Reports
Universities 2019 audits
This report contains findings on the results of financial audits of NSW universities for the year ended 31 December 2019.
All ten NSW universities received unqualified audit opinions. The 2019 financial results for universities are reported as at 31 December and reflect results from operations before the impact of the COVID‑19 pandemic.
The combined revenues for all NSW universities increased by $381 million to $11.4 billion in 2019, driven by increases in student revenues. Revenue from overseas students continued to grow faster than that from domestic students and contributed $3.6 billion in course fees to NSW universities in 2019.
Overseas students from the top three countries of origin, being China, India and Nepal, represented 72.4 per cent of all enrolments of overseas students and 65.4 per cent of all overseas student revenues for 2019. Revenue from students from these three countries comprised 40.9 per cent of total student revenues for all NSW universities, creating a considerable concentration risk for NSW universities.
The COVID‑19 pandemic may significantly impact the financial results of NSW universities in 2020. NSW universities provided data on COVID‑19 impacted student enrolments for semester one 2020. Overall numbers of student enrolments in semester one 2020 were 5.8 per cent beneath projections. Overseas student enrolments were 13.8 per cent beneath expectations and domestic student enrolments were 2.4 per cent below expectations.
The report makes recommendations to the NSW universities, aimed at strengthening controls over information technology, cyber security, validating published performance information, procurement practices and the oversight of their overseas controlled entities' legal and policy compliance functions.
This report analyses the results of our audits of the financial statements of the ten NSW universities for the year ended 31 December 2019. The table below summarises our key observations.
1. Financial reporting
| Financial reporting |
The 2019 financial statements of all ten NSW universities received unmodified audit opinions. One controlled entity of the Western Sydney University received a qualified audit opinion. Five NSW universities finalised their audited financial statements this year on or before the date they did last year. New accounting standards, which changed how universities report income and treat operating leases, became effective from 1 January 2019. |
| Sources of revenue from operations |
Government grants as a proportion of the total income of NSW universities continued to decrease. Fee revenue from overseas students continued to grow faster than fees from domestic students. Forty-one per cent of NSW universities' total student revenue came from overseas students from three countries. Five NSW universities increased the proportion of revenue they receive from overseas students from a single country. Two universities sourced over 73 per cent of their total overseas student revenue from students from a single country of origin in 2019. |
| Other revenues | Two universities attracted over 69.5 per cent of the total philanthropic revenue of $174 million received by all NSW universities in 2019. |
| Operating expenditures | Combined total operating expenditure for NSW universities increased to $9.9 billion in 2019, a rise of 5.2 per cent from 2018. |
| Current ratio | At 31 December 2019, five NSW universities had a current ratio of less than one, meaning those universities need to actively manage their cash to meet current obligations. |
| Controlled entities |
All six NSW universities with overseas controlled entities have devolved responsibility for governance and legislative compliance to their overseas controlled entities. Recommendation (repeat issue): NSW universities should strengthen their governance arrangements to oversight their overseas controlled entities' legal and policy compliance functions. |
| COVID-19 impacts and responses |
The 2019 financial results for universities are reported as at 31 December. Consequently, the results for the 2019 year were unaffected by the impact of the COVID-19 pandemic. NSW universities provided data on the COVID-19 impacted student enrolments for semester one 2020. Overall numbers of student enrolments were 5.8 per cent beneath projections. Overseas student enrolments were 13.8 per cent beneath expectations and domestic student enrolments were 2.4 per cent beneath expectations. NSW universities are responding to the challenges presented by COVID-19 by moving course delivery online, expanding student support and introducing cost saving measures. |
2. Internal controls and governance
| Internal control findings |
Our audits identified 108 internal control deficiencies in 2019 (99 in 2018). Gaps in information technology (IT) controls comprised the majority of these deficiencies. Deficiencies included a lack of sufficient user access reviews, inadequate review and approval of change management processes, and issues with password settings. We identified one high risk financial control deficiency at the University of New South Wales, which resulted in the University providing for a potential underpayment of casual staff salaries. NSW universities continue to implement recommendations arising from 35 findings raised in previous years. |
| Performance reporting |
Five NSW universities still do not have formal processes to internally review and validate performance information published in their annual reports. Recommendation (repeat issue): NSW universities should strengthen processes to review and validate published performance information. |
| Cyber security |
Two universities have not yet implemented a cyber risk policy and three universities have not formally trained staff in cyber awareness. Recommendation (repeat issue): NSW universities should strengthen cyber security frameworks and controls to protect sensitive data and prevent financial and reputational losses. |
| Management of IT service providers | NSW universities have contracts with vendors to support their computer systems. Five universities have not formally established frameworks to manage these contracts. Poor contract management can compound risks associated with IT control deficiencies. |
| Data breach management | Universities are required to maintain the privacy of sensitive data which, if disclosed or used inappropriately, could result in harm to individuals, financial loss, or loss of intellectual property. Two NSW universities have not established formal policies to manage data breaches. |
| Procurement |
All universities have a procurement policy. Most universities have a documented procurement manual and contact management policy. Recommendation: NSW universities should review their procurement and contract management policies and procedures to ensure that they are relevant and effective in reducing risk and improving purchasing outcomes. |
3. Teaching and research
| Graduate employment outcomes | Eight out of ten NSW universities exceeded the national average for full-time employment rates of their undergraduates in 2019. Six universities performed better than the national average for full-time employment outcomes of their postgraduates in 2019. |
| Student enrolments by field of education | Enrolments at NSW universities increased the most in Management and Commerce courses in 2019. |
| Achieving diversity outcomes |
Five universities in 2018 (five in 2017) met the target enrolment rate for students from low socio-economic status (SES) backgrounds. Eight universities increased enrolments of students from Aboriginal and Torres Strait Islander backgrounds in 2018. |
This report provides Parliament with the results of our financial audits of New South Wales universities and their controlled entities in 2019, including our analysis, observations and recommendations in the following areas:
- financial reporting
- internal controls and governance
- teaching and research.
Financial reporting is an important element of governance. Confidence and transparency in university sector decision making are enhanced when financial reporting is accurate and timely.
This chapter outlines our audit observations on the financial reporting of NSW universities for 2019.
Appropriate and robust internal controls help reduce risks associated with managing finances, compliance and administration of NSW universities.
This chapter outlines the internal controls related observations and insights across NSW universities for 2019, including overall trends in findings, level of risk and implications.
Our audits do not review all aspects of internal controls and governance every year. The more significant issues and risks are included in this chapter. These along with the less significant ones are reported to universities for them to address.
Universities' primary objectives are teaching and research. They invest most of their resources to achieve quality outcomes in academia and student experience. Universities have committed to achieving certain government targets and compete to advance their reputation and international and Australian rankings.
This chapter outlines teaching and research outcomes for NSW universities for 2019.
Appendix one – List of 2019 recommendations
Appendix two – Status of 2018 recommendations
Appendix three – NSW universities’ controlled entities and associated entities
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.
Funding enhancements for police technology
This report focuses on how the NSW Police Force managed a $100 million program to acquire new technology. The program invested in technologies intended to make police work safer and quicker. These included body-worn video (BWV) cameras, smart phone devices, mobile fingerprint scanners and hand-held drug testing devices.
The audit found that while the NSW Police Force mostly managed the ‘Policing for Tomorrow’ program effectively, investment decision making could be improved in the future. The NSW Police Force missed an opportunity to take a whole-of-organisation approach to identify capability gaps and target the acquired technologies to plug these.
The NSW Police Force has processes in place to monitor the benefits of some of the larger technology, but it does not do this consistently for all procured technology. It could not demonstrate that smaller projects are improving the efficiency or effectiveness of policing.
The audit also found that the NSW Police Force does not routinely engage with external stakeholders on the use or impacts of new technology that changes how officers interact with the public, noting that this will not always be possible for particularly sensitive procurements that involve covert technologies or methodologies.
The Auditor-General made three recommendations to guide improvement of NSW Police Force ICT procurement, benefits management and stakeholder engagement processes.
Ahead of the March 2015 election, the NSW Government announced a $100 million Policing for Tomorrow fund for the NSW Police Force to acquire technology intended to make police work safer and quicker. The announcement committed the NSW Police Force to several investment priorities, including body-worn video (BWV) cameras, smart phone devices (MobiPOL), mobile fingerprint scanners and hand-held drug testing devices. Otherwise, the NSW Police Force was allowed flexibility in identifying and resourcing suitable projects.
This audit assessed whether the Policing for Tomorrow fund was effectively managed to improve policing in New South Wales. We addressed the audit objective with the following audit questions:
- Did the NSW Police Force efficiently and effectively identify, acquire, implement and maintain technology resourced by the fund?
- Did the NSW Police Force establish effective governance arrangements for administering the fund, and for monitoring expected benefits and unintended consequences?
- Did technology implemented under the fund improve the efficiency and effectiveness of policing in New South Wales?
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Conclusion The NSW Police Force's management of the Policing for Tomorrow fund was mostly effective. There are measures in place to assess the impact of the technologies on the efficiency and effectiveness of policing in NSW. However, these measures are not in place for all technologies funded by Policing for Tomorrow. A strategic whole-of-organisation approach to identifying and filling technology capability gaps may have assisted in better targeting funds and managing expected benefits. The NSW Police Force identified, acquired, implemented and maintained a range of technologies resourced by the fund in an efficient and effective way. The election announcement committed the NSW Police Force to four specific projects which made up over three quarters of the fund value. Investment decisions for remaining funds were driven by the availability of funding and individual technology requirements rather than targeting improved policing outcomes and the capability necessary to achieve these. The NSW Police Force missed an opportunity to take a whole-of-organisation approach to selecting technology projects for the remainder of the funds where it had discretion. This may have included considering less obvious back office technology or making different investment decisions driven by gaps in the agency's technology capabilities. The NSW Police Force used effective governance arrangements for administering the Policing for Tomorrow fund, including using its existing ICT Executive Board. The NSW Police Force has adequate processes in place to drive benefits and monitor the impact of technology on the efficiency and effectiveness of policing for the larger projects funded by Policing for Tomorrow. Further work is required to ensure this for smaller projects. The NSW Police Force tends to consider only impacts on the organisation in managing benefits and identifying unintended consequences. It does not routinely engage proactively with stakeholders, including partner criminal justice agencies and members of the community, on new technology that changes how police interact with the public. |
We examined how effectively the NSW Police Force governed the Policing for Tomorrow fund, to ensure that key accountability and decision-making arrangements were in place to direct the $100 million spend to appropriate technologies. We also assessed how the NSW Police Force acquired, implemented and maintained technology funded by Policing for Tomorrow to determine the effectiveness of the relevant asset management.
The Policing for Tomorrow election commitment aimed to invest in technology to ‘make police work safer and quicker – meaning more time on the street combatting crime’. We assessed whether the NSW Police Force ensured that funded technologies have improved policing efficiency and effectiveness. We did not seek to independently assure the benefits or outcomes resulting from the technologies.
Appendix one – Response from agency
Appendix two – Policing for Tomorrow projects and expenditure
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 #334 - released 2 June 2020
Destination NSW's support for major events
This report focuses on whether Destination NSW (DNSW) can demonstrate that its support for major events achieves value for money.
The audit found that DNSW’s processes for assessing and evaluating the major events it funds are mostly effective, but its public reporting does not provide enough transparency.
DNSW provides clear information to event organisers seeking funding and has a comprehensive methodology for conducting detailed event assessments. However, the reasons for decisions to progress events from the initial assessment to the detailed assessment stage are not documented in sufficient detail.
DNSW does not publish detailed information about the events it funds or the outcomes of these events. This means that members of the public are unable to see whether its activities achieve value for money. However, DNSW’s internal reporting to its key decision‑makers, including the CEO, the Board and the Minister is appropriate.
The Auditor-General made four recommendations to DNSW, aimed at improving the transparency of its activities, improving the documentation of decisions and certain compliance matters, and streamlining its approach to assessing and evaluating events that receive smaller amounts of funding.
Destination NSW (DNSW) provides funding to attract a range of major events to New South Wales, including high-profile professional sports matches and tournaments, musicals, art and museum exhibitions, and participation-focused events such as festivals and sports events that members of the public can enter. The NSW Government's rationale for providing funding is to encourage event organisers to hold events in New South Wales, and to ensure that events held in New South Wales maximise the potential for attracting overseas and interstate visitors.
This audit assessed whether DNSW can demonstrate that its support for major events achieves value for money. In making this assessment, the audit examined whether:
- DNSW effectively assesses proposals to support major events
- DNSW effectively evaluates the impact of its support for major events.
This audit focused on DNSW's work to attract major events to New South Wales. It did not assess DNSW's tourism promotion or development work, which includes developing tourism strategies, marketing and advertising campaigns, national and international partnerships, and regional programs.
ConclusionDestination NSW's processes for assessing event applications and evaluating its support for major events are mostly effective. DNSW's internal systems allow it to know whether its decisions are achieving value for money. Its public reporting does not provide enough information about its activities and their outcomes, although it is consistent with that of equivalent organisations in other Australian jurisdictions. DNSW's process for assessing applications for funding from organisers of major events is mostly effective. Clear information is provided to event organisers seeking funding, and DNSW has a comprehensive methodology for conducting detailed event assessments. However, the reasons for decisions to progress events from the initial assessment to the detailed assessment stage are not documented in sufficient detail. DNSW has a framework for disclosure and monitoring staff conflicts of interest. However, its forms for staff to disclose conflicts of interest on specific events they are working on are ambiguous. DNSW's management of gifts and benefits broadly complies with the minimum standards set by the Public Service Commission, but there are some gaps in its implementation of these. DNSW conducts an evaluation of each major event it supports. DNSW articulates expected outcomes in contracts with event organisers and uses a sound methodology to evaluate events. Internal reporting to its key decision-makers, including the CEO, the Board and the Minister is appropriate. However, DNSW does not publish detailed information about the events it funds or the outcomes of these events. This means that members of the public are unable to see whether its activities achieve value for money. |
Appendix one – Response from Destination NSW
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 #332 - released 9 April 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.
Environmental impact assessment of major projects in NSW
The Audit Office is of the opinion that the basis for environmental impact assessment of major projects in NSW is sound. The key concept of 'environmental significance' is well defined. The system is closely specified. The Department of Urban Affairs and Planning (DUAP) leads a whole-of-government approach to environmental impact assessment and its assessments are comprehensive. However, the Audit Office considers that there are opportunities for improvement by more actively managing the participants and the performance of the environmental impact assessment system. DUAP needs to strengthen its internal documentation and must ensure the public have greater involvement.
Parliamentary reference - Report number #92 - released 28 November 2001
Use of the internet and related technologies to improve public sector performance
Notwithstanding the considerable effort, it is not apparent that the Government's vision can be fully achieved without increased efforts. Based on the current position, to ensure that the Government's vision can be achieved the Audit Office is of the view that the following key issues need to be urgently addressed:
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more robust mechanisms are needed to monitor, review and report publicly on progress and benefits
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a greater emphasis should be placed on central coordination to ensure that agencies act in a more uniform and integrated manner
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the achievement of significant reform of business processes will require a substantial strengthening of accountability mechanisms and more comprehensive, rigorous and systematic approaches to e-government project and risk management.
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despite an array of guidance material and support provided by central agencies, line agency needs for assistance do not seem to be being met to sufficiently advance matters across the sector at the pace and scope desired
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the Government’s e-government aspirations and funding are not always effectively harmonised. Agencies typically have limited resources available to trial or experience new technologies, and display an aversion to the associated risks.
Parliamentary reference - Report number #87 - released 19 September 2001
Controlling and reducing pollution from industry
The regulatory framework introduced under the Protection of the Environment Operations Act 1997, along with other initiatives progressively being implemented by the Environment Protection Authority (EPA), should enhance the overall effectiveness of environment protection in NSW. The Audit Office is of the opinion that the framework is consistent with best practice and once fully implemented, should contribute to the achievement of further improvements in the environmental performance of industry.
However while the legislative framework supports best practice in regulation and enforcement, there are a number of issues which limit the effectiveness of the reforms. Some of the problems, such as the quality of licences and the effectiveness of compliance activities, have been identified by the EPA and may be addressed through recent initiatives.
Parliamentary reference - Report number #82 - released 18 April 2001
