What the report is about

Sydney Metro is Australia’s largest public transport project. It requires the acquisition of many private properties, including residential and business properties.

This audit assessed the effectiveness of the acquisition of private properties for the Sydney Metro project. The audited agencies were Sydney Metro, the Department of Planning and Environment (Valuer General NSW) and Transport for NSW (the Centre for Property Acquisition).

The audit assessed agencies against the framework for property acquisitions in New South Wales. It did not re-perform the valuations done for individual properties that were acquired by Sydney Metro.

What we found

Acquisitions of private property for the Sydney Metro project were mostly effective in the sample of acquisitions we assessed. We found Sydney Metro:

• complied with legislative and policy requirements for compensation and communication with people subject to property acquisitions
• kept accurate records of its acquisitions and applied probity controls consistently
• did not complete detailed plans or negotiation strategies for the high-risk and high-value acquisitions we reviewed
• did not comply with legislative timelines for most compulsory acquisitions because of delays in receiving the required information from the Valuer General in these cases.

The Centre for Property Acquisition has overseen the implementation of reforms to residential acquisition processes, but its assessment of the effectiveness of these reforms has not been comprehensive.

What we recommended

The audit made four recommendations to the audited agencies to improve:

• plans and strategies for the acquisition of high-risk and high-value properties
• timeliness of issuing compensation determinations for compulsory acquisitions
• data quality on the experience of people subject to property acquisitions.

The NSW Government has the power to acquire land that is owned or leased by individuals or businesses, if it is needed for a public purpose. The power arises from the Land Acquisition (Just Terms Compensation) Act 1991 (the Just Terms Act). Government agencies that have the power to compulsorily acquire private property are referred to as ‘acquiring authorities’. People who are subject to acquisitions are referred to as ‘affected parties’ and include property owners (business or residential), businesses with a commercial lease on a property, or individuals with residential tenancy leases. In recent years, the vast majority of acquisitions by the NSW Government have been for public transport or road projects.

Sydney Metro is a NSW Government agency with responsibility for building the Sydney Metro railway project. Sydney Metro is Australia’s largest public transport project. The project requires the acquisition of a large number of private properties. Sydney Metro has been one of the largest acquirers of private property in recent years, completing over 500 acquisitions between 2020 and mid-2022, with a total acquisition value of over $2 billion. Other agencies and statutory officers involved in the acquisition of property for the Sydney Metro project include:

• the Department of Planning and Environment (DPE), which supports the minister responsible for the Just Terms Act. DPE also provides staff to the Valuer General of NSW
• the Valuer General of NSW, an independent statutory officer that determines compensation in cases where the acquiring authority and the affected party cannot agree on compensation for property that has been acquired
• Transport for NSW, which includes the Centre for Property Acquisition (CPA). The CPA does not have a direct role in acquiring properties, but its responsibilities include developing guidance for acquiring agencies and monitoring and reporting on their activities.

About this audit

The objective of this audit was to assess the effectiveness of acquisitions of private properties for Sydney Metro projects. The audit assessed agencies against the legislative and policy requirements in place for government acquisitions of private property in New South Wales. In line with the Audit Office's legislative mandate, the audit does not comment on the merits of the policy objectives reflected in the Just Terms Act.

The audit examined a sample of 20 property acquisitions. This was not a statistically representative sample. While our report provides comments on Sydney Metro’s overall acquisition processes, it does not provide assurance regarding the acquisitions that were not examined for this audit.

The audit did not re-perform the valuations done for individual properties that were acquired by Sydney Metro. Affected parties who disagree with the valuation of their property have the right to seek independent assessment of this via the Valuer General and the Land and Environment Court.

This chapter presents our findings on Sydney Metro's acquisition of industrial and commercial properties. Industrial properties include construction businesses and manufacturing facilities. Commercial properties were mostly properties such as shopping centres and office towers. Many of these acquisitions involve businesses and properties that are relatively complex and have high values. This means the valuation process can require multiple experts and can be lengthy and contested. Adherence to governance and probity requirements is important for these acquisitions in order to demonstrate that the acquiring authority has achieved value for money.

This chapter presents our findings on Sydney Metro's acquisition of residential properties, which include apartments and houses, and small business leases, which mostly affected businesses in small shopping centres or arcades. Most of these acquisitions were lower value compared to industrial and commercial property acquisitions and did not require as much expert advice on complex technical issues. However, residential property acquisitions can be personally distressing for the affected parties and require staff from the acquiring authority to provide support and show empathy while ensuring legislative compliance and value for money.

Appendix one – Responses from agencies

Appendix two – About the audit 

Appendix three – Performance auditing 

Copyright notice

© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.

Parliamentary reference - Report number #375 - released 9 February 2023

What the report is about

Cyber Security NSW is part of the Department of Customer Service, and aims to provide the NSW Government with an integrated approach to preventing and responding to cyber security threats.

This audit assessed the effectiveness of Cyber Security NSW's arrangements in contributing to the NSW Government's commitments under the NSW Cyber Security Strategy, in particular, increasing the NSW Government's cyber resiliency. The audit asked:

• Are internal planning and governance processes in place to support Cyber Security NSW meet its objectives? 
• Are Cyber Security NSW's roles and responsibilities defined and understood across the public sector?

What we found

Cyber Security NSW has a clear purpose that is in line with wider government policy and objectives. However, it does not clearly and consistently communicate its key objectives, with too few reliable and meaningful ways of measuring progress toward those objectives.

Cyber Security NSW does not provide adequate assurance of the cyber security maturity self assessments performed by NSW Government agencies. Department heads are accountable for ensuring their agency's compliance with NSW government policy.

Cyber Security NSW has a remit to assist local government to improve cyber resilience. However, it cannot mandate action and does not have a strategic approach guiding its efforts.

What we recommended

By 30 June 2023 the Department of Customer Service should:

1. implement an approach that provides reasonable assurance that NSW government agencies are assessing and reporting their compliance with the NSW Government Cyber Security Policy in a manner that is consistent and accurate
2. ensure that Cyber Security NSW has a strategic plan that clearly demonstrates how the functions and services provided by Cyber Security NSW contribute to meeting its purpose and achieving NSW government outcomes
3. ensure that Cyber Security NSW has a detailed, complete and accessible catalogue of services available to agencies and councils
4. develop a comprehensive engagement strategy and plan for the local government sector, including councils, government bodies, and other relevant stakeholders. 

The NSW Cyber Security Strategy details a vision for ‘…NSW to become a world leader in cyber security, protecting, growing, and advancing our digital economy’. Cyber Security NSW, located within the Department of Customer Service, has lead responsibility for one of the four commitments in the strategy: to increase the NSW Government’s cyber resilience.

Cyber Security NSW ‘aims to provide the NSW Government with an integrated approach to preventing and responding to cyber security threats’. It does not provide broader consumer-focused services.

In August 2020, the NSW Government approved a business case to enhance the funding and remit of Cyber Security NSW to include a broader range of services and functions. As a result, Cyber Security NSW is receiving $60 million in funding from 2020–21 to 2022–23, an increase from its previous funding of around $5 million per year (which had been sourced from contributions from each NSW Government department).

The objective of this performance audit was to assess the effectiveness of Cyber Security NSW’s arrangements in contributing to the NSW Government’s commitments under the NSW Cyber Security Strategy, in particular, to increase the NSW Government’s cyber resilience.

We assessed this objective through two lines of inquiry:

1. Are internal planning and governance processes in place to support Cyber Security NSW meet its objectives?
2. Are Cyber Security NSW roles and responsibilities defined and understood across the public sector?

The Audit Office of New South Wales has reported on the topic of cyber security previously. Most recently, the Internal Controls and Governance 2022 report included findings and recommendations relating to cyber security internal controls and governance at 25 of the largest agencies in the NSW public sector. While that report is multi-agency and sought to assess the level of cyber security attained in selected agencies, this current performance audit report focuses specifically on Cyber Security NSW and how well-equipped it is to meet its whole-of-government cyber security leadership and coordination roles.

Cyber security is an evolving landscape where the nature and scale of threats are increasing. The Australian Cyber Security Centre (ACSC), the Australian Government lead agency for cyber security, reported in its in 2020–21 annual report that it received over 67,500 cybercrime reports, equating to one report of a cyber attack every eight minutes, with no sector of the economy or type of government agency immune.

Citizens of NSW are increasingly accessing online government services in this context, providing different types of sensitive personal information. This reliance and transition to digital services has increased in recent times, particularly during the COVID-19 pandemic. The NSW Legislative Council’s Portfolio Committee (the Committee) noted in the March 2021 inquiry report into cyber security in NSW that ‘a failure to get cyber security right in New South Wales represents a significant risk to the State’s economy, business and community, and will affect public trust in government’.

The Committee noted that sound cyber security practices across NSW Government agencies, which Cyber Security NSW was established to drive, will enable the State and community to leverage opportunities from the digital world. Indeed, NSW aims to become a world leader in cyber security by protecting, growing and advancing the digital economy.

Establishment of Cyber Security NSW

Prior to the establishment of Cyber Security NSW, the Office of the Government Chief Information Security Officer was responsible for cyber security across the NSW government sector. This role was announced in March 2017 and was tasked with ‘identifying areas of high risk of attack, and working across NSW agencies to share intelligence, facilitate minimum security standards, and ultimately ensure that citizens can trust in the NSW Government’s delivery of digital transformation’. At the time of this appointment, the Minister for Customer Service and Digital Government stated that ‘cyber security and risk has emerged as one of the most high-profile, borderless and rapidly evolving risks facing government’.

The Office of the Government Chief Information Security Officer was renamed on 20 May 2019 to Cyber Security NSW. Governance updates at the time note that this was undertaken to ‘better reflect the leadership and coordination role required to uplift cyber security and decision-making across NSW Government’. The establishment of Cyber Security NSW was also partly in response to the Audit Office of New South Wales 2018 performance audit report on ‘Detecting and Responding to Cyber Security Incidents’. That audit found that there was no whole-of-government capability to detect and respond effectively to cyber security incidents. Cyber Security NSW is relatively new and is established as a branch within the Department of Customer Service (DCS).

The Office of the Government Chief Information Security Officer, and subsequently Cyber Security NSW, was initially funded through a levy imposed on clusters. Funding arrangements for Cyber Security NSW changed with the announcement in August 2020 of $240 million over three years for the stated purpose of bolstering the NSW Government’s cyber security capability and creating a world leading cyber industry. This funding included direct investment of $60 million from 2020–21 to 2022–23 for Cyber Security NSW to increase its capability and capacity, with the size of the team at the time expected to grow from 25 to 100 staff. In announcing this funding, the Minister for Customer Service and Digital Government stated that ‘…this is the biggest single cyber security investment in national history and will strengthen the government's capacity to detect and respond to the fast-moving cyber threat landscape’.

Cyber Security NSW is divided into two directorates, with one directorate having a focus on operations, and the other on policy and awareness. In turn, there are seven teams within the two directorates. As at March 2022, Cyber Security NSW had 76 ongoing positions filled, five contractors and 22 vacancies.

Cyber Security NSW states that its aim ‘…is to provide the NSW Government with an integrated approach to preventing and responding to cyber security threats. By building a stronger cyber resilience across whole-of-government, Cyber Security NSW is able to support the economic growth prosperity and efficiency of NSW’.

NSW Government Cyber Security Strategy

The NSW Government Cyber Security Strategy was released in September 2018 to ‘…guide and inform the safe management of government’s growing cyber footprint’. The 2018 Cyber Security Strategy also set out an action plan with success criteria against each of the six themes of the NSW cyber security framework. Based on a framework from the US National Institute of Standards and Technology (NIST), these themes are:

• lead
• prepare
• prevent
• detect 
• respond 
• recover.

The Strategy was revised in 2021 and combined with the Cyber Security Industry Development Strategy. The aim of this current strategy is to ‘…outline the key strategic objectives, guiding principles, and high-level focus areas that the NSW Government will use to align existing and future programs of work’. The strategy includes four NSW Government commitments to:

• increase NSW Government cyber resiliency
• help NSW cyber security businesses grow
• enhance cyber security skills and workforce 
• support cyber security research and innovation.

Cyber Security NSW has responsibility as ‘lead agency’ on the first commitment. This role requires it to set commitment objectives and focus areas for the strategy and provide central leadership and coordination of programs and initiatives.

NSW Government Cyber Security Policy

The NSW Government’s Cyber Security Policy was released in February 2019, replacing the former Digital Information Security Policy. All NSW Government agencies must comply with the Cyber Security Policy, and it was recommended for adoption by State Owned Corporations (SOC), local councils, and universities.

The current version of the Cyber Security Policy sets out a range of mandatory requirements for agencies, including: 

• annual reporting of their self-assessed levels of maturity against all the mandatory requirements of the Policy and the Australian Cyber Security Centre’s ‘Essential Eight’ requirements 
• that agencies must provide a list of their ‘crown jewels’ and high and extreme risks to their cluster Chief Information Security Officer (CISO).

The Policy sets out that Cyber Security NSW:

• may assist agencies with their implementation of the Policy with an FAQ document and guidelines on several cyber security topics
• will summarise the maturity reports provided by agencies and provide the results to the relevant governance bodies including the Cyber Security Steering Group, Secretaries’ Board, relevant committees of Cabinet, Cyber Security Senior Officers’ Group, and the ICT and Digital Leadership Group, as well as use these reports to identify common themes and areas for improvement across NSW Government.

As discussed further in Chapter 3, a mandatory guideline issued by the Secretary of the Department of Customer Service in 2020 established that departments and agencies will be subject to audits by Cyber Security NSW. This is to test compliance with the Cyber Security Policy and report these outcomes to the Secretaries’ Board.

This chapter considers whether the Department of Customer Service has a strategic plan for Cyber Security NSW that includes a consistent hierarchy of priorities, which are then reflected in workplans, and inform decisions about specific functions and activities. It also considers whether:

• there was a sound, evidence-based rationale for why Cyber Security NSW was established
• the specific services and functions Cyber Security NSW provides are adequately targeted to agency and council needs
•  there is adequate performance assessment of how the services and functions performed by Cyber Security NSW contribute to uplifting cyber maturity and increasing cyber resilience.

This chapter considers the distribution of responsibility for cyber security in the NSW public sector, as well as whether the responsibilities and roles of Cyber Security NSW are clear and understood by agencies and councils. It also considers whether Cyber Security NSW has sufficient authority and mandate to fulfill its responsibilities for both NSW Government agencies and the local government sector.

Appendix one – Response from agency

Appendix two – About the audit

Appendix three – Performance auditing

Copyright notice

© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.

Parliamentary reference - Report number #374 - released 8 February 2023

What the report is about

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

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

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

What we found

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

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

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

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

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

What we recommended

We recommended that the audited agencies should:

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

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

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

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

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

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

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

About this audit

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

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

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

Appendix two – Classification of government entities 

Appendix three – About the audit 

Appendix four – Performance auditing

Copyright notice

© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.

Parliamentary reference - Report number #372 - released 24 January 2023

What the report is about

Result of the Planning and Environment cluster agencies' financial statements audits for the year ended 30 June 2022.

What we found

Unmodified audit opinions were issued for all completed 30 June 2022 financial statements audits of cluster agencies. Seven audits are ongoing.

Disclaimed audit opinions were issued for the 2010–11 to 2015–16 financial statements of the Water Administration Ministerial Corporation (WAMC), as management was unable to certify that the financial statements exhibit a true and fair view of WAMC's financial position and financial performance.

Qualified audit opinions were issued for WAMC's 2016–17 and 2017–18 financial statements due to insufficient evidence to support the completeness and valuation of water meters infrastructure assets, the impairment of water meters, and the completeness of buildings at Nimmie Caira.

Unqualified audit opinions were issued for WAMC's 2018–19 and 2019–20 financial statements.

The Department of Planning and Environment (the department) assessed 45 Category 2 Statutory Land Managers (SLM) did not meet the reporting exemption criteria and therefore were required to prepare 2021–22 financial statements. None of these 45 Category 2 SLMs prepared and submitted their 30 June 2022 financial statements by the statutory reporting deadline.

All 119 Commons Trusts have never submitted their financial statements for audit as required by the Government Sector Finance Act 2018 (GSF Act).

NSW Treasury has confirmed that the Catholic Metropolitan Cemeteries Trust (CMCT) is a controlled entity of the State. To date, CMCT has not met its obligations to prepare financial statements under the GSF Act and it has not submitted financial statements to the Auditor-General for audit.

What the key issues were

Since 2017, the Audit Office has recommended the department address the different practices across the local government sector in accounting for rural firefighting equipment. Despite repeated recommendations, the department did little to resolve this issue. At the time of writing, 32 of 118 completed council audits received qualified audit opinions on their 30 June 2022 financial statements.

There continues to be significant deficiencies in Crown land records. The department uses the Crown Land Information Database (CLID) to record key information relating to Crown land in New South Wales that is managed and controlled by the department and land managers. The CLID system was not designed to facilitate financial reporting, and the department is required to conduct extensive adjustments and reconciliations to produce accurate information for the financial statements.

The department implemented the CrownTracker system as a replacement for CLID. The project was finalised in June 2022, but it has not achieved the intended outcomes.

Nine high-risk issues were identified across the cluster related to the findings outlined above and weaknesses in IT general controls, financial reporting, governance processes and internal controls.

Recommendations were made to address these deficiencies.

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

• financial reporting
• audit observations.

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

This chapter outlines our audit observations related to the financial reporting of agencies in the Planning and Environment cluster (the cluster) for 2022.

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

This chapter outlines our observations and insights from our financial statement audits of agencies in the Planning and Environment cluster.

Appendix one – Misstatements in financial statements submitted for audit

Appendix two – Early close procedures

Appendix three – Timeliness of financial reporting

Appendix four – Financial data

Appendix five – Councils received qualified audit opinions 

Copyright notice

© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.

What the report is about

Local councils in New South Wales are responsible for assessing local and regional development applications.

Most development applications are assessed and determined by council staff under delegated authority. However, some development applications must be referred to independent local planning panels or Sydney and regional planning panels for determination.

Councils provide support to local planning panels. The Department of Planning and Environment provides support to Sydney and regional planning panels.

This audit assessed whether Byron Shire Council, Northern Beaches Council and The Hills Shire Council had effectively assessed and determined development applications in compliance with legislative and other requirements.

It also assessed whether The Hills Shire Council, Northern Beaches Council and the Department of Planning and Environment had provided effective support to relevant independent planning panels.

What we found

All councils had established clear roles, responsibilities and delegations for assessment and determination of development applications and had also established processes to ensure quality of assessment reports.

Northern Beaches Council and The Hills Shire Council have established comprehensive approaches to considering and managing risks related to development assessment.

Northern Beaches Council's approach to publishing its assessment reports promotes transparency.

Across a sample of development applications assessed and determined between 2020–22:

• Northern Beaches Council and The Hills Shire Council had assessed and determined applications in compliance with legislative and other requirements. However, The Hills Shire Council could do more to transparently document any conflicts of interest within assessment reports.
• Byron Shire Council had assessed most applications in compliance with legislative and other requirements. However, we found opportunities for the Council to:
  • ensure determinations were made in line with delegations
  • strengthen its approach to transparent management of conflicts of interest and quality review of assessments.

The Hills Shire Council and Northern Beaches Council had effectively supported their respective local planning panels.

The Department of Planning and Environment had processes that meet requirements for supporting regional planning panels but could do more to promote consistency in approach, share information across panels and measure the effectiveness of its support.

What we recommended

We made recommendations to Byron Shire Council, The Hills Shire Council and the Department of Planning and Environment to address the gaps identified and improve the transparency of processes.

Local councils in New South Wales are responsible for assessing local and regional development applications under the Environmental Planning and Assessment Act 1979 (EP&A Act).

In assessing development applications, councils consider:

• whether the proposed development application is compliant with legislation and environmental planning instruments
• whether the proposed development meets local planning controls and objectives
• any environmental, social and economic impacts
• any submissions from impacted properties, neighbours and interested parties
• the public interest.

Once assessed, a development application will be determined by council staff under delegated authority, the elected council, or an independent planning panel.¹ 

The involvement of a particular independent planning panel is established under legislative and policy instruments, and depends on the type and value of the proposed development. Most development applications are assessed and determined by council staff under delegated authority.

In determining development applications, independent planning panels must manage any potential, real or perceived conflicts of interest of panel members for a given development application, meet and vote on development applications, and publish their decisions and reasons.

Under the EP&A Act, and as required by statutory instruments and procedures, councils and the Department of Planning and Environment (DPE) must provide secretariat and other support functions to independent planning panels.

Previous reviews and inquiries have identified several significant risks that are present within the processes involved in the assessment and determination of development applications. These risks include possible non-compliance with complex legal and policy requirements, potential improper influence from developers and other stakeholders, and a perceived lack of transparency within the planning system and planning outcomes.

There are several planning pathways for development in New South Wales. This audit focuses on local and regional development that requires assessment and determination by a local council and/or an independent local planning panel or Sydney or regional planning panel in three Local Government Areas (LGAs): Byron Shire Council, Northern Beaches Council, The Hills Shire Council.

Audited councils were selected from a range of criteria, including:

• the number, value and types of development applications determined in 2018–19
• average determination timeframes
• appeals against determinations and Land and Environment Court outcomes
• LGA demographics.

The audit also avoided councils that had previously been subject to a performance audit.

The objective of this audit was to assess whether:

• selected councils have effectively assessed and determined development applications in compliance with relevant legislation, regulations and government guidance
• selected councils and DPE effectively support independent planning panels to determine development applications in compliance with relevant legislation, regulations and government guidance.

This audit continues a series of audits examining the development assessment process in NSW local councils and is focused on the assessment and determination stages.

The Audit Office of New South Wales previously considered local government development assessments in our 2019 performance audit: 'Development assessment: pre-lodgement and lodgement in Camden Council and Randwick City Council'.

Appendix one – Response from agencies

Appendix two – Council profile: Byron Shire Council

Appendix three – Council profile: Northern Beaches Council

Appendix four – Council profile: The Hills Shire Council

Appendix five – About the audit 

Appendix six – Performance auditing

Copyright notice

© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.

Parliamentary reference - Report number #370 - released 12 December 2022

What the report is about

In this report, we have analysed the key findings and recommendations from our audit reports over the past four years.

This analysis includes financial audits, performance audits, and compliance audits of state and local government entities that were tabled in NSW Parliament between July 2018 and February 2022.

The report is framed by recognition that the past four years have seen significant challenges and emergency events.

The scale of government responses to these events has been wide-ranging, involving emergency response coordination, service delivery, governance and policy.

The report is a resource to support public sector agencies and local government to improve future programs and activities.

What we found

Our analysis of findings and recommendations is structured around six key themes:

• Integrity and transparency
• Performance and monitoring
• Governance and oversight
• Cyber security and data
• System planning for disruption
• Resource management.

The report draws from this analysis to present recommendations for elements of good practice that government agencies should consider in relation to these themes. It also includes relevant examples from recent audit reports.

In this report we particularly call out threats to the integrity of government systems, processes and governance arrangements.

The report highlights the need for balanced advice to government on options and risks, for transparent documentation and reporting of directions and decisions, and for early and open sharing of information with integrity bodies and audit.

A number of the matters highlighted in this report are similar to those described in our previous Insights Report, (Performance Audit Insights: key findings from 2014–2018) specifically in relation to cyber and information security, to performance measurement, reporting and evaluation, and system and workforce planning and capability.

I am pleased to present the Audit Insights 2018–2022 report. This report describes key findings, trends and lessons learned from the last four years of audit. It seeks to inform the New South Wales Parliament of key risks identified and to provide insights and suggestions to the agencies we audit to improve performance across the public sector.

The report is framed by a very clear recognition that governments have been responding to significant events, in number, character and scale, over recent years. Further, it acknowledges that public servants at both state and council levels generally bring their best selves to work and diligently strive to deliver great outcomes for citizens and communities. The role of audit in this context is to provide necessary assurance over government spending, programs and services, and make suggestions for continuous improvement.

A number of the matters highlighted in this report are similar to those described in our previous Insights Report, (Performance Audit Insights: key findings from 2014–2018) specifically in relation to cyber and information security, to performance measurement, reporting and evaluation, and system and workforce planning and capability.

However, in this report we particularly call out threats to the integrity of government systems, processes and governance arrangements. We highlight the need for balanced advice to government on options and risks, for transparent documentation and reporting of directions and decisions, and for early and open sharing of information with integrity bodies and audit. Arguably, these considerations are never more important than in an increasingly complex environment and in the face of significant emergency events and they will be key areas of focus in our future audit program.

While we have acknowledged the challenges of the last few years have required rapid responses to address the short-term impacts of emergency events, there is much to be learned to improve future programs. I trust that the insights developed in this report provide a helpful resource to public sector agencies and local government across New South Wales. I would be pleased to receive any feedback you may wish to offer.

Margaret Crawford
Auditor-General for New South Wales

This report brings together a summary of key findings arising from NSW Audit Office reports tabled in the New South Wales Parliament between July 2018 and February 2022. This includes analysis of financial audits, performance audits, and compliance audits tabled over this period.

• Financial audits provide an independent opinion on the financial statements of NSW Government entities, universities and councils and identify whether they comply with accounting standards, relevant laws, regulations, and government directions.
• Performance audits determine whether government entities carry out their activities effectively, are doing so economically and efficiently, and in accordance with relevant laws. The activities examined by a performance audit may include a selected program or service, all or part of an entity, or more than one government entity. Performance audits can consider issues which affect the whole state and/or the local government sectors.
• Compliance audits and other assurance reviews are audits that assess whether specific legislation, directions, and regulations have been adhered to.

This report follows our earlier edition titled 'Performance Audit Insights: key findings from 2014–2018'. That report sought to highlight issues and themes emerging from performance audit findings, and to share lessons common across government. In this report, we have analysed the key findings and recommendations from our reports over the past four years. The full list of reports is included in Appendix 1. The analysis included findings and recommendations from 58 performance audits, as well as selected financial and compliance reports tabled between July 2018 and February 2022. The number of recommendations and key findings made across different areas of activity and the top issues are summarised at Exhibit 1.

The past four years have seen unprecedented challenges and several emergency events, and the scale of government responses to these events has been wide-ranging involving emergency response coordination, service delivery, governance and policy. While these emergencies are having a significant impact today, they are also likely to continue to have an impact into the future. There is much to learn from the response to those events that will help the government sector to prepare for and respond to future disruption. The following chapters bring together our recommendations for core elements of good practice across a number of areas of government activity, along with relevant examples from recent audit reports.

This 'Audit Insights 2018–2022' report does not make comparative analysis of trends in public sector performance since our 2018 Insights report, but instead highlights areas where government continues to face challenges, as well as new issues that our audits have identified since our 2018 report. We will continue to use the findings of our Insights analysis to shape our future audit priorities, in line with our purpose to help Parliament hold government accountable for its use of public resources in New South Wales.

Appendix one – Included reports, 2018–2022

Appendix two – About this report

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.

What the report is about

The ePlanning program is an initiative of the Department of Planning and Environment (the department) to deliver a digital planning service for New South Wales through the NSW planning portal (the portal).

Using the portal, relevant planning activities can be carried out online, including all stages of development applications.

The portal has been developed under three separate business cases in 2013, 2014 and 2020.

In late 2019, the government mandated the use of the portal for all development applications. This decision took effect across 2020–21.

This audit assessed the effectiveness of the department's implementation, governance and stakeholder engagement in delivering the NSW planning portal. 

What we found

Since implementation commenced in 2013, the NSW planning portal has progressively achieved its objectives to provide citizens with access to consolidated planning information, and allow them to prepare and submit development applications online.

Shortcomings in the department's initial planning and management of the program led to a significant time overrun. It has taken the department longer and cost significantly more to implement the portal than first anticipated. 

In recent years the department has improved the planning, implementation and governance of the ePlanning program, resulting in improved delivery of the portal’s core functions.

The department now has a clear view of the scope necessary to finalise the program, but has not yet published the services it plans to implement in 2022 and 2023.

Mandating the use of the portal for all development applications changed the program's strategic risk environment and required the department to work more closely with a cohort of stakeholders, many of whom did not want to adopt the portal.

Despite this change, the department kept its overall delivery approach the same.

While implementation of the portal has delivered financial benefits, the department has overestimated their value.

The Department has only reported benefits since 2019 and has not independently assured the calculation of benefits.

What we recommended

By December 2022, the department should:

• publish a roadmap of the services it expects to release on the portal across 2022 and 2023
• update its ePlanning program assumptions, benefits targets and change management approach to reflect the government's decision to mandate the use of the portal for all stages of a development application
• independently assure and report publicly the correct calculation of ePlanning program benefits.

The ePlanning program is an initiative of the Department of Planning and Environment (the department) to deliver a digital planning service for New South Wales through the NSW planning portal (the portal, or the planning portal). The department defines the portal as an online environment where community, industry and government can work together to better understand and meet their obligations under the Environmental Planning and Assessment Act 1979 (NSW). Using the portal, relevant planning activities can be carried out online throughout New South Wales. This includes, but is not limited to:

• applying for and gaining planning approval
• applying for and gaining approval for building works, sub-dividing land and similar activities
• issuing occupancy and other certificates.

The portal has been developed under three separate business cases. The first business case in 2013 led to the creation of a central portal, which made planning information available to view by planning applicants and allowed some planning applications to be lodged and tracked online.

Under a second business case prepared in 2014, the department set out to improve and widen the functions available via the portal. The department prepared a third business case in 2020 to fund further improvements to the portal over the period July 2020 to June 2023. The third business case also extended the portal's functions to support the building and occupation stages of the planning cycle.

In late 2019, the government mandated the use of the portal for all stages of development applications. This decision took effect across 2020–21 and applied to all councils as well as certifiers and others involved in the planning process.

The objective of this performance audit was to assess the effectiveness of the department's implementation, governance and stakeholder engagement in delivering the NSW planning portal. We investigated whether:

• delivery of the NSW planning portal was planned effectively
• sound governance arrangements are in place to ensure effective implementation of the program
• users of the NSW planning portal are supported effectively to adopt and use the system.

This part of the report sets out how:

• the ePlanning program has been planned and delivered
• users of the portal have been supported
• the program has been governed.

This part of the report sets out the ePlanning program's:

• expected and reported financial benefits
• calculation of financial benefits.

In 2019, the department increased its expectations for net financial benefits

The department's three ePlanning business cases each forecast substantial financial benefits from the implementation of the planning portal. The department expected that most financial benefits would flow to planning applicants due to a quicker and more consistent planning process. It also expected that government agencies and councils would benefit from the portal.

In 2019 the department commissioned a review to explore opportunities to better identify, monitor and realise the benefits of the ePlanning program. Using this work, the department updated the expected benefits for business cases 1 and 2 to take account of:

• errors and miscalculations in the original benefits calculations
• slower delivery of the portal and changes to the take-up of portal services by councils
• changes to the services supported by the portal.

Reported benefits significantly exceed the current targets

In September 2021, the department reported that the program had achieved $334 million of benefits over the three financial years up to June 2021 plus the first two months of 2021–22. These reported benefits were significantly higher than expected. 

The department attributes the higher-than-expected financial benefits to the following:

• benefit targets have not been updated to reflect the impact of the 2019 decision to mandate the use of the portal for all development applications. This decision brought forward the expected benefits as well as potential costs of the program. However, the department did not update its third business case which was draft at the time. The business case was subsequently approved in July 2020
• one-off cost savings for agencies not having to develop their own systems
• public exhibitions of planning proposals continuing to be available online during 2020 when some newspapers stopping printing due to COVID-19.

The calculation of benefits is overstated

The department reported $334 million of benefits in September 2021 due to the ePlanning program. This calculation is overstated because:

• a proportion of reported benefits is likely to be due to other planning reforms
• the calculation of the largest single benefit is incorrect
• the reported benefits may not fully account for dis-benefits reported by some stakeholders.

The program’s benefits are calculated primarily from changes in planning performance data, such as the time it takes to determine a planning development application. The department currently attributes the benefits from shorter planning cycles entirely to the effect of the ePlanning program. However, planning cycles are impacted by many other factors such as the complexity of planning regulations and the availability of planning professionals. Planning cycles may also be impacted by other departmental initiatives which are designed to improve the time that it takes for a planning application to be evaluated. The Introduction describes some of these initiatives.

The largest contribution to the department’s September 2021 benefit report was an estimated saving of $151 million for developers due to lower costs associated with holding their investment for a shorter time. However, the department’s calculation of this benefit assumes a high baseline for the time to determine a development application. It also assumes that all development applications except for additions or alterations to existing properties will incur financing costs. However, a small but material number of these applications will be self-financed. The calculation also includes several data errors in spreadsheets.

The calculation of some benefits relies upon an extrapolation of the benefits experienced by a small number of early-adopter councils, including lower printing and scanning costs, fewer forms and quicker processing times. However, some councils report that their costs have increased following the introduction of the portal, primarily because aspects of the portal duplicate work that they carry out in their own systems. The portal has also required some councils to re-engineer aspects of their own systems, such as the integration of their planning systems with other council systems such as finance or property and rating systems. It has also required councils to create new ways of integrating council information systems with the planning portal.

The department has published information to help councils and certifiers to automatically integrate their systems with the planning portal. This approach uses application programming interfaces (or APIs) which are an industry-standard way for systems to share information. In April and May 2021, the government granted $4.8 million to 96 regional councils to assist with the cost of developing, implementing and maintaining APIs. The maximum amount of funding for each council was $50,000. The department is closely monitoring the implementation of APIs by councils and other portal users. Once they are fully implemented the department expects APIs to reduce costs incurred by stakeholders.

The department has not yet measured stakeholder costs. It was beyond the scope of this audit to validate these costs.

The department has not independently assured the calculation of reported benefits

In 2020 the department appointed an external provider to calculate the benefits achieved by the ePlanning program. The department advised that it chose to outsource the calculation of benefits because the provider had the required expertise and because it wanted an independent calculation of the benefits. The process involves:

• extraction and verification of planning performance data by the department
• population of data input sheets by the department
• calculation of benefits by the external provider using the data input
• confirmation by the department that the calculation includes all expected benefit sources.

The department does not have access to the benefits calculation model which is owned and operated by the external provider. The department trusts that the provider correctly calculates the benefits and does not verify the reported benefit numbers. However, as the benefits model involves many linked spreadsheets and approximately 300 individual data points, there is a risk that the calculation model contains errors beyond those discussed in this audit.

The reported benefits have only been calculated since 2019

The department originally intended to track benefits from October 2014. However, it only started to track benefits in 2019 when it appointed an external provider to calculate the benefits achieved by the portal. Any benefits or dis-benefits between the introduction of the portal and 2019 are unknown and not included in the department’s calculation of benefits.

Appendix one – Response from agency

Appendix two – About the audit

Appendix three – Performance auditing

Copyright notice

© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.

Parliamentary reference - Report number #366 - released 21 June 2022

What the report is about

This report draws together the financial impact of COVID-19 on the agencies integral to responses across the state government sector of New South Wales.

What we found

Since the COVID-19 pandemic hit NSW in January 2020, and until 30 June 2021, $7.5 billion was spent by state government agencies for health and economic stimulus. The response was largely funded by borrowings.

The key areas of spending since the start of COVID-19 in NSW to 30 June 2021 were:

• direct health response measures – $2.2 billion
• personal protective equipment – $1.4 billion
• small business grants – $795 million
• quarantine costs – $613 million
• increases in employee expenses and cleaning costs across most agencies
• vaccine distribution, including vaccination hubs – $71 million.

The COVID-19 pandemic significantly impacted the financial performance and position of state government agencies.

Decreases in revenue from providing goods and services were offset by increases in appropriations, grants and contributions, for health and economic stimulus funding in response to the pandemic.

Most agencies had expense growth, due to additional operating requirements to manage and respond to the pandemic along with implementing new or expanded stimulus programs and initiatives.

Response measures for COVID-19 have meant the NSW Government is unlikely to meet targets in the Fiscal Responsibility Act 2012 being:

• annual expense growth kept below long-term average revenue growth
• elimination of State’s unfunded superannuation liability by 2030.

What the report is about

The results of the Transport cluster agencies’ financial statement audits for the year ended 30 June 2021.

What we found

Unmodified financial statement audit opinions were issued for all Transport cluster agencies. Resolution of issues delayed signing the Transport Asset Holding Entity of NSW (TAHE) until 24 December 2021. Matters relating to TAHE are also reported in the report on State Finances 2021.

Emphasis of Matter - TAHE

An Emphasis of Matter paragraph was included in TAHE's audit opinion to draw attention to uncertainty associated with:

• future access and licence fees that are subject to re-signed agreements
• an additional $4.1 billion of funding that is outside the forward estimates period
• a significant portion of the fair value of TAHE’s non-financial assets is reflected in the terminal value, which is outside the ten-year contract period to 30 June 2031, and the risk that TAHE will not be able to negotiate contract terms to support current projections.

TAHE's transition from RailCorp also changed its valuation of assets to an income approach, resulting in a $20.3 billion decrease to the fair value. The fair value decrease was because the cash flows were not sufficient to support the previous recorded value.

TAHE corrected a misstatement of $1.2 billion relating to the valuation of its assets. This followed significant deliberation on key judgements and assumptions, with TAHE adopting risk assumptions in its valuation that were not in line with comparable benchmarks.

Emphasis of Matter - State Transit Authority of New South Wales

An Emphasis of Matter paragraph was included in the State Transit Authority of NSW's (the Authority) audit opinion to draw attention to the financial statements not prepared on a going concern basis. This was because the NSW Government put the Authority's bus contracts out to competitive tender and accordingly, management assessed the Authority's principal activities are not expected to operate for a full 12 months after 30 June 2021.

The implementation of AASB 1059 ‘Service Concession Arrangements: Grantors’ resulted in a net increase in assets of $23.5 billion across the Transport cluster.

The 2020–21 audits identified six high-risk and 45 moderate risk issues across the cluster. Fourteen of the moderate risk issues were repeat issues, including information technology controls around management of user access for key financial systems and payroll processes.

The high-risk issues, in addition to those related to TAHE and previously reported in the report on State Finances 2021, include:

• absence of conflict of declarations related to land acquisition processes at Transport for NSW
• no evidence of conflict of interest declarations obtained by TAHE from consultants and contractors regarding involvement in other engagements.

What we recommended

TAHE needs to:

• finalise revised commercial agreements to reflect fees detailed in a Heads of Agreement signed on 18 December 2021
• prepare robust projections and business plans to support the required rate of return.

NSW Treasury and TAHE should monitor the risk that control of TAHE assets could change in the future.

Transport for NSW needs to significantly improve its processes to ensure all key information is identified and shared with the Audit Office.

Transport agencies should implement a process to ensure conflicts of interest declarations are completed for land acquisitions and applied consistently across the cluster.

Transport agencies should implement a process to capture all contracts and agreements entered to ensure:

• agencies are aware of contractual obligations
• financial reporting implications are assessed, particularly with respect to leases, revenue and service concession arrangements.

This report provides Parliament and other users of the transport cluster (the cluster) agencies’ financial statements with the results of our audits, our observations, analysis, conclusions and recommendations in the following areas:

• financial reporting
• audit observations.

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

This chapter outlines our audit observations related to the financial reporting of agencies in the cluster for 2021.

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

This chapter outlines our observations and insights from our financial statement audits of agencies in the cluster.

Findings reported to management

The number of findings reported to management has increased, and 37 per cent of all issues were repeat issues

Breakdowns and weaknesses in internal controls increase the risk of fraud and error. Deficiencies in internal controls, matters of governance interest and unresolved issues were reported to management and those charged with governance of agencies. The Audit Office does this through management letters, which include observations, related implications, recommendations and risk ratings.

In 2020–21, there were 73 findings raised across the cluster (56 in 2019–20) and 37 per cent of all issues were repeat issues (43 per cent in 2019–20).

In view of the recent performance audit ‘Managing Cyber Risks’ and compliance audit ‘Compliance with the NSW Cyber Security Policy’ involving the cluster, it is noted with concern that the most common repeat issues related to weaknesses in controls over information technology user access administration and password management. Moderate risk issues included completeness and accuracy of contract registers, accounting for assets and management of supplier and payroll masterfiles.

A delay in implementing audit recommendations increases the risk of intentional and accidental errors in processing information, producing management reports, and generating financial statements. This can impair decision-making, affect service delivery and expose agencies to fraud, financial loss and reputational damage. Control deficiencies may also mean agency staff are less likely to follow internal policies, inadvertently causing the agency not to comply with legislation, regulation, and central agency policies.

The table below describes the common issues identified across the cluster by category and risk rating. 

2020–21 audits identified six high-risk findings

High-risk findings were reported at the following cluster agencies.

The number of moderate risk findings increased from prior year

Forty-five moderate risk findings were reported in 2020–21, representing a 73.1 per cent increase from 2019–20. Of these, 14 were repeat findings, and 31 were new issues. 

Key moderate risk findings related to:

• weaknesses in user access management to key financial systems
• management of contracts and agreements register
• management of supplier and payroll masterfiles
• accounting for assets
• control deficiencies at service organisations
• segregation of duties relating to the hiring of employees
• conflict of interest management
• annual leave management
• review of internal audit charter
• disaster recovery planning.

Transport Asset Holding Entity of New South Wales

Background

The establishment of TAHE was originally announced by the NSW Government in the 2015–16 State Budget. On 1 July 2020, the former Rail Corporation New South Wales (RailCorp), a not-for-profit entity, transitioned to the Transport Asset Holding Entity of New South Wales (TAHE), a for-profit statutory state-owned corporation under the Transport Administration Act 1988. There was no change in the structure of TAHE as a new entity was not created. Ownership remains fully with the government. TAHE, and the former RailCorp, were both classified as Public Non-Financial Corporation (PNFC) entities within the Total State Sector Accounts.

Prior to 1 July 2015, the government paid appropriations to Transport for NSW, a General Government Sector (GGS) agency, to construct transport assets. When completed, these assets were granted to the former RailCorp, a not for-profit entity within the PNFC sector. The grants to the former RailCorp were recorded as an expense in the State’s GGS budget result.

From 1 July 2015, the government announced the creation of TAHE (a dedicated asset manager). Funding for new capital projects was to be provided through equity injections and was no longer recorded as an expense to the GGS budget, even though the business model was yet to be determined. The change, as explained in the 2015–16 State Budget, was due to the expectation that the former RailCorp will transition to TAHE, which was intended, over time to provide a commercial return. That Budget also highlighted how the change, which was largely a change in the basis of accounting, was intended to improve the GGS budget result each year. In total, the GGS has contributed approximately $11.1 billion to TAHE since 2015–16. This includes the equity injections from the GGS to TAHE made in the current year of $2.4 billion.

NSW Treasury initially set a timetable for the stand-up of TAHE of 1 July 2019, which included finalising the business model, operating model and contracts for the use of TAHE's assets. The enactment of the Transport Administration Act 1988 resulted in RailCorp transitioning to TAHE on 1 July 2020, 12 months after its originally planned operational date. Contributions paid to the former RailCorp and subsequently to TAHE by the GGS were treated as equity investments from July 2015 forward. This treatment continued, despite delays in settling the business model. In 2020, the Audit Office raised a high-risk finding due to the significance of the financial reporting impacts and business risks for NSW Treasury and TAHE.

The business model adopted and the flow of funds between transport agencies in the GGS and PNFC sectors is shown in the diagram below. For further details refer to the Report on State Finances 2021.

Appendix one – Misstatements in financial statements submitted for audit

Appendix two – Early close procedures

Appendix three – Financial data

Copyright notice

© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.

What the report is about

Natural disaster events, including bushfires and floods, have directly impacted some local councils in New South Wales over recent years. It is important for local councils to effectively plan so that they can continue operations through natural disasters and other disruptions.

This audit assessed the effectiveness of Bega Valley Shire Council and Snowy Valleys Council’s approaches to business and service continuity arrangements for natural disasters.

What we found

Bega Valley Shire Council has a documented approach to planning for business and service continuity that provides for clear decision making processes and accountability.

Bega Valley Shire Council has prepared for identified natural disaster risks to business and service continuity but can do more to monitor how it has implemented controls responding to these risks.

Bega Valley Shire Council did not follow all aspects of its business continuity plan in responding to the 2019–20 bushfires.

Bega Valley Shire Council can do more to ensure its business continuity management approach is regularly reviewed and updated, and that staff are regularly trained in its implementation.

Snowy Valleys Council did not have a finalised approach to ensure business and service continuity until October 2020. Now in place, this approach identifies governance, assigns roles and responsibilities, and includes procedures to retain or resume services. That said, the Council has not adequately documented key elements of its business continuity management approach.

Snowy Valleys Council's strategic risk register identifies that natural disasters may impact its ability to deliver services, but the Council has not identified controls to respond to these risks.

During the 2019–20 bushfires, in the absence of a business continuity plan, Snowy Valleys Council relied on the local knowledge of its staff to manage service continuity in line with directions from the Local Emergency Operations Controller and the combat agency (the Rural Fire Service).

Both councils advised that, during the 2019–20 bushfires, services were maintained, sometimes with adaptation and sometimes with support from other councils, NSW Government and Australian Government agencies.

What we recommended

Bega Valley Shire Council should update and regularly review its business continuity plans, provide business continuity training, and improve its monitoring of risk controls and actions, including for natural disaster impacts.

Snowy Valleys Council should document and monitor all disruption-related risks and controls, regularly review and update its business continuity plans, and progress planned actions to increase staff awareness of business continuity plans.

Across both councils, we recommended that recordkeeping relating to service delivery during natural disasters should be adequate to inform post incident reviews and future updates to business continuity.

Natural disaster events, including bushfires and floods, have directly impacted some local councils in New South Wales over recent years. Given their important role in delivering essential services to their communities, it is important for local councils to effectively plan so that they can continue operations through natural disasters and other disruptions.

Business continuity plans are a widespread mechanism used by governments and private sector organisations to ensure they are prepared to respond effectively to disruptions. In New South Wales, business continuity plans are widely used by local councils to help ensure continuity of service delivery, safety and availability of staff, availability of information technology systems and other systems, financial management and governance. There are no current sector-wide requirements or policies for business continuity management issued by the Department of Planning and Environment (DPE)¹ for NSW councils. As such, councils can develop their own business continuity management frameworks.

Our 'Report on Local Government 2020' considered the financial and governance impacts from recent natural disaster events on local councils in New South Wales. It also considered sector-wide trends in business continuity planning, including how many councils enacted or updated their business continuity plans in 2019–20.

The report found that all councils were impacted by emergency events, and that some councils changed their governance, policies, systems, and processes to respond to the emergency events. Sixty-five per cent of councils updated their business continuity plan as a response to recent emergency events, and 43 per cent of councils updated their disaster recovery plan.

This audit follows on from the 'Report on Local Government 2020' with a detailed examination of the effectiveness of business and service continuity arrangements for natural disasters in two councils.

The selected councils for this audit were Bega Valley Shire Council and Snowy Valleys Council. They were selected because they had been heavily impacted by the 2019–20 bushfires and other natural disaster events, such as storms and floods between December 2018 to December 2020.

The objective of this performance audit was to assess the effectiveness of the councils' approaches to business and service continuity arrangements for natural disasters. In making this assessment, we considered whether the selected councils:

• had documented approaches for identifying, mitigating, and responding to disaster-related risks to business and service continuity
• effectively implemented strategies to prepare for identified disaster-related impacts
• responses during selected disasters were effective in managing business and service continuity.

Appendix one – Responses from councils and the Department of Planning and Environment 

Appendix two – Emergency management arrangements for local councils 

Appendix three – About the audit 

Appendix four – Performance auditing 

Copyright notice

© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.

Parliamentary reference - Report number #362 - released 17 February 2022.