Reports
Service NSW's handling of personal information
The Auditor-General for New South Wales, Margaret Crawford, released a report today examining the effectiveness of Service NSW’s handling of customers’ personal information to ensure its privacy.
The audit found that Service NSW is not effectively handling personal customer and business information to ensure its privacy. Service NSW continues to use business processes that pose a risk to the privacy of personal information. This includes the routine emailing of personal information between Service NSW service centres and other agencies, which is one of the processes that contributed to the data breach earlier this year. The audit found that previously identified risks and recommended solutions had not been implemented on a timely basis.
The Auditor-General made eight recommendations aimed at ensuring improved processes, technologies, and governance arrangements for how Service NSW handles customers’ personal information.
The Hon. Victor Dominello, MP, Minister for Customer Service, requested this audit under section 27(B)(3)(c) of the Public Finance and Audit Act 1983 following public reports in May 2020 of a cyber security attack which had led to a breach of Service NSW customer information. This audit also included the Department of Customer Service which supports Service NSW with privacy, risk and governance functions.
Service NSW was established in 2013 with the intention that it would, over time, 'become the primary interaction point for customers accessing New South Wales Government transaction services'.
Service NSW's functions are set out in the Service NSW (One stop Access to Government Services) Act 2013. This legislation allows for other NSW Government agencies to delegate to and enter into agreements with the Chief Executive Officer of Service NSW in order for Service NSW to undertake service functions for the agency.
Service NSW now has agreements with 36 NSW Government client agencies to facilitate over 1,200 types of interactions and transactions for the community.
The nature of each agreement between Service NSW and its client agencies varies. Some client agencies have delegated authority to allow Service NSW staff to conduct transactions on their behalf in the agencies' systems. Other arrangements do not include the same degree of delegation. In these cases, Service NSW provides services such as responding to enquiries and validating documents.
In addition, Service NSW conducts transactions for its own programs, such as the Seniors Card. Personal information for these programs, as well as information for customers' MyServiceNSW accounts, are stored by Service NSW on its Salesforce Customer Relationship Management (CRM) system.
In March 2020, Service NSW suffered two cyber security attacks in short succession. Technical analysis undertaken by the Department of Customer Service (DCS) concluded that these attacks resulted from a phishing exercise through which external threat actors gained access to the email accounts of 47 staff members. These attacks resulted in the breach of a large amount of personal customer information that was contained in these email accounts. See Section 1.1 for further details.
This audit is being conducted in response to a request from the Hon. Victor Dominello, Minister for Customer Service, under section 27B(3)(c) of the Public Finance and Audit Act 1983. Minister Dominello requested that the Auditor General conduct a performance audit in relation to Service NSW's handling of sensitive customer and business information.
This audit assessed how effectively Service NSW handles personal customer and business information to ensure its privacy.
It addressed the following:
- Does Service NSW have processes and governance in place to identify and manage risks to the privacy of personal customer and business information?
- Does Service NSW have policies, processes and systems in place that support the effective handling of personal customer and business information to ensure its privacy?
- Has Service NSW effectively implemented its policies, processes and systems for managing personal customer and business information?
ConclusionService NSW is not effectively handling personal customer and business information to ensure its privacy. It continues to use business processes that pose a risk to the privacy of personal information. These include routinely emailing personal customer information to client agencies, which is one of the processes that contributed to the March 2020 data breach. Previously identified risks and recommended solutions had not been implemented on a timely basis.Service NSW identifies privacy as a strategic risk in both its Risk Management Guideline and enterprise risk register and sets out a zero level appetite for privacy risk in its risk appetite statement. That said, the governance, policies, and processes established by Service NSW to mitigate privacy risk are not effective in ensuring the privacy of personal customer and business information. While Service NSW had risk identification and management processes in place at the time of the March 2020 data breach, these did not prevent the breach occurring. Some of the practices that contributed to the data breach are still being followed by Service NSW staff. For example, business processes still require Service NSW staff to scan and email personal information to some client agencies. The lack of multi factor authentication has been identified as another key contributing factor to the March 2020 data breach as this enabled the external threat actors to gain access to staff email accounts once they had obtained the user account details through a phishing exercise. Service NSW had identified the lack of multi factor authentication on its webmail platform as a risk more than a year prior to the breach and had committed to addressing this by June 2019. It was not implemented until after the breach occurred. There are weaknesses in the general IT and security controls implemented by Service NSW over its Salesforce Customer Relationship Management (CRM) system, which holds the personal information of over four million NSW residents.Internal audits carried out by Service NSW, including one completed in August 2020, have identified significant weaknesses in the general IT and security controls implemented by Service NSW over its Salesforce CRM system. These include deficiencies in the management of role based access, monitoring and audit of user access, and partitioning of program specific transaction information. These deficiencies create an increased risk of unauthorised access to the personal information of over four million customers held in the system. Lines of responsibility for meeting privacy obligations are not clearly drawn between Service NSW and its client agencies.Service NSW has agreements in place with client agencies. However, the agreements lack detail and clarity about the roles and responsibilities of the agencies in relation to the collection, storage and security of customer's personal information. This lack of clarity raises the risk that privacy obligations will become confused and missed between the agencies. Service NSW carries out privacy impact assessments for major new projects but does not routinely review existing processes and systems.Service NSW carries out privacy impact assessments as part of its routine processes for implementing major new projects, ensuring that privacy management is considered as part of project design. Service NSW does not regularly undertake privacy impact assessments or reviews of existing or legacy processes and systems, which has resulted in some processes continuing despite posing significant risks to the privacy of personal information, such as the scanning, emailing, and storing of identification documents. |
1. Key findings
Service NSW identifies privacy risks, but the controls and processes it put in place to mitigate these privacy risks were not adequate to prevent or limit the extent of the data breach that occurred in March 2020
Service NSW’s approach to risk management is framed by its Risk Management Guideline, which defines 'privacy and compliance' as one of the key types of risk for the agency. Service NSW's enterprise risk register identifies four strategic privacy related risks. Service NSW has set out a zero level appetite for privacy risk in its risk appetite statement.
Service NSW has assessed the adequacy of its controls for privacy risks as needing improvement. To be fully effective, the Risk Management Guideline says that these controls should have a focus that is ‘largely preventative and address the root causes’.
One of the business processes that was a key contributing factor to the data breach was the emailing of personal information by Service NSW staff to client agencies.
This process had been identified as a risk prior to the breach and some steps had been put in place to mitigate the risk. In particular, staff were required to manually delete emails that contained personal information. However, these measures were ineffective in preventing the breach, as the external threat actors still gained access to 47 staff email accounts that contained a large amount of personal information.
It is unclear why Service NSW did not effectively mitigate this risk prior to the breaches. However, Service NSW has advised that it implemented measures in June and October 2020 to automatically archive emails likely to contain personal information. This is expected to limit the quantity of information retained in email accounts for extended periods.
Service NSW has not put in place any technical or other solutions to avoid Service NSW staff having to scan and email personal information to some client agencies. Urgent action is needed to remove the requirement for staff to email personal information to client agencies, thereby mitigating the risk inherent in sending and storing this information using email.
There are weaknesses in the general IT and security controls implemented by Service NSW over its Salesforce CRM system, which holds the personal information of over four million customers
There are weaknesses in the general IT and security controls implemented by Service NSW over its Salesforce CRM system. These weaknesses include deficiencies in governance of role based access, monitoring and audit of staff access, and partitioning of program specific transaction information. These deficiencies create an increased risk of unauthorised access to the personal information of over four million customers which is stored in this system.
In addition, there is an absence of important controls to safeguard customers' privacy, such as multi factor authentication and reviewable logs of access history to their information. Such controls, when properly implemented, would enhance the control that customers are able to exercise over their personal information.
A privacy impact assessment conducted on Service NSW’s Salesforce CRM system in 2015 recommended that the system include the ability for customers to review access history to their personal information, as well as the option for customers to apply multi factor authentication to their accounts. While both these recommendations appeared positively received by Service NSW, neither have been implemented.
Since its inception, Service NSW’s use of Salesforce has extended to storing transaction data, particularly for transactions for which Service NSW is responsible, such as the Seniors Card. It also holds details of over four million MyServiceNSW account holders, including name, email address and phone number, and optional address details. It was not originally intended for the system to hold this volume and nature of customer information.
Lines of responsibility for meeting privacy obligations are unclear between Service NSW and its client agencies
Service NSW's privacy management plan does not clearly set out the privacy obligations of Service NSW and its client agencies. It sets out that 'compliance with the privacy principles will primarily be the responsibility of that [client] agency'. However, Service NSW has its own obligations under the security principles of the Privacy and Personal Information Protection Act 1998 (PPIP Act) to take reasonable steps to prevent unauthorised access to personal information, which is not made clear in the privacy management plan.
The agreements between Service NSW and client agencies reviewed for this audit only include general and high level references to privacy. Most do not include details of each parties' privacy responsibilities such as: which agency will provide the customer with a privacy notice explaining how their personal information will be handled, how personal information will be kept secure, how long Service NSW will retain information, what processes will be followed for internal reviews, and what specific planning is in place to respond to data breaches.
Service NSW's privacy management plan has not been updated to include new programs and governance changes
Service NSW's privacy management plan includes most of the matters required by law or good practice, with some exceptions. It does not explain any exemptions that the agency commonly relies on under the PPIP Act and does not address any health information that Service NSW may handle. It had also not been updated to reflect governance changes and the fact that, at the time this audit commenced, Service NSW was disclosing the content of internal review applications (the formal expression for 'complaints') to the Department of Customer Service (DCS). These governance changes were part of the centralisation of Service NSW's corporate support functions into DCS in late 2019, though internal review staff were seconded back into Service NSW during the course of this audit.
The current July 2019 privacy management plan has also not been updated since the rollout of a number of major new initiatives in 2020. These include 2019–20 bushfire emergency recovery initiatives (such as small business grants) and COVID 19 pandemic response initiatives (such as small business grants, border permits and the COVID safe check in app).
Service NSW routinely conducts privacy impact assessments for new initiatives, though privacy risks remain in legacy systems and processes
Service NSW routinely conducts privacy impact assessments for major new initiatives and the assessments reviewed for this audit largely accorded with good practice guidance.
Service NSW does not routinely review existing processes and systems to ensure that they are effective in ensuring the privacy of customer personal information. Business processes that create the highest risk to privacy, such as emailing of personal information, are more common in these longstanding legacy systems.
Service NSW's significant and rapid growth has outpaced the establishment of a robust control environment which has exacerbated privacy risks
Since it was established in 2013, Service NSW has experienced significant growth in the number and diversity of the types of transactions it provides, as well as the number of client agencies with which it works. The pace and extent of this growth has contributed to important controls not being properly implemented on a timely basis, which has heightened privacy risks, particularly in regard to existing, legacy systems and processes.
The pace of change and increasing demand for new program implementation has limited the opportunity for Service NSW, in collaboration with its client agencies, to revisit and redesign legacy business practices which pose a greater privacy risk. This includes the scanning and emailing of personal information.
While 2019–20 has seen additional demands placed on Service NSW in responding to the 2019–20 bushfire emergency and COVID 19 pandemic, it is the nature of the agency’s work that it operates in a fast paced and complex environment, where it is required to respond to multiple client agencies and stakeholders. Ensuring customer privacy should be integral to Service NSW’s business as usual operations.
2. Recommendations
Service NSW commissioned a number of external reviews and investigations stemming from the data breaches. The Auditor General's recommendations below have taken these other reviews into account. In order to offer assurance that it is appropriately protecting the privacy of its customers, Service NSW should address the full breadth of findings and recommendations made across all relevant reviews.
As a matter of urgency, Service NSW should:
1. in consultation with relevant client agencies and the Department of Customer Service, implement a solution for a secure method of transferring personal information between Service NSW and client agencies
2. review the need to store scanned copies of personal information and, if still required, implement a more secure method of storing this information and regular deletion of material.
By March 2021, Service NSW should:
3. ensure that all new agreements entered into with client agencies from 1 April 2021 address the deficiencies identified in this audit, including that they provide clarity on:
- the content and provision of privacy collection notices
- the terms by which personal information will be retained, stored, archived, and disposed of when no longer required
- steps that will be taken by each agency to ensure that personal information is kept secure
- the circumstances in which, and processes by which, applications for internal review will be referred by one agency to the other
- how identified breaches of privacy will be handled between agencies
4. in collaboration with the Department of Customer Service, review its privacy management plan to address the deficiencies raised in this audit, including:
- to clarify Service NSW's understanding of how responsibility for meeting privacy obligations are delineated between Service NSW and client agencies
- to better reflect the full scope and complexity of personal information handled by Service NSW
- to better explain how applications for internal review are handled between Service NSW and the Department of Customer Service
- to ensure regular ongoing review, either according to a schedule or when Service NSW experiences substantial change to its programs and handling of personal information
5. in consultation with the Department of Customer Service, review its policies and processes for the management of privacy risks, including to:
- ensure that there are appropriate mechanisms to escalate identified privacy risks from business units to the Executive Leadership Team
- ensure that there are action plans to address strategic privacy risks that are assessed as having ineffective controls.
By June 2021, Service NSW should:
6. address deficiencies in the controls over, and security for, its Salesforce customer relationship management and related systems that hold customer personal information, including:
- establish policies and processes for regular access reviews and monitoring of user activity in these systems, including for privileged users
- enable partitioning and role based access restrictions to personal information collected for different programs
- provide customers the choice to use multi factor authentication to further secure their MyServiceNSW accounts
- enable customers to view the transaction history of their personal information to detect possible mishandling.
By December 2021, Service NSW should:
7. ensure that all existing agreements with client agencies address the deficiencies identified in this audit, including that they provide clarity on:
- the content and provision of privacy collection notices
- the terms by which personal information will be retained, stored, archived, and disposed of when no longer required
- steps that will be taken by each agency to ensure that personal information is kept secure
- the circumstances in which, and processes by which, applications for internal review will be referred by one agency to the other
- how identified breaches of privacy will be handled between agencies
8. carry out a risk assessment of all processes, systems and transactions that involve the handling of personal information and undertake a privacy impact assessment for those that:
- are identified as high risk and have not previously had a privacy impact assessment
- have had major changes or updates since the privacy impact assessment was completed.
Appendix one – Responses from agencies
Appendix two – About the audit
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.
Central Agencies 2020
This report analyses the results of our audits of the financial statements of the Treasury, Premier and Cabinet, Customer Service cluster agencies (central agencies), and the Legislature for the year ended 30 June 2020. The table below summarises our key observations.
1. Financial reporting
| Audit opinions and timeliness of reporting |
Unqualified audit opinions were issued on the 2019–20 financial statements of central agencies and the Legislature. The audit opinion on the Social and Affordable Housing NSW Fund's compliance with the payment requirements of the Social and Affordable Housing NSW Fund Act 2016 was qualified. All agencies met statutory deadlines for submitting |
| Agencies were financially impacted by recent emergency events | The NSW Government allocated $1.4 billion to provide small business support and bushfire recovery relief, support COVID-19 quarantine compliance management, recruit more staff to respond to increased customer demand, and meet additional COVID-19 cleaning requirements. Agencies spent $901 million (64 per cent of the allocated funding) for the financial year ended 30 June 2020. NSW Self Insurance Corporation reported an increase of $850 million in its liability for claims related to emergency events. |
| AASB 16 'Leases' resulted in significant changes to agencies' financial position | The implementation of new accounting standards was challenging for many agencies. The New South Wales Government Telecommunications Authority was not well-prepared to implement AASB 16 'Leases' and had not completely assessed contracts that contained leases. This resulted in understatements of leased assets and liabilities by $56 million which were subsequently corrected. |
| Implementation of new revenue standards | NSW Treasury did not adequately implement the new revenue standard AASB 1058 ‘Income of Not-for-Profit Entities’ for the Crown Entity. This resulted in understatements of $274 million in opening equity and $254 million to current year revenue, which have been corrected in the final financial statements. |
2. Audit observations
| Management letter findings and repeat issues | Our 2019–20 audits identified nine high risk and 122 moderate risk issues across central agencies and the Legislature. The high risk issues were identified in the audits of:
High risk findings include:
Of the 122 moderate risk issues, 36 per cent were repeat issues. The most common repeat issue related to weaknesses in controls over information technology user access administration, which increases the risk of inappropriate access to systems and records. |
| Grants administration for disaster relief | Service NSW delivers grants responding to emergency events on behalf of other NSW Public Sector agencies. Since the first grant program commenced in January 2020, Service NSW processed approximately $791 million to NSW citizens and businesses impacted by emergency events for the financial year ended 30 June 2020. A performance audit of grants administration for disaster relief is planned for 2020–21. It will assess whether grants programs administered under the Small Business Support Fund were effectively designed and implemented to provide disaster relief. |
| Internal controls at GovConnect NSW service providers require enhancement |
GovConnect NSW provides transactional and information technology services to central agencies. It engages an independent service auditor (service auditor) from the private sector to perform annual assurance reviews of controls at service providers, namely Infosys, Unisys and the Department of Customer Service (DCS). The service auditor issued:
These may impact on the ability of agencies to detect and respond to a cyber incident. Recommendation: We recommend DCS work with GovConnect service providers to resolve the identified control deficiencies as a matter of priority. |
| The NSW Public Sector's cyber security resilience needs to improve |
The NSW Cyber Security Policy requires agencies to provide a maturity self-assessment against the Australian Cyber Security Centre (ACSC) Essential 8 to the head of the agency and Cyber Security NSW annually. Completed self-assessment returns highlighted limited progress in implementing the Essential 8. Repeat recommendation: Cyber Security NSW and NSW government agencies need to prioritise improvements to their cyber security resilience as a matter of urgency |
| Three Insurance and Care NSW (icare) entities had net asset deficiencies at 30 June 2020 | The Workers Compensation Nominal Insurer, NSW Self Insurance Corporation and the Lifetime Care and Support Authority of NSW all had negative net assets at 30 June 2020. These icare entities did not hold sufficient assets to meet the estimated present value of all of their future payment obligations at 30 June 2020. The deterioration in net assets was largely due to increases in outstanding claims liabilities. Notwithstanding the overall net asset deficiencies, the financial statements for these entities were prepared on a going concern basis. This is because future payment obligations are not all due within the next 12 months. Settlement is instead expected to occur over years into the future, depending on the nature of the benefits provided by each scheme. |
| icare has not been able to demonstrate that its allocation of costs reflects the actual costs incurred by the Workers Compensation Nominal Insurer and other schemes |
Costs are incurred by icare as the 'service entity' of the statutory scheme it administers, and then subsequently recovered from the schemes through 'service fees'. In the absence of documentation supported by robust supporting analysis, there is a risk of the schemes being overcharged, and the allocation of costs being in breach of legislative requirements. Recommendation: icare should ensure its approach to allocating service fees to the Workers Compensation Nominal Insurer and the other schemes it manages, is transparent and reflects actual costs. |
| icare did not comply with GIPA requirements | icare did not comply with the Government Information (Public Access) Act 2009 (GIPA) contract disclosure requirements in 2019–20 and has not complied for several years. A total of 417 contracts were identified by management as not having been published on the NSW Government’s eTendering website. The final upload of these past contracts occurred on 20 August 2020. |
| Implementation of Machinery of Government (MoG) changes | MoG changes impacted the governance and business processes of some agencies. Our audits identified and reported areas for improvement in the consolidation of corporate functions following MoG implementation processes at Infrastructure NSW and in the Customer Service cluster. |
This report provides Parliament and other users of NSW Government central agencies' financial statements and the Legislature's financial statements with the results of our financial audits, observations, analyses, conclusions and recommendations.
Emergency events, such as bushfires, floods and the COVID-19 pandemic significantly impacted agencies in 2019–20. Our findings on nine agencies that were most impacted by recent emergency events are included throughout this report.
Refer to Appendix one for the names of all central agencies and Appendix four for the nine agencies most impacted by emergency events.
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 on the financial reporting of central agencies and the Legislature for 2020, including the financial implications from recent emergency events.
Section highlights
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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 the financial statement audits of agencies in the central agencies and the Legislature
- our assessment of how well agencies adapted their systems, policies, procedures and governance arrangements in response to recent emergencies.
Section highlights
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Support for regional town water infrastructure
The Auditor-General for New South Wales, Margaret Crawford, released a report today examining whether the Department of Planning, Industry and Environment has effectively supported the planning for, and funding of, town water infrastructure in regional NSW.
The audit found that the department has not effectively supported or overseen town water infrastructure planning since at least 2014. It does not have a clear regulatory approach and lacks internal procedures and data to guide its support for local water utilities that service around 1.85 million people in regional NSW.
The audit also found that the department has not had a strategy in place to target investments in town water infrastructure to the areas of greatest priority. A state-wide plan is now in development.
The Auditor-General made seven recommendations to the department, aimed at improving the administration and transparency of its oversight, support and funding for town water infrastructure, and at strengthening its sector engagement and interagency coordination on town water planning issues and investments.
According to the Auditor-General, ‘A continued focus on coordinating town water planning, investments and sector engagement is needed for the department to more effectively support, plan for and fund town water infrastructure, and to work with local water utilities to help avoid future shortages of safe water in regional towns and cities.’
This report is part of a multi-volume series on the theme of water. Refer to ‘Water conservation in Greater Sydney’ and ‘Water management and regulation – undertaking in 2020-21’.
Safe and reliable water and sewer services are essential for community health and wellbeing, environmental protection, and economic productivity. In 2019, during intense drought, around ten regional New South Wales (NSW) cities or towns were close to ‘zero’ water and others had six to 12 months of supply. In some towns, water quality was declared unsafe.
Ensuring the right water and sewer infrastructure in regional NSW to deliver these services (known as 'town water infrastructure') involves a strategic, integrated approach to water management. The NSW Government committed to ‘secure long-term potable water supplies for towns and cities’ in 2011. In 2019, it reiterated a commitment to invest in water security by funding town water infrastructure projects.
The New South Wales’ Water Management Act 2000 (WM Act) aims to promote the sustainable, integrated and best practice management of the State’s water resources, and establishes the priority of town water for meeting critical human needs.
The Department of Planning, Industry and Environment (the department) is the lead agency for water resource policy, regulation and planning in NSW. It is also responsible for ensuring water management is consistent with the shared commitments of the Australian, State and Territory Governments under the National Water Initiative. This includes the provision of healthy, safe and reliable water supplies, and reporting on the performance of water utilities.
Ninety-two Local Water Utilities (LWUs) plan for, price and deliver town water services in regional NSW. Eighty-nine are operated by local councils under the New South Wales’ Local Government Act 1993, and other LWUs exercise their functions under the WM Act. The Minister for Water, Property and Housing is the responsible minister for water supply functions under both acts.
The department is the primary regulator of LWUs. NSW Health, the NSW Environment Protection Authority (EPA) and the Natural Access Resource Regulator (NRAR) also regulate aspects of LWUs' operations. The department’s legislative powers with respect to LWUs cover approving infrastructure developments and intervening where there are town water risks, or in emergencies. In this context, the department administers the Best Practice Management of Water Supply and Sewerage Guidelines (BPM Guidelines) to support its regulation and to assist LWUs to strategically plan and price their services, including their planning for town water infrastructure.
Under the BPM Guidelines, the department supports LWU’s town water infrastructure planning with the Integrated Water Cycle Management (IWCM) Checklist. The Checklist outlines steps for LWUs to prepare an IWCM strategy: a long-term planning document that sets out town water priorities, including infrastructure and non-infrastructure investments, water conservation and drought measures. The department's objective is to review and approve (i.e. give ‘concurrence to’) an IWCM strategy before the LWU implements it. In turn, these documents should provide the department with evidence of town water risks, issues and infrastructure priorities.
The department also assesses and co-funds LWU's town water infrastructure projects. In 2017, the department launched the $1 billion Safe and Secure Water Program to ensure town water infrastructure in regional NSW is secure and meets current health and environmental standards. The program was initially established under the Restart NSW Fund.
This audit examined whether the department has effectively supported the planning for and funding of town water infrastructure in regional NSW. It focused on the department’s activities since 2014. This audit follows a previous Audit Office of NSW report which found that the department had helped to promote better management practices in the LWU sector, up to 2012–13.
ConclusionThe Department of Planning, Industry and Environment has not effectively supported or overseen town water infrastructure planning in regional NSW since at least 2014. It has also lacked a strategic, evidence-based approach to target investments in town water infrastructure. A continued focus on coordinating town water planning, investments and sector engagement is needed for the department to more effectively support, plan for and fund town water infrastructure, and work with Local Water Utilities to help avoid future shortages of safe water in regional towns and cities. The department has had limited impact on facilitating Local Water Utilities’ (LWU) strategic town water planning. Its lack of internal procedures, records and data mean that the department cannot demonstrate it has effectively engaged, guided or supported the LWU sector in Integrated Water Cycle Management (IWCM) planning over the past six years. Today, less than ten per cent of the 92 LWUs have an IWCM strategy approved by the department. The department did not design or implement a strategic approach for targeting town water infrastructure investment through its $1 billion Safe and Secure Water Program (SSWP). Most projects in the program were reviewed by a technical panel but there was limited evidence available about regional and local priorities to inform strategic project assessments. About a third of funded SSWP projects were recommended via various alternative processes that were not transparent. The department also lacks systems for integrated project monitoring and program evaluation to determine the contribution of its investments to improved town water outcomes for communities. The department has recently developed a risk-based framework to inform future town water infrastructure funding priorities. The department does not have strategic water plans in place at state and regional levels: a key objective of these is to improve town water for regional communities. The department started a program of regional water planning in 2018, following the NSW Government’s commitment to this in 2014. It also started developing a state water strategy in 2020, as part of an integrated water planning framework to align local, regional and state priorities. One of 12 regional water strategies has been completed and the remaining strategies are being developed to an accelerated timeframe: this has limited the department’s engagement with some LWUs on town water risks and priorities. |
Regional New South Wales (NSW) is home to about a third of the state's population. Infrastructure that provides safe and reliable water and sewer services (also known simply as 'town water infrastructure') is essential for community health and wellbeing, environmental protection, and economic productivity. Planning for and meeting these infrastructure needs, as well as identifying when non-infrastructure options may be a better solution, involves a strategic and integrated approach to water resource management in regional NSW.
We examined whether the department has effectively supported planning for town water infrastructure since 2014. This assessment was made in the context of its current approach to LWU sector regulation. The findings below focus on whether the department has an effective framework including governance arrangements for town water issues to inform state-wide strategic water planning, and whether (at the local level) the department has effectively overseen and facilitated town water infrastructure planning through its Integrated Water Cycle Management (IWCM) planning guidance to LWUs.
We examined whether the department has effectively targeted town water infrastructure funding to policy objectives, with a focus on the design and implementation of the Safe and Secure Water Program (SSWP) since its commencement in 2017. The program’s aim was to fund town water infrastructure projects that would deliver health, social and environmental benefits, and support economic growth and productivity. We also assessed the department’s capacity to demonstrate the outcomes of the SSWP funding and the contributions of its town water infrastructure investments more broadly. Finally, we identified risks to the effectiveness of the department’s work underway since 2018–19, which is intended to enhance its strategic water planning and approach to prioritising investments in reducing town water risks.
Appendix one – Response from agency
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 #341 - released 24 September 2020
Credit card management in Local Government
The Auditor-General for New South Wales, Margaret Crawford, released a report today examining credit card management in Local Government.
The audit was in response to a letter from the then Minister for Local Government in November 2018. The audit assessed the effectiveness of credit card management practices in six councils, including in the areas of policies, procedures, compliance and monitoring.
The audit found that all six councils had gaps in their credit card policies and procedures. The Auditor-General recommended that the Department of Planning, Industry and Environment publish guidelines on credit card management for the Local Government sector. The report also generated insights for the Local Government sector with respect to credit card management.
In 2018–19, all councils responding to an Audit Office survey (representing over 90 per cent of the sector) indicated they issued credit cards to staff members to make work-related purchases. As there are no sector-wide requirements or policies for credit card use and management in Local Government, councils have developed their credit card management frameworks to suit their own needs. The quality of credit card policies and procedures may therefore vary across the sector.
Credit cards are an efficient means of payment, especially for low-value purchases. Compared to the use of petty cash, credit card transactions provide better transparency and accountability for expenditure. By using credit cards, councils only need to make one payment each month, which can reduce the time spent on paying separate vendors, as in the case of purchase orders.
This audit assessed the effectiveness of credit card management practices in six councils: Dubbo Regional Council, Junee Shire Council, Lane Cove Council, Nambucca Valley Council, Penrith City Council and Shellharbour City Council. The councils selected represent a mix of rural, regional and metropolitan councils. They were also among the top ten users of credit cards within their geographical classification, in terms of the number of credit cards issued or the number of transactions per credit card.
This audit referenced the NSW Treasury's Policy and Guidelines Paper TPP17–09 'Use and Management of NSW Government Purchasing Cards', as its principles and recommendations for NSW Government agencies are relevant for councils.
The Audit Office of New South Wales Report on Local Government 2019 provided a high-level overview of credit card management across the sector. While over 90 per cent of councils reported that they had a credit card policy and a credit card acquittal process, the quality of these policies and procedures may vary across the sector as there is no standardised or recommended approach to credit card management for Local Government. This audit complements the Report on Local Government 2019 by providing a detailed discussion of the effectiveness of credit card management practices in councils.
Audit conclusionAll six audited councils had important gaps in their credit card policies and procedures. Their reconciliation of credit card transactions needs to be enhanced to enable detection of potential misuse or fraud.
The audit found important gaps in each of the six audited councils' credit card management practices. Their policies and procedures covered the essential aspects of credit card use and management, but a lack of coverage or clarity in some areas could lead to inconsistent and inappropriate use of credit cards. These areas included: eligibility to hold a credit card, aligning credit card limits with financial delegations, and the reconciliation procedures.
While all six councils conducted reconciliations of credit card transactions, the processes need to be enhanced to enable detection of potential misuse or fraud. Reconciliations had focused solely on verifying receipts, and did not require evidence of business-related purposes, even for transactions such as alcohol purchases or spending at entertainment venues. Five of the six councils also did not include compliance checks in their reconciliation process, such as checking that purchases were not for restricted items.
The level of senior management involvement in monitoring credit card use varied across the six councils. Three of the six councils did not generate regular reports for management oversight. Five of the six councils had no plans for internal audits or targeted reviews of credit card management and use.
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Council staff provided with a credit card can purchase from a wide range of businesses, including online transactions with overseas vendors. However, councils may limit the types of purchases that staff can make through their policies and procedures or by setting controls that block certain transaction types such as cash advances. To examine credit card usage, the audit obtained credit card transaction data from 1 July 2016 to 30 June 2019 for the six councils in this review. The data included:
- transaction date
- amount
- merchant category code (MCC)
- merchant name.
The audit analysed the number and value of transactions by each council, and the types of purchases made using credit cards.
The existence of a documented approach to managing credit cards ensures transparency and consistency of use within the council. A credit card management framework that contains preventative and detective controls can also minimise risks of fraud, misuse and wastage.
There is no prescribed credit card management framework for Local Government, but typical components of a credit card management framework include:
- policies and procedures
- guidance for staff
- monitoring and reporting.
With no detailed guidance notes similar to those in TPP17–09 for NSW Government, councils have developed their own credit card management framework based on their size, structure, resources and intended credit card usage. For instance, the size of a council has implications for the number of credit cards issued, which in turn influences the arrangements for training and guidance provided to cardholders and approvers.
The intended level of credit card usage may determine whether a council adopts a manual or electronic credit card management system and councils should identify the system that best meets their needs. For instance, a council with few credit cards may not be able to justify investment in an electronic system. On the other hand, a manual system may only be viable for councils with a low number of credit cards and a low number of transactions.
Among the six councils audited, the three councils with fewer cards and a lower number of transactions had a manual credit card management system, while the three councils with more cards and a higher number of transactions used an electronic system.
Exhibit 10 summarises the six councils' policies on use of credit cards.
| Council | Audit Office classification | Number of staff (full-time equivalent) | Number of credit cards issued (current at August 2019) | Policy on credit card use |
| Dubbo Regional Council | Regional | 453 | 77 | Purchase cards are used for official council business up to $5,000 and the policy allows cardholders to delegate the use of their purchase cards to other staff members. |
| Junee Shire Council | Rural | 71 | 1 | Corporate credit cards are for council business activities and minor purchases where a purchase order is not accepted. Items that can be purchased via a purchase order should not be purchased on a corporate credit card. |
| Lane Cove Council | Metropolitan | 192 | 6 | Corporate credit cards are for official council business, but should not be used when there is an alternative form of payment that aligns with the council's purchasing process. |
| Nambucca Valley Council | Rural | 110 | 37 | Purchase cards are used for the payment of goods and services associated with council businesses. |
| Penrith City Council | Metropolitan | 1,031 | 167 | Purchase cards are used for ‘low value and low risk procurement of goods and services’, while corporate cards are held by senior staff for ‘non-routine low value work related purchases’. |
| Shellharbour City Council | Regional | 372 | 65 | Credit cards are for purchases up to $9,999 and the preferred payment method for transactions under $1,000. |
While it is important for councils to have an established credit card management framework, it is equally important that they ensure compliance in practice. This chapter examines councils' credit card management practices – how well staff members were complying with policies and procedures, and how effective their credit card controls were. The chapter is structured to cover:
- preventative controls (embedded in the issuance, use and cancellation of cards) that prevent fraud and misuse
- detective controls (embedded in reconciliation and record keeping) that assist in detecting fraud and misuse.
Where ineffective credit card management practices are identified, councils should reflect on whether they need to more closely monitor compliance, or whether there are fundamental deficiencies in their policies and procedures that need to be refined.
Dubbo Regional Council had gaps in its credit card policy and procedures. It allowed cardholders to share their credit card with other staff members, which complicated credit card management, increased the risk of misuse and fraud, and breached its agreement with the credit card issuer. The council's reconciliation of credit card transactions needs to be enhanced to ensure it can review compliance with policy and detect potential misuse or fraud.Dubbo Regional Council had 77 credit cards at the time of the audit. The council's policy on credit card sharing violated its agreement with the card issuer that each credit card should be for the respective cardholder's use only. Credit card sharing also increases the risk of misuse and fraud. The council's credit card policy and procedures lacked clarity in several areas. The eligibility criteria were broad and there was a risk of inconsistency in granting approvals, especially since the council gave approval delegations to multiple senior staff members. The policy and procedures also lacked guidance on the reconciliation of the general manager's credit card and the management of Cabcharge. The audit identified gaps in the council's credit card management practices. While the council had a clear policy on financial delegations, there was no evidence that credit card limits were monitored in line with financial delegations. The credit card register contained inaccurate information, and the council was also unable to provide records of certain transactions requested for review by the audit. The council's credit card reconciliation process needs to be enhanced to enable detection of potential misuse or fraud. It did not include compliance checks or reviewing the business-related purpose of transactions. Purchases of restricted items such as fuel, meals and entertainment were not accompanied by evidence of need or exemption. Travel expenses were not checked against travel pre-approval forms. The audit also identified instances of split transactions. The council provided no evidence of the finance team's involvement in the reconciliation of credit card transactions. Senior management oversight of credit card use was lacking, as the council did not produce reports on credit card use. There was also no evidence that the internal auditor had undertaken monitoring activities as required in the credit card policy. RecommendationsDubbo Regional Council should immediately: 1. amend its credit card policy to prevent cardholders from sharing their credit card with other staff. By December 2020, Dubbo Regional Council should: 2. clarify in the credit card policy and procedures:
3. ensure that credit card management practices include:
4. ensure reconciliation involves:
5. ensure there is ongoing senior management oversight of credit card use 6. ensure the internal auditor undertakes monitoring activities as specified in the credit card policy. |
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Junee Shire Council had gaps in its credit card policy and procedures. The council's reconciliation of credit card transactions needs to be enhanced to ensure it can review compliance with policy and detect potential misuse or fraud. Junee Shire Council had only one credit card, held by the general manager, at the time of the audit. Staff members could seek approval from the general manager to purchase using the credit card. This raises concerns of credit card sharing, which would be a violation of the council's agreement with its credit card issuer. Credit card sharing also increases the risk of misuse and fraud. The council had fuel cards and store cards for use by staff members. However, its credit card policy and procedures did not cover the management of these types of cards. The lack of documented rules and guidance increases the risk of misuse and fraud. The audit identified other gaps in the council's credit card management practices:
The council's credit card reconciliation process needs to be enhanced to enable detection of potential misuse or fraud. It did not include reviewing the business-related purpose of transactions. The council also provided no evidence of the finance team's involvement in the reconciliation of credit card transactions. As the cardholder, the general manager reviewed all transactions every month. As the approver, the mayor (or deputy mayor) had to sign off on these transactions. Hence, there was sufficient management oversight of the council's credit card use. However, there was a lack of periodic review of the council's credit card use, as it was not included in the council's forward program of internal audits. RecommendationsJunee Shire Council should immediately: 1. amend its credit card policy to prevent cardholders from sharing their credit card with other staff. By December 2020, Junee Shire Council should: 2. clarify in the credit card policy and procedures:
3. ensure that credit card management practices include:
4. ensure reconciliation involves:
5. develop a plan for periodic reviews (e.g. internal audit) of credit card use and management 6. ensure its credit card policy and procedures are reviewed according to schedule. |
Lane Cove Council had gaps in its credit card policy and procedures. The council's reconciliation of credit card transactions needs to be enhanced to ensure it can review compliance with policy and detect potential misuse or fraud.Lane Cove Council had six credit cards, held by the most senior staff members, at the time of the audit. During our interviews, cardholders advised that they had shared their credit card with reporting staff. Credit card sharing is a violation of the council's agreement with its credit card issuer, and it also increases the risk of misuse and fraud. The council's credit card policy lacked clarity in several areas. While the general manager had delegation to authorise the issue of credit cards, the policy did not specify any eligibility criteria. The policy and procedures also lacked guidance on the reconciliation of the general manager's credit card and the management of fuel cards and store cards. The audit identified gaps in the council's credit card management practices. There was no evidence that credit card limits were monitored in line with financial delegations. The credit card register contained inaccurate information, and the council was also unable to provide records of certain transactions requested for review by the audit. The council's credit card reconciliation process needs to be enhanced to enable detection of potential misuse or fraud. The process also did not include compliance checks or reviewing the business-related purpose of transactions. Purchases of restricted items such as fuel and fine payments were not accompanied by adequate justification. There was a lack of targeted guidance for approvers in reconciliation, and the council only evidenced the finance team's involvement in an administrative capacity (i.e. entering data into the journals). Senior management oversight of credit card use was lacking. Although the credit card policy referred to management reporting, the council had not been producing such reports at the time of the audit. Management reporting was implemented in December 2019 following our discussions. There was a lack of periodic review of the council's credit card use, as it was not included in the council's forward program of internal audits. The council has adopted a new Management Directive in January 2020, which has clarified the eligibility criteria for credit cards. RecommendationsLane Cove Council should immediately: 1. amend its credit card policy to prevent cardholders from sharing their credit card with other staff. By December 2020, Lane Cove Council should: 2. clarify in the credit card policy and procedures:
3. ensure that credit card management practices include:
4. ensure reconciliation involves:
5. develop a plan for periodic reviews (e.g. internal audit) of credit card use and management. |
Nambucca Valley Council had gaps in its credit card policy and procedures. The council's reconciliation of credit card transactions needs to be enhanced to ensure it can review compliance with policy and detect potential misuse or fraud.Nambucca Valley Council had 37 credit cards at the time of the audit. During our interviews, cardholders described instances of credit card sharing within the council. Credit card sharing is a violation of the council's agreement with its credit card issuer, and it also increases the risk of misuse and fraud. The council's credit card policy lacked clarity in several areas. While the general manager had delegation to authorise the issue of credit cards, the policy did not specify any eligibility criteria. The policy and procedures lacked guidance on the management of fuel cards, store cards and Cabcharge. The policy also lacked coverage of the reconciliation arrangements for the general manager's credit card as the general manager did not hold a credit card. While the policy did not preclude the mayor and the general manager from holding a credit card, both opted not to do so. The audit identified gaps in the council's credit card management practices. There was no evidence that credit card limits were monitored in line with financial delegations. The credit card register contained inaccurate information, and there was insufficient control in handling staff departures, as the audit identified one incident where a credit card was returned after the staff member's last day. The council's credit card reconciliation process needs to be enhanced to enable detection of potential misuse or fraud. The process also did not include adequate compliance checks or reviewing the business-related purpose of transactions. Purchases of restricted items such as fuel and the use of third-party travel websites were not accompanied by adequate justification. Travel expenses were not checked against travel pre-approval forms. The audit also identified instances of split transactions. Senior management oversight of credit card use was insufficient, as the council had been producing reports for only one manager for his department at the time of the audit. Management reporting for the Chief Finance Officer was implemented following our discussions. There was a lack of periodic review of the council's credit card use, as it was not included in the council's forward program of internal audits. The audit acknowledges that the council had revised its credit card procedures following our discussions to address our preliminary findings. The council has also set additional credit card blocks in response to this audit. The recommendations below contain only the outstanding items. RecommendationsNambucca Valley Council should immediately: 1. ensure cardholders stop sharing their credit card with other staff. By December 2020, Nambucca Valley Council should: 2. clarify in the credit card policy and procedures:
3. ensure that credit card management practices include:
4. ensure reconciliation involves:
5. develop a plan for periodic reviews (e.g. internal audit) of credit card use and management. |
Penrith City Council had gaps in its credit card policy and procedures. The council's reconciliation of credit card transactions needs to be enhanced to ensure it can review compliance with policy and detect potential misuse or fraud.Penrith City Council had 167 credit cards at the time of the audit. During our interviews, cardholders described instances of credit card sharing within the council. Credit card sharing is a violation of the council's agreement with its credit card issuer, and it also increases the risk of misuse and fraud. The audit identified gaps in the council's credit card policy and procedures. There was no documented arrangement for the reconciliation of the general manager's credit card. There was also no guidance on the management of Cabcharge. The credit card register contained inaccurate information, and the council was also unable to provide records of certain transactions requested for review by the audit. The council's credit card reconciliation process needs to be enhanced to enable detection of potential misuse or fraud. The process did not include adequate compliance checks or reviewing the business-related purpose of transactions. The council's policy required prior approval for conferences, accommodation or meal expenses. However, there was no evidence that such approvals were checked during credit card reconciliation. The audit also identified instances of split transactions. The council implemented monthly reporting for managers in July 2019. There was a lack of periodic review of the council's credit card use, as it was not included in the council's forward program of internal audits. RecommendationsPenrith City Council should immediately: 1. ensure cardholders stop sharing their credit card with other staff. By December 2020, Penrith City Council should: 2. clarify in the credit card policy and procedures
3. ensure that credit card management practices include:
4. ensure reconciliation involves:
5. develop a plan for periodic reviews (e.g. internal audit) of credit card use and management. |
Shellharbour City Council had gaps in its credit card policy and procedures. The council's reconciliation of credit card transactions needs to be enhanced to ensure it can review compliance with policy and detect potential misuse or fraud.Shellharbour City Council had 65 credit cards at the time of the audit. During our interviews, cardholders described instances of credit card sharing within the council. Credit card sharing is a violation of the council's agreement with its credit card issuer, and it also increases the risk of misuse and fraud. The council's credit card policy lacked clarity in several areas. While the general manager had delegation to authorise the issue of credit cards, the policy did not specify any eligibility criteria. The council did not align credit card limits with financial delegations, and while blocking codes were used, there was no explanation in the policy or procedures. Although the mayor and general manager's credit card transactions were reviewed during the council's monthly Executive Leadership Team meetings, the policy and procedures lacked guidance on the reconciliation of their credit cards. The council also did not have sufficiently detailed documentation for the management of fuel cards. The audit identified gaps in the council's credit card management practices:
The council's credit card reconciliation process needs to be enhanced to enable detection of potential misuse or fraud. The process did not include compliance checks or reviewing the business-related purpose of transactions. Purchases of restricted items, such as fuel and fine payments, were not accompanied by adequate justification. The audit identified instances of split transactions, and travel or conference approval forms were also not checked during reconciliation. There was a lack of targeted guidance for approvers in reconciliation, and the council also provided no evidence of the finance team's involvement in the reconciliation of credit card transactions. The council's Executive Leadership Team was involved in the monthly review of credit card transactions, hence there was management oversight of credit card use. However, there was a lack of periodic review of the council's credit card use, as it was not included in the council's forward program of internal audits. RecommendationsShellharbour City Council should immediately: 1. ensure cardholders stop sharing their credit card with other staff. By December 2020, Shellharbour City Council should: 2. clarify in the credit card policy and procedures:
3. ensure that credit card management practices include:
4. ensure reconciliation involves:
5. develop a plan for periodic reviews (e.g. internal audit) of credit card use and management 6. ensure its credit card policy and procedures are reviewed according to schedule. |
Appendix one – Responses from councils and the Department of Planning, Industry and Environment
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 #340 - released 3 September 2020
Report on Local Government 2019
I am pleased to present my third report to the Parliament on the 2019 audits of local government councils in New South Wales.
This report notes that unqualified audit opinions were issued on the 2018–19 financial statements of 134 councils and 11 joint organisations. The opinion for one council was disclaimed and three audits are yet to complete.
The report also highlights improvements I have seen in financial reporting and governance arrangements across councils. Fewer errors were identified. More councils have audit, risk and improvement committees and internal audit functions. Risk management practices, including fraud control systems, have also improved.
These are very pleasing indicators of the gradual strengthening of governance and financial oversight of the sector. I want to acknowledge the investment councils have made in working with the Audit Office to improve consistency of practice and accountability generally.
Of course there is more work to do, particularly to prepare for new accounting standards and to strengthen controls over information technology and cyber security management. Asset management practices can also be improved. This report provides some guidance to council on these matters and we will continue to partner with the Office of Local Government in the Department of Planning, Industry and Environment to support good practice.
Auditor-General
5 March 2020
This report focuses on key observations and findings from the 2018–19 financial audits of councils and joint organisations.
Unqualified audit opinions were issued on the financial statements for 134 councils and 11 joint organisations. The audit opinion for Bayside’s 2017–18 and 2018–19 financial statements were disclaimed. Three audits are still in progress and will be included in next year’s report.
The report highlights a number of areas where there has been improvement. There was a reduction in errors identified in council financial statements and high risk issues reported in audit management letters. More councils have audit, risk and improvement committees and internal audit functions. Risk management practices and fraud control systems have also improved.
The report also found that councils could do more to be better prepared for the new accounting standards, asset management practices could be strengthened, and information technology controls and cyber security management could be improved.
The Auditor-General recommended that the Office of Local Government within the Department of Planning, Industry and Environment develop a cyber security policy by 30 June 2021 to ensure a consistent response to cyber security risks across councils.
Financial reporting is an important element of good governance. Confidence in and transparency of public sector decision making is enhanced when financial reporting is accurate and timely. Strong financial performance provides the platform for councils to deliver services and respond to community needs.
This chapter outlines our audit observations on the financial reporting and performance of councils and joint organisations.
Section highlights
- There was a reduction in the number and dollar value of errors identified in councils' financial statements.
- We continue to identify prior period errors, which are predominantly asset-related.
- Unqualified audit opinions were issued for 99 per cent of completed audits for councils and joint organisations.
- Three audits remain outstanding, with the outcomes to be reported in next year's Report to Parliament.
- Seventy-nine per cent of councils and joint organisations lodged their financial reports by 31 October 2019.
- Councils that performed some early reporting procedures achieved better outcomes in terms of the quality and timeliness of financial reporting.
- Councils are at various levels of preparedness to implement the new accounting standards for the 2019–20 financial year. Some have made the necessary modifications to systems and processes, but others are still assessing impacts.
- Most councils met the prescribed benchmarks for the liquidity and working capital performance measures over the past three years.
- More councils reported negative operating performance compared with the prior year, meaning their operating expenditure exceeded their operating revenue.
Strong governance systems and internal controls help councils to operate effectively and efficiently, produce reliable financial reports, comply with laws and regulations and support ethical government.
This chapter outlines the overall trends related to governance and internal control issues across councils and joint organisations for 2018–19.
Section highlights
- While the total number of issues reported in our management letters increased compared with the prior year, the total number of high risk issues have decreased. Of the high-risk issues, 41 per cent were deficiencies in information technology controls.
- More councils have established audit, risk and improvement committees and internal audit functions.
- Councils have improved risk management practices, with over 75 per cent of councils now having a risk management policy and register.
- While most councils have policies and processes to manage gifts and benefits, we identified some instances of non-compliance with the Model Code of Conduct.
- Most councils have policies and processes to manage the use of credit cards.
- Councils can strengthen policies and practices for managing fraud controls and legislative compliance.
- There are further opportunities for councils to improve internal controls over revenue, purchasing, payroll, cash, financial accounting and governance processes.
Councils rely on information technology (IT) to deliver services and manage information. While IT delivers considerable benefits, it also presents risks that council needs to address.
In prior years, we reported that councils need to improve IT governance and controls to manage key financial systems. This chapter outlines the progress made by councils in the management of key IT risks and controls, with an added focus on cyber security.
Section highlights
- We continue to report deficiencies in information technology controls, particularly around user access management. These controls are key to ensuring IT systems are protected from inappropriate access and misuse.
- Many councils do not have IT policies and procedures and others do not identify, monitor or report on IT risks.
- Cyber security management requires improvement, with some basic elements of governance not yet in place for many councils.
Councils are responsible for managing a significant range of assets to deliver services on behalf of the community.
This chapter outlines our asset management observations across councils and joint organisations.
Section highlights
- There was an increase in the total number of issues reported in our management letters for asset management processes.
- There were less high-risk issues reported compared to the previous year.
- We continue to identify discrepancies between the council's Crown land asset records and the Crown Land Information Database (CLID) managed by the former Department of Industry (DOI).
- Inconsistent practices remain across the Local Government sector in accounting for landfill sites.
Appendix one – Response from the Office of Local Government within the Department of Planning, Industry and Environment
Appendix two – Status of 2018 recommendations
Appendix three – Status of audits
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.
The Cross City Tunnel Project
In our opinion the Government’s ‘no net cost to government’ requirement was a legitimate (but not the only possible) basis for the tunnel bid process. The Government was entitled to decide that tunnel users meet the tunnel costs. Structuring the bid process on the basis of an upfront reimbursement of costs incurred (or to be incurred) by the Roads and Traffic Authority (RTA) was therefore appropriate.
In our opinion, however, the Government, Treasury and the RTA did not sufficiently consider the implications of an upfront payment involving more than simple project cost reimbursement (i.e. the ‘Business Consideration Fee’ component). In addition, the RTA was wrong to change the toll escalation factor late in 2002 to compensate the tunnel operator, Cross City Motorway Pty Ltd, for additional costs.
Parliamentary reference - Report number #152 - released 31 May 2006
