Reports
Actions for Internal controls and governance 2020
Internal controls and governance 2020
The Auditor-General for New South Wales, Margaret Crawford today released her report on the findings and recommendations from the 2019–20 financial audits that relate to internal controls and governance at 40 of the largest agencies in the NSW public sector.
The bushfire and flood emergencies and the COVID‑19 pandemic continue to have a significant impact on the people and public sector of New South Wales. The scale of the government response to these events has been significant. The report focuses on the effectiveness of internal controls and governance processes, including relevant agencies’ response to the emergencies. In particular, the report focuses on:
- financial and information technology controls
- business continuity and disaster recovery planning arrangements
- procurement, including emergency procurement
- delegations that support timely and effective decision-making.
Due to the ongoing impact of COVID‑19 agencies have not yet returned to a business‑as‑usual environment. ‘Agencies will need to assess their response to the recent emergencies and update their business continuity, disaster recovery and other business resilience frameworks to reflect the lessons learnt from these events’ the Auditor-General said.
The report noted that special procurement provisions were put in place to allow agencies to better respond to the COVID-19 pandemic. The Auditor-General recommended agencies update their procurement policies to reflect the current requirements of the NSW Procurement Framework and the emergency procurement requirements.
This report analyses the internal controls and governance of 40 of the largest agencies in the NSW public sector for the year ended 30 June 2020. These 40 agencies constitute an estimated 85 per cent of total expenditure for all NSW public sector agencies.
1. Internal control trends
New, repeat and high risk findings |
Internal control deficiencies increased by 13 per cent compared to last year. This is predominately due to a seven per cent increase in new internal control deficiencies and 24 per cent increase in repeat internal control deficiencies. There were ten high risk findings compared to four last year. The recent emergencies have consumed agency time and resources and may have contributed to the increase in internal control deficiencies, particularly repeat deficiencies. Agencies should:
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Common findings |
A number of findings remain common across multiple agencies over the last four years, including:
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2. Information technology controls
IT general controls |
We found deficiencies in information security controls over key financial systems including:
The deficiencies above increase the risk of non-compliance with the NSW Cyber Security Policy, which requires agencies to have processes in place to manage user access, including privileged user access to sensitive information or systems and remove that access once it is not required or employment is terminated. |
3. Business continuity and disaster recovery planning
Assessing risks to business continuity and Scenario testing |
The response to the recent emergencies and the COVID-19 pandemic has encompassed a wide range of activities, including policy setting, on-going service delivery, safety and availability of staff, availability of IT and other systems and financial management. Agencies were required to activate their business continuity plans in response, and with the continued impact of COVID-19 have not yet returned to a business-as-usual environment. Our audits focused on the preparedness of agency business continuity and disaster recovery planning arrangements prior to the onset of the COVID-19 pandemic. We identified deficiencies in agency business continuity and disaster recovery planning arrangements. Twenty-three per cent of agencies had not conducted a business impact analysis (BIA) to identify critical business functions and determine business continuity priorities. Agencies can also improve the content of their BIA. For example, ten per cent of agencies' BIAs did not include recovery time objectives and six per cent of agencies did not identify key IT systems that support critical business functions. Scenario testing improves the effectiveness with which a live crisis is handled, but 40 per cent of agencies had not conducted a business continuity scenario testing exercise in the period from 1 January 2019 to 31 December 2019. There were also opportunities to improve the effectiveness of scenario testing exercises by:
Agencies have responded to the recent emergencies but addressing deficiencies will ensure agencies have adequate safeguards in their processes to again respond in the future, if required. During 2020–21 we plan to conduct a performance audit on 'Business continuity and disaster recovery planning'. This audit will consider the effectiveness of agency business continuity planning arrangements to maintain business continuity through the recent emergencies and/or COVID-19 pandemic and return to a business-as-usual environment. We also plan to conduct a performance audit on whole-of-government 'Coordination of emergency responses'. |
Responding to disruptions |
We found agencies' governance functions could have been better informed about responses to disruptive incidents that had activated a business continuity or disaster recovery response between 1 January 2019 to 31 December 2019. For instance: in 89 per cent of instances where a business continuity response was activated, a post-incident review had been performed. In 82 per cent of these instances, the outcomes were reported to a relevant governance or executive management committee in 95 per cent of instances where a disaster recovery response was activated, a post incident review had been performed. In 86 per cent of these instances, the outcomes were reported to a relevant governance committee or executive management committee. Examples of recorded incidents included extensive air quality issues and power outages due to bushfires, system and network outages, and infected and hijacked servers. Agencies should assess their response to the recent emergencies and the COVID-19 pandemic and update business continuity, disaster recovery and other business resilience frameworks to incorporate lessons learned. Agencies should report to those charged with governance on the results and planned actions. |
Management review and oversight | Eighty-two per cent and 86 per cent of agencies report to their audit and risk committees (ARC) on their business continuity and disaster recovery planning arrangements, respectively. Only 18 per cent and five per cent of ARCs are briefed on the results of respective scenario testing. Briefing ARCs on the results of scenario testing exercises helps inform their decisions about whether sound and effective business continuity and disaster recovery arrangements have been established. |
4. Procurement, including emergency procurement
Policy framework |
Agency procurement policies did not capture the requirements of several key NSW Procurement Board Directions (the Directions), increasing the risk of non-compliance with the Directions. We noted:
Recommendation: Agencies should review their procurement policies and guidelines to ensure they capture the key requirements of the NSW Government Procurement Policy Framework, including NSW Procurement Board Directions. |
Managing contracts |
Eighty-eight per cent of agencies maintain a central contract register to record all details of contracts above $150,000, which is a requirement of GIPA legislation. Of the agencies that maintained registers, 13 per cent did not capture all contracts and eight per cent did not include all relevant contract details. Sixteen per cent of agencies did not periodically review their contract register. Timely review increases compliance with GIPA legislation, and enhances the effectiveness with which procurement business units monitor contract end dates, contract extensions and commence new procurement. |
Training and support |
Ninety-three per cent of agencies provide training to staff involved in procurement processes, and a further 77 per cent of agencies provide this training on an on-going basis. Of the seven per cent of agencies that had not provided training to staff, we noted gaps in aspects of their procurement activity, including:
Training on procurement activities ensures there is effective management of procurement processes to support operational requirements, and compliance with procurement directions. |
Procurement activities | While agencies had implemented controls for tender activities above $650,000, 43 per cent of unaccredited agencies did not comply with the NSW Procurement Policy Framework because they had not had their procurement endorsed by an accredited agency within the cluster or by NSW Procurement. This endorsement aims to ensure the procurement is properly planned to deliver a value for money outcome before it commences. |
Emergency procurement |
As at 30 June 2020, agencies within the scope of this report reported conducting 32,239 emergency procurements with a total contract value of $316,908,485. Emergency procurement activities included the purchase of COVID-19 cleaning and hygiene supplies. The government, through NSW Procurement released the 'COVID-19 Emergency procurement procedure', which relaxed procurement requirements to allow agencies to make COVID-19 emergency procurements. Our review against the emergency procurement measures found most agencies complied with requirements. For example:
Complying with the procedure helps to ensure government resources are being efficiently, effectively, economically and in accordance with the law. Recommendation: Agency procurement frameworks should be reviewed and updated so they can respond effectively to emergency situations that may arise in the future. This includes:
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5. Delegations
Instruments of delegation |
We found that agencies have established financial and human resources delegations, but some had not revisited their delegation manuals following the legislative and machinery of government changes. For those agencies impacted by machinery of government changes we noted:
Delegations manuals are not always complete; 16 per cent of agencies had no delegation for writing off bad debts and 26 per cent of agencies had no delegation for writing off capital assets. Recommendation: Agencies should ensure their financial and human resources delegation manuals contain regular set review dates and are updated to reflect the Government Sector Finance Act 2018, machinery of government changes and their current organisational structure and roles and responsibilities. |
Compliance with delegations |
Agencies did not understand or correctly apply the requirements of the Government Sector Finance Act 2018 (GSF Act), resulting in non-compliance with the Act. We found that 18 per cent of agencies spent deemed appropriations without obtaining an authorised delegation from the relevant Minister(s), as required by sections 4.6(1) and 5.5(3) of the GSF Act. Further detail on this issue will be included in our Auditor-General's Reports to Parliament on Central Agencies, Education, Health and Stronger Communities, which will be tabled throughout December 2020. Recommendation: Agencies should review financial and human resources delegations to ensure they capture all key functions of laws and regulations, and clearly specify the relevant power or function being conferred on the officer. |
6. Status of 2019 recommendations
Progress implementing last year's recommendations |
Recommendations were made last year to improve transparency over reporting on gifts and benefits and improve the visibility management and those charged with governance had over actions taken to address conflicts of interest that may arise. This year, we continue to note:
While we acknowledge the significance of the recent emergencies, which have consumed agency time and resources, we note limited progress has been made implementing these recommendations. Further detail on the status of implementing all recommendations is in Appendix 2. Recommendation: Agencies should re-visit the recommendations made in last year's report on internal controls and governance and action these recommendations. |
Internal controls are processes, policies and procedures that help agencies to:
- operate effectively and efficiently
- produce reliable financial reports
- comply with laws and regulations
- support ethical government.
This chapter outlines the overall trends for agency controls and governance issues, including the number of audit findings, the degree of risk those deficiencies pose to the agency, and a summary of the most common deficiencies we found across agencies. The rest of this report presents this year’s controls and governance findings in more detail.
Section highlights We identified ten high risk findings, compared to four last year with two findings repeated from the previous year. There was an overall increase of 13 per cent in the number of internal control deficiencies compared to last year due to a seven per cent increase in new internal control deficiencies, and a 24 per cent increase in repeat internal control deficiencies. The recent emergencies have consumed agency time and resources and may have contributed to the increase in internal control deficiencies, particularly repeat deficiencies. We identified a number of findings that remain common across multiple agencies over the last four years. Some of these findings related to areas that are fundamental to good internal control environments and effective organisational governance. Examples include:
Policies, procedures and internal controls should be properly designed, be appropriate for the current organisational structure and its business activities, and work effectively. |
This chapter outlines our audit observations, conclusions and recommendations, arising from our review of agency controls to manage key financial systems.
Section highlights Government agencies’ financial reporting is heavily reliant on information technology (IT). We continue to see a high number of deficiencies related to IT general controls, particularly those related to user access administration. These controls are key in adequately protecting IT systems from inappropriate access and misuse. IT is also important to the delivery of agency services. These systems often provide the data to help monitor the efficiency and effectiveness of agency processes and services they deliver. Our financial audits do not review all agency IT systems. For example, IT systems used to support agency service delivery are generally outside the scope of our financial audit. However, agencies should also consider the relevance of our findings to these systems. Agencies need to continue to focus on assessing the risks of inappropriate access and misuse and the implementation of controls to adequately protect their systems, focussing on the processes in place to grant, remove and monitor user access, particularly privileged user access. |
This chapter outlines our audit observations, conclusions and recommendations, arising from our review of agency business continuity and disaster recovery planning arrangements.
Section highlights We identified deficiencies in agency business continuity and disaster recovery planning arrangements and opportunities for agencies to enhance their business continuity management and disaster recovery planning arrangements. This will better prepare them to respond to a disruption to their critical functions, resulting from an emergency or other serious event. Twenty-three per cent of agencies had not conducted a business impact analysis (BIA) to identify critical business functions and determine business continuity priorities and 40 per cent of agencies had not conducted a business continuity scenario testing exercise in the period from 1 January 2019 to 31 December 2019. Scenario testing improves the effectiveness with which a live crisis is handled. This section focusses on the preparedness of agency business continuity and disaster recovery planning arrangements prior to the onset of the COVID-19 pandemic. While agencies have responded to the recent emergencies, proactively addressing deficiencies will ensure agencies have adequate safeguards in their processes to again respond in the future, if required. During 2020–21 we plan to conduct a performance audit on 'Business continuity and disaster recovery planning'. This audit will consider the effectiveness of agency business continuity planning arrangements to maintain business continuity through the recent emergencies and/or COVID-19 pandemic and return to a business-as-usual environment. We also plan to conduct a performance audit on whole-of-government 'Coordination of emergency responses'. |
This chapter outlines our audit observations, conclusions and recommendations, arising from our review of procurement agency procurement policies and procurement activity.
Section highlights We found agencies have procurement policies in place to manage procurement activity, but the content of these policies was not sufficiently detailed to ensure compliance with NSW Procurement Board Directions (the Directions). The Directions aim to ensure procurement activity achieves value for money and meets the principles of probity and fairness. Agencies have generally implemented controls over their procurement process. In relation to emergency procurement activity, agencies reported conducting 32,239 emergency procurements with a total contract value of $316,908,485 up to 30 June 2020. Our review of emergency procurement activity conducted during 2019–20 identified areas where some agencies did not fully comply with the 'COVID-19 Emergency procurement procedure'. We also found not all agencies are maintaining complete and accurate contract registers. This not only increases the risk of non-compliance with GIPA legislation, but also limits the effectiveness of procurement business units to monitor contract end dates, contract extensions and commence new procurement in a timely manner. We noted instances where agencies renewed or extended contracts without going through a competitive tender process during the year. |
This chapter outlines our audit observations, conclusions and recommendations, arising from our review of agency compliance with financial and human resources delegations.
Appendix one – List of 2020 recommendations
Appendix two – Status of 2019 recommendations
Appendix three – Cluster agencies
Copyright notice
© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.
Actions for Health capital works
Health capital works
This report examines whether NSW Health effectively planned and delivered major capital works to meet the demand for health services in New South Wales.
The report found that NSW Health has substantially expanded health infrastructure across New South Wales since 2015. However, the program was driven by Local Health District priorities without assessment of the State’s broader and future‑focussed health requirements.
The report found that unclear decision making roles and responsibilities between Health Infrastructure and the Ministry of Health limited the ability of NSW Health to effectively test and analyse investment options.
Project delays and budget overruns on some major projects indicate that Health Infrastructure's project governance, risk assessment and management systems could be improved.
The Auditor‑General recommends that NSW Health ensure its capital projects offer the greatest value to New South Wales by establishing effective policy guidance and enhancing project governance and management systems.
Since 2011–12, NSW Health has aimed to improve its facilities and build 'future focused' infrastructure. The NSW Government’s 2015–16 election commitments established a four-year $5.0 billion capital program for NSW Health to build and upgrade more than 60 hospitals and health services. The 2019–20 State Budget committed a further $10.1 billion over four years for another 29 projects. This is the largest investment to date on health capital works in New South Wales.
Recent reviews of infrastructure have recognised that population and demographic growth will require a change in the delivery and composition of health infrastructure, including considering greater use of non-traditional, non-capital health service options and assets.
To ensure that expenditure on capital works represents the best value for money, NSW Health's business cases need to be robust and supported by evidence that demonstrates they are worthy investments. The NSW Process of Facility Planning has been the main framework guiding the detailed planning and development of NSW Health's capital works proposals. This framework was developed by the then NSW Department of Health in 2010. Its aim is to ensure investment proposals are supported by rigorous planning processes that address health service needs and provide value for money.
Infrastructure projects of the complexity and scale being delivered by NSW Health carry inherent risks. For example, unplanned cost escalations can potentially impact on the State’s finances. Unforeseen delays can also reduce the intended benefits. The growth in the State’s health capital spend and project profile, means its exposure to such risks has increased over time.
The objective of this audit was to assess the effectiveness of planning and delivery of major capital works to meet demand for health services in New South Wales. To address this objective, the audit examined whether:
- the Ministry of Health has effective procedures for planning and prioritising investments in major health capital works
- Health Infrastructure develops robust business cases for initiated major capital works that reliably inform government decision making
- Health Infrastructure has effective project governance and management systems that support delivering projects on-time, within budget and achievement of intended benefits.
The audit focused on the Ministry of Health and Health Infrastructure – being the lead agencies within NSW Health responsible for prioritising, planning and delivering major health capital works across the State. The audit examined 13 business cases for eight discrete projects over a ten-year period.
ConclusionNSW Health has substantially expanded health infrastructure across New South Wales since 2015. However, its planning and prioritisation processes were not assessed against a long-term statewide health infrastructure plan and lacked rigorous assessment against non-capital options creating a risk that they do not maximise value for New South Wales. The scale of NSW Health's capital investment is significant and has grown substantially in recent years. The NSW Government’s election commitments in 2015–16 and 2019–20 collectively set out a $15.0 billion capital program to build and upgrade 89 hospitals and health services. NSW Health developed this infrastructure program in the absence of a statewide health infrastructure strategy and investment framework to focus its planning and decisions on the types of capital investments required to meet the long-term needs of the NSW health system. Consequently, locally focused priorities of the State’s 17 Local Health Districts have been the primary drivers of NSW Health’s capital investments since 2015–16. Local Health District investment proposals for hospitals were developed without consideration of alternative health options such as community health service models, technology-driven eHealth care, or private sector options. Without rigorous assessment against a range of potential health service options, there is a risk that selected projects do not maximise value for New South Wales. In recognition of the need for a statewide approach to infrastructure planning, the Ministry of Health recently developed a 20-year Health Infrastructure Strategy and prioritisation framework in 2019. The strategy was approved by the NSW Government in April 2020. NSW Health's ability to effectively test and analyse its capital investment options has been compromised by unclear decision-making roles and responsibilities between its Health Infrastructure and the Ministry of Health agencies. While both Health Infrastructure and the Ministry of Health have responsibilities for the assessment of business cases for proposed infrastructure projects, confusion about the roles of each agency at key steps compromised the efficacy of the process. Health Infrastructure and the Ministry of Health have differing views about which agency is responsible for testing business case inputs and conducting comprehensive options appraisals. As a result of this confusion, Health Infrastructure and the Ministry of Health did not rigorously test Local Health District capital investment proposals against defined statewide health infrastructure investment priorities. The NSW Process of Facility Planning does not clarify the responsibilities of all parties in validating and prioritising Local Health District's Clinical Service Plans and progressing them to business cases. NSW Health's infrastructure priorities are not sufficiently supported by transparent documentation of selection methodology and the rationale for decisions. Consequently, there is a risk that recommended options, whilst having some economic and health service merit, do not represent the greatest value. Substantial delays and budget overruns on some major projects indicate that Health Infrastructure's project governance, risk assessment and management systems could be improved. Health Infrastructure did not fully comply with NSW Government guidelines for developing business cases and making economic appraisals for proposed capital investments. These weaknesses, along with delays and budget overruns on some projects, demonstrate a need for Health Infrastructure to strengthen its project governance, management and quality control systems. |
Over the period of review, NSW Government policies for business case development and submission have emphasised that effective governance arrangements are critical to a proposal's successful implementation.
NSW Health's Process of Facility Planning similarly highlights the importance of effective governance and project management for achieving good outcomes. It prescribes a general governance structure managed by Health Infrastructure that can be tailored to the planning and delivery of health infrastructure projects greater than $10.0 million.
The three major hospital redevelopments examined in metropolitan, regional and rural areas had a combined Estimated Total Cost of more than $1.2 billion and comprised eight discrete projects and 13 separate business cases.
Almost all these projects experienced delivery challenges which impacted achievement of their original objectives and intended benefits. This is expected in complex and large-scale health infrastructure programs. However, in some projects the impacts were significant and resulted in substantial delays, unforeseen costs, and diversion of resources from other priority areas.
Our review of the selected case studies highlighted opportunities for enhancing governance and project management. Specifically, it indicates a need for improving transparency in the management of contingencies, risk management and assessments particularly relating to adverse site conditions and the selection of contractors. There is also a need to strengthen forward planning for options to address unfunded priorities within business cases that risk complicating the delivery of future project stages resulting in unforeseen costs and potentially avoidable budget overruns.
In February 2017, the Ministry's Capital Strategy Group approved the use of surplus funds of $13.76 million from Stage 1 of the Hornsby Ku-ring-gai Hospital Redevelopment for new works deemed needed to support Stage 2. Following this decision, Health Infrastructure finalised and submitted a business case addendum for Stage 1 to the Ministry in March 2017, addressing the new works comprising a two-storey building for medical imaging and paediatric floors. The business case addendum also addressed options to fit out and procure major medical imaging equipment. The Ministry approved the Stage 1 business case in July 2017, noting the Ministry's Capital Strategy Group had already approved the use of remaining Stage 1 funds to deliver the new works.
Stage 1 was completed in 2015, almost two years before the Stage 1 business case addendum was prepared in February 2017.
The Ministry's decision to approve the new works using $13.76 million of surplus Stage 1 funds did not comply with the NSW Treasury Circular TC 12/20. This policy establishes the Treasurer's approval must be sought and received before a new capital project with an Estimated Total Cost of $5.0 million or more can be approved by NSW Health. The Ministry therefore exceeded its delegated authority in making this decision, as it was not evident it had sought and received the Treasurer's approval prior to doing so.
Consequently, the surplus Stage 1 funds should not have been used by the Ministry to deliver new works in the circumstances. Instead, they should have been released from the Stage 1 project in accordance with established NSW Health procedures, and the Stage 1 Estimated Total Cost revised down accordingly. This did not occur, and NSW Health ultimately directed $11.0 million in surplus Stage 1 funds to the new works.
These circumstances indicate a need to strengthen transparency and accountability within NSW Health for the approval of new projects, and how contingency funds are used in the management of major health capital works. They also demonstrate the impact of weaknesses with options appraisal as the initial Stage 1 business case did not consider alternative options for addressing the initially unfunded works later covered by the Stage 1 business case addendum and ultimately funded from the Stage 1 contingency provision.
In addition to proposing the above-noted new works, the 2017 Stage 1 Business Case Addendum for the Hornsby-Ku-ring-gai development sought to retrospectively address the estimated funding gap of around $14.0 million for the internal fit out, supply of major medical imaging equipment, and cost to operate the medical imaging service at Hornsby Ku-ring-gai Hospital also not addressed in the originally Stage 1 business case.
The Stage 1 business case addendum considered various procurement options to purchase and run the medical imaging services ranging from State operation purchase options to private operation purchase options.
It recommended outsourcing the operation and provision of equipment to the private sector based on estimated savings to the public sector initially of around $650,000 per annum reducing over time to $270,000. The Ministry endorsed this option in June 2017, but it did not ultimately proceed.
A July 2018 report to the Executive Steering Committee on the project shows NSW Health later decided to deliver operation of the medical imaging unit 'traditionally' with an updated estimate of the cost at approximately $16.4 million. The report also shows the Ministry supported the costs now being met by the Northern Sydney Local Health District.
This means the funding gap previously identified in the Stage 1 business case addendum for fitting out the medical imaging building and supply of major medical equipment would need to be met fully by the State, representing a $16.4 million cost overrun for the project.
Examined reports to the Executive Steering Committee show this was largely funded by the Northern Sydney Local Health District via the disposal of land realising approximately $15.0 million in proceeds.
This initially unforeseen cost, along with the additional $11.0 million for the new works approved under the Stage 1 business case addendum, were ultimately merged with the Stage 2 project initially approved in 2017–18 with an Estimated Total Cost of $200 million.
The 2019–20 State Budget provided an additional $65.0 million for a further Stage 2A to deliver additional built capacity to support outpatient services, enhanced allied health services, re-housed community health services and the delivery of prioritised clinical services unfunded as part of Stage 2. The funds were approved based on an Investment Decision Template (IDT) that examined two options in addition to the base case representing scoping alternatives to the preferred master planned capital solution.
However, we found the IDT showed around 23 per cent of the $65.0 million sought (i.e. $15.0 million) was to be allocated to fund the deficit in Stage 2, which had arisen as a result of project delays due to adverse site conditions. This was not discussed in the IDT.
The February 2020 report to the Executive Steering Committee shows a combined Stage 2 and 2A final forecast cost of $292.6 million against a potential budget of $290.7 million representing an overall deficit for the project of around 0.6 per cent.
However, this favourable final budget position does not transparently show the funding challenges experienced over the project's implementation to-date. The three major budget issues include:
- inappropriate use of around $11.0 million in Stage 1 contingency for originally unfunded works contrary to Treasury policy
- the additional $16.4 million cost unforeseen in the Stage 1 business case for delivering medical imaging services mostly funded through the sale of land
- an additional $15.0 million from Stage 2A to cover the budget overrun in Stage 2 due to adverse site conditions.
The cumulative impact of these events is that Stages 1 and 2 of the Hornsby project cost approximately $42.4 million than it should have in the circumstances around 14 per cent more than what the revised combined Estimated Total Cost for both stages should have been after releasing the $11.0 million in surplus Stage 1 funds, with Stage 2 delayed by around 14 months.
Major construction projects often experience adverse site conditions which can be difficult to fully detect in advance. However, we found this was a common occurrence in the projects we examined sometimes with significant time and/or budget impacts indicating scope to enhance related risk and cost assessments. Specifically:
- Hornsby Ku-ring-gai Hospital Redevelopment Stage 2: adverse site conditions during demolition works resulted in an 11-month delay for delivering the medical imaging unit and 14-month delay completing Stage 2 main works including need for additional $15.0 million in funds to cover the resultant budget deficit for the project.
- Blacktown Mt Druitt Hospital Redevelopment Stage 2: adverse site conditions combined with project complexity delayed completion of the early works by approximately five months. This contributed to the delay in completing the main construction works which occurred around nine months later than planned in the business case.
- Dubbo Health Service Redevelopment Stages 3 and 4: Health Infrastructure advised adverse site conditions including asbestos containing materials and ground conditions delayed works for the main building with completion forecast for March 2021, around 21 months later than planned in the final business case. This resulted in the need for additional $13.5 million to cover increased construction costs and risks, increasing the Stage 3 and 4 forecast final cost from $150 million to $163.5 million as at February 2020.
These examples indicate a risk the cumulative impact of adverse site conditions may be substantial when measured across both time and Health Infrastructure's full delivery program. They also point to potential for Health Infrastructure to achieve efficiencies and improved outcomes from strengthening its approach to assessing and mitigating the risks from adverse site conditions.
Main construction works on Stage 1 of the Dubbo Health Service Redevelopment were completed in October 2015, approximately 13 months later than planned in the final business case. Delays were mainly due to insolvency of the early works contractor resulting in their departure from the project. The ensuing 11-month delay in completing the early works significantly impacted the overall schedule and delivery of main construction works.
The insolvency event was significant as it affected nine separate Health Infrastructure projects – three of which had yet to reach practical completion. It also affected state-funded projects in other sectors. It resulted in the need for additional funding of $11.5 million that was provided in the 2014–15 State Budget increasing the total Stage 1 and 2 budget from $79.8 million to $91.3 million.
Health Infrastructure’s analysis of lessons learned shows it worked actively to mitigate the impacts of the insolvency event across all affected projects. However, it also indicates a risk the lessons were mainly focused on mitigating the impacts after an insolvency event occurred rather than on prevention.
Although Health Infrastructure initially commissioned a financial assessment of the now insolvent early works contractor before engagement, it did not detect any risks of the impending insolvency and instead concluded the contractor was in a strong financial position. However, the contractor became insolvent shortly after commencement approximately seven months later. This indicates a risk of weaknesses in the assessment performed that was not explicitly addressed by the lessons learned.
Delivery of the main construction works were further impacted by disputes with the main works contractor over the scope of works for the renal unit resulting in Health Infrastructure terminating the contract in November 2016 following lengthy negotiations over several months.
The scope of works relating to the renal unit were ultimately transferred to Stages 3 and 4 and were delivered in December 2019, around five years later than originally planned in the business case.
Health Infrastructure advised the delay was ultimately beneficial to the project because the refurbishment works for the renal unit, initially scheduled for Stages 1 and 2, would have been demolished to accommodate the new Western Cancer Centre proposed after Stages 1 and 2 and currently being delivered in parallel with Stages 3 and 4.
Health Infrastructure advised the actual cost of Stages 1 and 2 was $84.7 million against the budget of $91.3 million. The residual $6.6 million relates to the renal works not delivered during Stage 1 and 2 and transferred to Stage 3 and 4.
Health Infrastructure advised the contractual provisions for mitigating insolvency events 'in-flight' are limited highlighting the importance of proactive and effective due diligence prior to engaging contractors for significant construction projects.
Health Infrastructure's 2017-20 Corporate Plan identifies the development of a quality framework to support delivery of future-focused outcomes as a key organisational priority. Related initiatives within the Corporate Plan describe a framework underpinned by a Quality Committee providing advice on:
- records management, to meet the requirements of the State Records Act 1998
- project assurance, to ensure future focused outcomes and enhance Health Infrastructure's Standards, Policies, Procedures and Guidelines, Templates and Design Guidance Notes
- knowledge management and library services, to promote and leverage from project learnings.
Although Health Infrastructure has some elements of a quality framework it is not yet fully in place. Health Infrastructure advised it had yet to establish the quality framework and related committee described in its Corporate Plan due in part to its focus on responding to the growth of its capital program.
Health Infrastructure's Development and Innovation team has been active in supporting continuous improvement in knowledge and project management including development of business cases. Although useful, these initiatives have relied heavily on leveraging and disseminating insights from Gateway reviews and have not formed part of a systematic quality and continuous improvement framework.
The limited focus on the quality of business cases is reflected in internal performance monitoring and reporting which focuses mainly on tracking the delivery of projects against internal benchmarks, often revised from the baselines in the business case, and expenditure against cashflow targets. There is no evident internal monitoring and/or reporting to the Chief Executive and Board on defined quality metrics linked to business case development and staff capability.
Performance reporting on balanced scorecard metrics has similarly focused mainly on process rather than quality and has been inconsistent in recent years.
Appendix one – Response from agency
Appendix two – About the audit
Appendix three – Performance auditing
Appendix four – Ministry of Health planning tools and guidelines
Appendix five – Streamlined investment decision process for Health Capital Projects
Appendix six – Timeline of business cases and relevant policy guidelines
Copyright notice
© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.
Parliamentary reference - Report number #338 - released 12 August 2020
Actions for CBD South East Sydney Light Rail: follow-up performance audit
CBD South East Sydney Light Rail: follow-up performance audit
This is a follow-up to the Auditor-General's November 2016 report on the CBD South East Sydney Light Rail project. This follow-up report assessed whether Transport for NSW has updated and consolidated information about project costs and benefits.
The audit found that Transport for NSW has not consistently and accurately updated project costs, limiting the transparency of reporting to the public.
The Auditor-General reports that the total cost of the project will exceed $3.1 billion, which is above the revised cost of $2.9 billion published in November 2019. $153.84 million of additional costs are due to omitted costs for early enabling works, the small business assistance package and financing costs attributable to project delays.
The report makes four recommendations to Transport for NSW to publicly report on the final project cost, the updated expected project benefits, the benefits achieved in the first year of operations and the average weekly journey times.
The CBD and South East Light Rail is a 12 km light rail network for Sydney. It extends from Circular Quay along George Street to Central Station, through Surry Hills to Moore Park, then to Kensington and Kingsford via Anzac Parade and Randwick via Alison Road and High Street.
Transport for NSW (TfNSW) is responsible for planning, procuring and delivering the Central Business District and South East Light Rail (CSELR) project. In December 2014, TfNSW entered into a public private partnership with ALTRAC Light Rail as the operating company (OpCo) responsible for delivering, operating and maintaining the CSELR. OpCo engaged Alstom and Acciona, who together form its Design and Construct Contractor (D&C).
On 14 December 2019, passenger services started on the line between Circular Quay and Randwick. Passenger services on the line between Circular Quay and Kingsford commenced on 3 April 2020.
In November 2016, the Auditor-General published a performance audit report on the CSELR project. The audit found that TfNSW would deliver the CSELR at a higher cost with lower benefits than in the approved business case, and recommended that TfNSW update and consolidate information about project costs and benefits and ensure the information is readily accessible to the public.
In November 2018, the Public Accounts Committee (PAC) examined TfNSW's actions taken in response to our 2016 performance audit report on the CSELR project. The PAC recommended that the Auditor-General consider undertaking a follow-up audit on the CSELR project. The purpose of this follow-up performance audit is to assess whether TfNSW has effectively updated and consolidated information about project costs and benefits for the CSELR project.
Conclusion
Transport for NSW has not consistently and accurately updated CSLER project costs, limiting the transparency of reporting to the public. In line with the NSW Government Benefits Realisation Management Framework, TfNSW intends to measure benefits after the project is completed and has not updated the expected project benefits since April 2015.Between February 2015 and December 2019, Transport for NSW (TfNSW) regularly updated capital expenditure costs for the CSELR in internal monthly financial performance and risk reports. These reports did not include all the costs incurred by TfNSW to manage and commission the CSELR project.
Omitted costs of $153.84 million for early enabling works, the small business assistance package and financing costs attributable to project delays will bring the current estimated total cost of the CSELR project to $3.147 billion.
From February 2015, TfNSW did not regularly provide the financial performance and risk reports to key CSELR project governance bodies. TfNSW publishes information on project costs and benefits on the Sydney Light Rail website. However, the information on project costs has not always been accurate or current.
TfNSW is working with OpCo partners to deliver the expected journey time benefits. A key benefit defined in the business plan was that bus services would be reduced owing to transfer of demand to the light rail - entailing a saving. However, TfNSW reports that the full expected benefit of changes to bus services will not be realised due to bus patronage increasing above forecasted levels.
Appendix one – Response from agency
Appendix two – Governance and reporting arrangements for the CSELR
Appendix three – 2018 CSELR governance changes
Appendix four – About the audit
Appendix five – Performance auditing
Copyright notice
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Parliamentary reference - Report number #335 - released 11 June 2020
Actions for Managing demand for ambulance services 2017
Managing demand for ambulance services 2017
NSW Ambulance has introduced several initiatives over the past decade to better manage the number of unnecessary ambulance responses and transports to hospital emergency departments. However, there is no overall strategy to guide the development of these initiatives nor do NSW Ambulance's data systems properly monitor their impact. As a result, the Audit Office was unable to assess whether NSW Ambulance's approach to managing demand is improving the efficiency of ambulance services.
NSW Ambulance uses a telephone referral system to manage triple zero calls from people with medical issues that do not require an ambulance. This has the potential to achieve efficiency improvements but there are weaknesses in NSW Ambulance's use and monitoring of this system. Paramedics are now able to make decisions about whether patients need transport to a hospital emergency department. NSW Ambulance does not routinely measure or monitor the decisions paramedics make, so it does not know whether these decisions are improving efficiency. Extended Care Paramedics who have additional skills in diagnosing and treating patients with less urgent medical issues were introduced in 2007. NSW Ambulance analysis indicates that these paramedics have the potential to improve efficiency, but have not been used as effectively as possible.
Our 2013 audit of NSW Ambulance found that accurate monitoring of activity and performance was not being conducted. More than four years later, this remains the case.
NSW Ambulance has recognised the need to change the way it manages demand and has developed initiatives that have the potential to improve efficiency. However, there are significant weaknesses in the strategy for and implementation of its demand management initiatives.
NSW Ambulance has identified the goal of moving from an emergency transport provider to a mobile health service and developed several initiatives to support this. Its demand management initiatives have the potential to contribute to the broader policy directions for the health system in New South Wales. However, there is no clear overall strategy guiding these initiatives and their implementation has been poor.
NSW Ambulance's reasons for changing its approach to demand management have not been communicated proactively to the community. Demand management initiatives that have been operating for over a decade still do not have clear performance measures or targets. Project management of new initiatives has been inadequate, with insufficient organisational resources to oversee them and inadequate engagement with other healthcare providers.
NSW Ambulance uses an in-house Vocational Education and Training course to recruit some paramedics, as well as recruiting paramedics who have completed a university degree. No other Australian ambulance services continue to provide their own Vocational Education and Training qualifications. Paramedics will need more support in several key areas to be able to fulfil their expanded roles in providing a mobile health service. Performance and development systems for paramedics are not used effectively. Up to date technology would help paramedics make better decisions and improve NSW Ambulance's ability to monitor demand management activity.
There are gaps in NSW Ambulance's oversight of the risks of some of the initiatives it has introduced, particularly its lack of information on the outcomes for patients who are not transported to hospital. Weaknesses in the way NSW Ambulance uses its data limit its ability to properly assess the risks of the demand management initiatives it has introduced.
Parliamentary reference - Report number #295 - released 13 December 2017
Actions for Health 2017
Health 2017
The following report highlights results of the financial audits of entities in the NSW health cluster. The report focuses on key observations and findings from the most recent audits of these entities.
The report also includes a range of findings on service delivery. Overall, NSW Health is achieving most of their targets. Some local health districts are continuing to experience increased demand for their services and are finding it more difficult to meet their targets. For example, three local health districts had not achieved some emergency department response time targets for three consecutive years.
1. Financial reporting and controls
Financial Reporting |
All health cluster entities received unqualified audit opinions and the quality of financial reporting remains high across the cluster. Early close procedures were largely completed and all financial statements were submitted by the deadlines. |
Financial performance |
Overall, NSW Health recorded an operating surplus of $407 million in 2016–17. Eleven local health districts/specialty networks recorded operating deficits in 2016–17, four more than 2015–16. Expenses across NSW Health increased by 4.4 per cent in 2016–17 (6.0 per cent in 2015–16), lower than the expected long term annual expense growth rate. |
Excess annual leave | Managing excess annual leave is a continual challenge for NSW Health, with thirty–five per cent of the workforce having excess balances. |
Overtime payments | NSW Health entities are generally managing overtime well; however NSW Ambulance’s overtime payments, $74.6 million in 2016–17, remain significantly higher than other health entities. |
Time and leave recording practices | Unapproved employee timesheets continue to be a problem for health entities. Weak timesheet approval controls increase the risk of staff claiming and being paid for hours they have not worked. There is also an increased risk of high volumes of roster adjustments, manual pays, salary overpayments and leave not being recorded accurately. |
2. Service Delivery
Service Agreements | Most of the service agreements between the Secretary of NSW Health and health entities were signed earlier than prior years. |
Performance monitoring | Five NSW Health entities are not meeting the Ministry of Health’s performance expectations at 30 June 2017. |
Emergency department performance | Data provided by the Ministry indicates NSW Health, on average, met emergency department triage response time targets across all triage categories for the fourth consecutive year. |
Ambulance response times | Data provided by the Ministry shows NSW Ambulance response times for imminently life‑threatening incidents of 7.5 minutes in 2016–17 was within the Ministry’s target of 10.0 minutes. Data provided by the Ministry indicates NSW Ambulance response times for potentially life‑threatening incidents did not improve in 2016–17. The median response time of 11.1 minutes in 2016–17 was similar to 2015–16 (11.0 minutes). This is despite the number of Priority 1 responses reducing by 4.3 per cent. |
Unplanned hospital re-admissions | Data provided by the Ministry shows eight local health districts achieved the Ministry of Health’s unplanned hospital re‑admissions target in 2016–17. The target is for local health districts to reduce re‑admission rates from the previous financial year. |
This report sets out the results of the 30 June 2017 financial statement audits of Health cluster entities.
The report has been structured into two chapters focusing on:
- Financial reporting and controls
- Service delivery.
This chapter outlines audit observations, conclusions and recommendations related to financial reporting and internal controls of entities for 2016-17.
Observation | Conclusion or recommendation |
2.1 Quality of financial reporting |
|
All cluster entities received unqualified audit opinions and misstatements identified in financial statements fell. | The quality of financial reporting remains high across the cluster. |
2.2 Timeliness of financial reporting |
|
Early close procedures were largely completed and all financial statements were submitted by the deadlines. | Health entities controlled by the Ministry of Health continued submitting their financial statements well ahead of the statutory deadlines. |
2.4 Financial and sustainability analysis |
|
NSW Health recorded an operating surplus of $407 million in 2016–17.
|
The statewide operating surplus was $84 million higher than 2015–16. Net surpluses contribute to NSW Health’s ability to invest in new facilities, upgrades and redevelopments. The 2016–17 financial results were once again impacted by the NSW Government initiative to improve cash management across the sector. |
2.5 Performance against budget | |
Ten local health districts/specialty networks’ expense budget variance was outside performance expectations agreed with the Ministry at the beginning of 2016–17. | The Ministry continues to manage performance across NSW Health to improve the accuracy of budgeting practices. |
2.7 Human Resources | |
Thirty-five per cent of NSW Health’s workforce have excess annual leave balances.
NSW Ambulance had the highest average sick leave rate in NSW Health of 85.2 hours per FTE in 2016–17 (78.7 hours in 2015–16). This was higher than the statewide average of 62.1 hours (62.0 hours in 2015–16).
Unapproved employee timesheets continue to be a problem for health entities. Weak timesheet approval controls increase the risk of staff claiming and being paid for hours they have not worked.
|
Managing excess annual leave is a continual challenge for health entities.
Recommendation: NSW Ambulance should further review the effectiveness of its rostering practices to identify strategies to reduce excessive overtime payments. Recommendation: Health entities should conduct a risk‑based review of time and leave recording practices to ensure control weaknesses are identified and fixed. |
This chapter outlines our audit observations, conclusions and recommendations relating to service delivery for 2016–17.
Observation | Conclusion or recommendation |
3.1 Service agreements in NSW Health | |
Most of the service agreements between the Secretary of NSW Health and health entities were signed earlier than prior years. Thirteen local health districts/specialty networks signed their service agreements by the 31 July 2017 due date. This is a significant improvement with only seven local health districts/specialty networks meeting the date in 2015–16. |
Having service agreements signed as close as possible to the start of each year provides the Ministry and NSW Health entities with clarity around roles, responsibilities, performance measures, budgets, and service volumes and levels. |
3.2 Performance of NSW Health entities | |
Five NSW Health entities were not meeting the Ministry’s performance expectations at 30 June 2017. | The Ministry is managing the five entities in accordance with its performance review process. |
3.4 Emergency department response times | |
Data provided by the Ministry indicates NSW Health again, on average, met emergency department triage response time targets across all triage categories for the fourth consecutive year. The Ministry manages performance across NSW Health to ensure patients presenting at emergency departments receive care in a clinically appropriate timeframe. |
Based on the Ministry’s data, local health districts/specialty networks are, on average, meeting triage targets despite increasing emergency department attendances. The data shows eleven local health districts met all triage targets in 2016–17, compared to eight in |
3.5 Emergency treatment performance | |
The Ministry manages public patient access to emergency services in public hospitals. It has an emergency treatment performance target of 81 per cent of patients leaving emergency departments within four hours. |
Data provided by the Ministry indicates NSW Health maintained its overall emergency treatment performance in 2016–17, but did not achieve its target. The State average emergency treatment performance was 74.2 per cent (74.2 per cent in 2015–16). Based on the Ministry’s data, only four local health districts achieved the target in 2016–17, five in |
3.6 Ambulance response times | |
NSW Ambulance has a response time target of 10.0 minutes for imminently life‑threatening incidents in New South Wales. | Data provided by the Ministry indicates NSW Ambulance response times for imminently life-threatening incidents of 7.5 minutes in 2016–17 was within the Ministry’s target. |
3.7 Transfer of care | |
The Ministry has a target of 90 per cent for the number of ambulance arrivals within a 30 minute ‘transfer of care’ timeframe. | Data provided by the Ministry indicates the rate of ambulance arrivals within a 30 minute 'transfer of care' timeframe improved from 87.6 per cent in 2015–16 to 91.7 per cent in 2016–17, exceeding the Ministry’s target. |
3.8 Average length of stay in hospital | |
Based on the Ministry’s 2016–17 data, the average length of stay for acute episodes was 3.0 days. The average length of stay in New South Wales hospitals is lower than the national average of 3.2 days (in 2015–16). | The Ministry’s data shows the average length of stay by patients for acute episodes has remained stable in New South Wales hospitals for four years. |
3.9 Elective surgery access performance | |
Data provided by the Ministry indicates NSW Health continues to manage waiting times for elective surgery in public hospitals. | The Ministry’s data shows NSW Health improved on‑time admission of patients for elective surgery in 2016–17 despite a 1.8 per cent increase in admissions. While the result improved, only one of the three targets for elective surgery waiting times was met in 2016–17. |
3.10 Unplanned hospital re-admissions | |
Data provided by the Ministry indicates NSW Health, on average, did not reduce the rate of unplanned hospital re‑admissions in 2016–17. The Ministry has a target of reducing unplanned hospital re‑admissions compared to the previous financial year. Low re‑admission rates may indicate good patient management practices and post-discharge care. |
The Ministry’s data shows eight local health district met the target to reduce the rate of re‑admissions compared to the previous financial year. The statewide average rate increased from 6.3 per cent to 6.4 per cent. |
3.11 Post discharge care for acute mental health patients | |
NSW Health has a goal to increase community-based care to acute mental health patients after they are discharged. Continuity of care in the community can lead to reduced symptom severity, lower re‑admission rates, and improved quality of life. | The Ministry’s 2016–17 data shows the statewide average for post discharge follow-up of acute mental health patients within seven days was 70.0 per cent (66.0 per cent in 2015–16). The statewide average improved and met the NSW Health target of 70 per cent. Nine local health districts exceeded the NSW Health target. |
3.12 Mental health acute re-admissions | |
NSW Health has a goal to reduce acute public sector mental health re-admissions. High re‑admission rates may indicate deficiencies in inpatient treatment and follow up care. | The Ministry’s data shows twelve local health districts did not achieve the NSW Health target of 13 per cent mental health acute re‑admissions in 2016–17. |
3.13 Unplanned and emergency re‑presentations | |
NSW Health aims to reduce the number of unplanned and emergency re‑presentations to emergency departments. The Ministry’s 2016–17 data shows the State average of emergency department re‑presentations decreased marginally from 5.0 per cent in 2015–16 to 4.9 per cent. |
Patients attending rural emergency departments are more likely to re‑present within 48 hours of being discharged than those in regional or metropolitan emergency departments. |
3.14 Healthcare associated infection | |
The national target for the rate of Staphylococcus aureus (golden staph) bloodstream infection is two cases per 10,000 bed days. | Data provided by the Ministry indicates the rate of golden staph bloodstream infection in New South Wales hospitals continues to be well below the target and national benchmark at 0.72 cases per 10,000 bed days in 2016–17 (0.75 in 2015–16). |
3.15 Patient experience and satisfaction | |
The Bureau of Health Information analyses and reports on the results of patient surveys. The Bureau’s survey shows 65 per cent of adult admitted patients rated the care they received in hospital as ‘very good’ and 29 per cent rated it as ‘good’. |
NSW Health recognises that patient surveys are an important feedback mechanism on the health care system that can only come from personal experiences. |
Actions for Agency compliance with NSW Government travel policies
Agency compliance with NSW Government travel policies
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.
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.
Actions for Government Advertising: Campaigns for 2015–16 and 2016–17
Government Advertising: Campaigns for 2015–16 and 2016–17
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.
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 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 201516 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
Actions for Sydney Road Maintenance Contracts
Sydney Road Maintenance Contracts
In November 2013, Roads and Maritime Services (RMS) outsourced the maintenance of State roads in the Sydney region south and west zones using an innovative contracting approach called the Stewardship Maintenance Contract (SMC). The SMC links risk to reward, and uses a performance framework where outcomes should drive improved performance over time.
WA | VIC | QLD | NSW | |
---|---|---|---|---|
Roads managed (lane kms) | 52,659 | 50,510 | 71,353 | 80,348 |
Estimated spend ($/lane km) | 5,000 | 4,500 | 6,000 | 7,000 |
Road quality measure (%) | 99 | 99 | 94 | 91 |
Parliamentary reference - Report number #288 - released 15 June 2017
Actions for NorthConnex
NorthConnex
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.
Parliamentary reference - Report number #287 - released 8 June 2017
Actions for 2016 - An overview
2016 - An overview
This report focuses on key observations and findings from 2016 audits and highlights key areas of focus for financial and performance audits in 2017.
Financial reporting | |
Observation | Conclusion |
Only one qualified audit opinion was issued on the 2015–16 financial statements of NSW public sector agencies, compared to two in 2014–15. | The quality of financial reporting continued to improve across the NSW public sector. |
More 2015–16 financial statements and audit opinions were signed within three months of the year end. | Timely financial reporting was facilitated by more agencies resolving significant accounting issues early, completing asset valuations on time and compiling sufficient evidence to support financial statement balances. |
NSW Treasury’s early close procedures in 2015–16 were again successful in improving the quality and timeliness of financial reporting, largely facilitated by the early resolution of accounting issues. For 2016–17, NSW Treasury has narrowed the scope of mandatory early close procedures. |
The narrowed scope of mandatory early close procedures may diminish the good performance in ensuring the quality and timeliness of financial reporting achieved in recent years. To mitigate this risk, NSW Treasury has mandated that agencies perform non-financial asset valuations and prepare proforma financial statements in their early close procedures. It also encourages them to continue with the good practices embedded in recent years. |
Although most agencies complied with NSW Treasury’s early close asset revaluation procedures we identified areas where they can improve. | Asset revaluations need to commence early enough to ensure all assets are identified and the results are analysed, recorded and reflected accurately in the early close financial statements. |
Number of misstatements | |||||
Year ended 30 June | 2015-16 | 2014-15 | 2013-14 | 2012-13 | 2011-12 |
Total reported misstatements | 298 | 396 | 459 | 661 | 1,077 |
All material misstatements identified by agencies and audit teams were corrected before the financial statements and audit opinions were signed. A material misstatement relates to an incorrect amount, classification, presentation or disclosure in the financial statements that could reasonably be expected to influence the economic decisions of users.
Significant matters reported to the portfolio Minister, Treasurer and Agency Head
In 2015–16, we reported the following significant matters to the portfolio Minister, Treasurer and agency head in our Statutory Audit Reports:
Appropriate financial controls help ensure the efficient and effective use of resources and the implementation and administration of agency policies. They are essential for quality and timely decision making.
In 2015–16, our audit teams made the following key observations on the financial controls of NSW public sector agencies.
Financial controls | |
Observation | Conclusion |
More needs to be done to implement audit recommendations on a timely basis. We found 212 internal control issues identified in previous audits had not been adequately addressed by 30 June 2016. |
Delays in implementing audit recommendations can impact the quality of financial information and the effectiveness of decision making. Agencies need to ensure they have action plans, timeframes and assigned responsibilities to address recommendations in a timely manner. |
Agencies continue to face challenges managing information security. Most information technology issues we identified related to poor IT user administration in areas like password controls and inappropriate access. | Agencies should review the design and effectiveness of information security controls to ensure data is adequately protected. |
We found shared service provider agreements did not always adequately address information security requirements. |
Where agencies use shared service providers they should consider whether the service level arrangements adequately address information security. |
Thirteen of 108 agencies required to attest to having a minimum set of information security controls did not do so in their 2015 annual reports. | The 'NSW Government Digital Information Security Policy' recognises the growing need for effective information security. With cyber security threats continuing to increase as digital services expand we plan to look at cyber security as part of our 2017–18 performance audit program. |
We identified instances where service level agreements with shared service providers were outdated, signed too late or did not exist. | Corporate and shared service arrangements are more effective when service level arrangements are negotiated and signed in time, clearly detail rights and responsibilities and include meaningful KPIs, fee arrangements and dispute resolution processes. |
Internal controls at GovConnect, the private sector provider of transactional and information technology services to many NSW public sector agencies were ineffective in 2015–16. We found mitigating actions taken to manage transition risks from ServiceFirst to GovConnect were ineffective in ensuring effective control over client transactions and data. | The Department of Finance, Services and Innovation should ensure GovConnect addresses the control deficiencies. It should also examine the breakdowns in the transition of the shared service arrangements and apply the learnings to other services being transitioned to the private sector. |
Maintenance backlogs exist in several NSW public sector agencies, including Roads and Maritime Services, Sydney Trains, NSW Health, the Department of Education and the Department of Justice. | To address backlog maintenance it is important for agencies to have asset lifecycle planning strategies that ensure newly built and existing assets are funded and maintained to a desired service level. |