 2017:

1. improve the accuracy and reliability of their data on contingent labour

2. routinely report the use of contingent labour to agency executive.

The Department of Industry, Department of Education, and Transport for NSW should:

by December 2017:

3. ensure agency-wide on-boarding and off-boarding guidelines or checklists detail the specific requirements for engaging or releasing contingent labour, including provisions for knowledge transfer.

by March 2018

4. ensure that contingent labour informs and is informed by workforce planning, by:

analysing agency-wide business needs, staff capability, and skills gaps
understanding how gaps are filled by contingent workers or other recruitment options
assessing whether long-term contingent worker engagements are the most economical and effective labour option
evaluating whether contingent workers meet agency business needs and deliver value for money.

5. assess and centrally document the performance of their contingent workforce to ensure that services are delivered as contracted

6. implement processes to ensure that hiring managers consider other recruitment options prior to engaging or re-engaging contingent workers.

Sector-wide learnings

This audit identified learnings that government agencies across the sector should consider when procuring and managing contingent labour:

1. Contingent workforce planning should be part of an agency’s broader workforce planning.

2. Using information systems to manage and procure contingent labour improves the accuracy, reliability and timeliness of contingent labour data. This information enables agencies to consistently assess contingent labour rates and to identify persistent skills gaps in their workforce.

3. Routine reporting of contingent labour to agency executives provides oversight of an agency’s use of contingent labour.

4. Hiring managers should consider all recruitment options, with advice from human resources staff, before engaging contingent labour to ensure that it is the most appropriate solution for a specific need.

5. Regularly assessing long tenure contingent labour engagements helps to ensure that such engagements are still the most economical and effective labour option.

6. Planning the engagement of contingent workers, including provisions for knowledge transfer, maximises the potential to obtain value for money from the use of contingent labour.

7. Assessing and centrally documenting the performance of contingent labour against agreed deliverables helps to ensure services are delivered as planned, including in terms of quality, and timeliness.

Download appendices for report on Contingent workforce

Parliamentary reference - Report number #282 - released 27 April 2017

Audit progress

Sector

Year

Report type

Topic

Reports

1. Financial reporting and controls

2. Service delivery

No breach of specific prohibitions in the Act

Request for quotes to design advertisement did not reflect the full scope required

No breach of specific prohibitions in the Act

Animal welfare concerns were identified as the reason for urgent advertising

Phase 1 advertisements did not focus on the urgent needs

Peer review process limited to influencing second phase of advertisements

The department could not demonstrate value for money was achieved for creative work

Short notice did not allow for cost-efficient media booking for all phases

The department used a wide public campaign for a narrow target audience

No demonstrated basis for use of confronting imagery and provocative language

Not all Phase 1 radio advertisements clearly identified that they were authorised by the New South Wales Government

The department’s cost benefit analysis did not consider alternatives to advertising

There were two factual inaccuracies in key messages used for Phase 1 advertisements

The Department and partner organisations administer the rebate schemes as designed

Communication about rebates does not reach all eligible households

Scheme objectives are not measurable

The structure of rebate schemes for ongoing support is complex

The design of the rebate schemes creates some inequities

Departmental oversight of energy retailers and EAPA Providers is not strong enough

Security deposits are close to calculated value and should be accessible if needed

Rehabilitation cost estimates are not yet adequate, but improvements are planned

There is no financial assurance over long-term environmental risks

Rehabilitation and closure outcomes are vague, particularly for unplanned closure

Monitoring is not adequate to effectively gauge rehabilitation progress

There is no mechanism to prevent a mine being in ‘care and maintenance’ indefinitely

75 per cent of prisoners who needed programs did not complete them before the earliest date they could have been released for parole

Program resourcing at the prison level is inadequate to meet increased demand

The mix of available programs may be out of step with the needs of some prisoners

Corrective Services NSW does not collect robust and comparable information on program quality and outcomes

Corrective Services NSW has not systematically evaluated its therapeutic programs to confirm they are effective in reducing reoffending

Challenges for Corrective Services NSW

Prison overcrowding

The use of contingent labour neither informs nor is informed by agency level workforce plans

Contingent workforce data is not always reliable or accurate

Long tenure of contingent workers is an issue in agencies

On and off-boarding processes could be strengthened

Risk that agencies are being overcharged when engaging contingent labour

No system in place to monitor the performance of contingent workers

Contractor Central has the potential to improve value for money

Sector-wide learnings