Reports
Progress and measurement of the Premier's Priorities
The Premier’s Implementation Unit uses a systematic approach to measuring and reporting progress towards the Premier’s Priorities performance targets, but public reporting needed to improve, according to a report released today by the Auditor-General of NSW, Margaret Crawford.
The Premier of New South Wales has established 12 Premier’s Priorities. These are key performance targets for government.
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Source: Department of Premier and Cabinet, Premier’s Priorities website.
Each Premier’s Priority has a lead agency and minister responsible for achieving the performance target.
The Premier’s Implementation Unit (PIU) was established within the Department of Premier and Cabinet (DPC) in 2015. The PIU is a delivery unit that supports agencies to measure and monitor performance, make progress toward the Premier’s Priorities targets, and report progress to the Premier, key ministers and the public.
This audit assessed how effectively the NSW Government is progressing and reporting on the Premier's Priorities.
The Premier’s Implementation Unit (PIU) is effective in assisting agencies to make progress against the Premier’s Priorities targets. Progress reporting is regular but transparency to the public is weakened by the lack of information about specific measurement limitations and lack of clarity about the relationship of the targets to broader government objectives.The PIU promotes a systematic approach to measuring performance and reporting progress towards the Premier’s Priorities’ performance targets. Public reporting would be improved with additional information about the rationale for choosing specific targets to report on broader government objectives.
The PIU provides a systematic approach to measuring performance and reporting progress towards the Premier's Priorities performance targets. Public reporting would be improved with additional information about the rationale for choosing specific targets to report on broader government objectives. The data used to measure the Premier’s Priorities comes from a variety of government and external datasets, some of which have known limitations. These limitations are not revealed in public reporting, and only some are revealed in progress reported to the Premier and ministers. This limits the transparency of reporting.
The PIU assists agencies to avoid unintended outcomes that can arise from prioritising particular performance measures over other areas of activity. The PIU has adopted a collaborative approach to assisting agencies to analyse performance using data, and helping them work across organisational silos to achieve the Premier’s Priorities targets.
Data used to measure progress for some of the Premier’s Priorities has limitations which are not made clear when progress is reported. This reduces transparency about the reported progress. Public reporting would also be improved with additional information about the relationship between specific performance measures and broader government objectives.
The PIU is responsible for reporting progress to the Premier, key ministers and the public. Agencies provide performance data and some play a role in preparing progress reports for the Premier and ministers. For 11 of the Premier's Priorities, progress is reported against measurable and time-related performance targets. For the infrastructure priority, progress is reported against project milestones.
Progress of some Priorities is measured using data that has known limitations, which should be noted wherever progress is reported. For example, the data used to report on housing completions does not take housing demolitions into account, and is therefore overstating the contribution of this performance measure to housing supply. This known limitation is not explained in progress reports or on the public website.
Data used to measure progress is sourced from a mix of government and external datasets. Updated progress data for most Premier’s Priorities is published on the Premier’s Priorities website annually, although reported to the Premier and key ministers more frequently. The PIU reviews the data and validates it through fieldwork with front line agencies. The PIU also assists agencies to avoid unintended outcomes that can arise from prioritising single performance measures. Most, but not all, agencies use additional indicators to check for misuse of data or perverse outcomes.
We examined the reporting processes and controls for five of the Premier’s Priorities. We found that there is insufficient assurance over the accuracy of the data on housing approvals.
The relationships between performance measures and broader government objectives is not always clearly explained on the Premier’s Priority website, which is the key source of public information about the Premier’s Priorities. For example, the Premier’s Priority to reduce litter volumes is communicated as “Keeping our Environment Clean.” While the website explains why reducing litter is important, it does not clearly explain why that particular target has been chosen to measure progress in keeping the environment clean.
By December 2018, the Department of Premier and Cabinet should:
- improve transparency of public reporting by:
- providing information about limitations of reported data and associated performance
- clarifying the relationship between the Premier’s Priorities performance targets and broader government objectives.
- ensure that processes to check and verify data are in place for all agency data sources
- encourage agencies to develop and implement additional supporting indicators for all Premier’s Priority performance measures to prevent and detect unintended consequences or misuse of data.
The Premier's Implementation Unit is effective in supporting agencies to deliver progress towards the Premier’s Priority targets.
The PIU promotes a systematic approach to monitoring and reporting progress against a target, based on a methodology used in delivery units elsewhere in the world. The PIU undertakes internal self-evaluation, and commissions regular reviews of methodology implementation from the consultancy that owns the methodology and helped to establish the PIU. However, the unit lacks periodic independent reviews of their overall effectiveness. The PIU has adopted a collaborative approach and assists agencies to analyse performance using data, and work across organisational silos to achieve the Premier’s Priorities targets.
Agency representatives recognise the benefits of being responsible for a Premier's Priority and speak of the value of being held to account and having the attention of the Premier and senior ministers.
By June 2019, the Department of Premier and Cabinet should:
- establish routine collection of feedback about PIU performance including:
- independent assurance of PIU performance
- opportunity for agencies to provide confidential feedback.
Appendix one: Response from agency
Appendix three: About the audit
Appendix four: Performance auditing
Parliamentary reference - Report number #307 - released 13 September 2018
Managing Antisocial behaviour in public housing
The Department of Family and Community Services (FACS) has not adequately supported or resourced its staff to manage antisocial behaviour in public housing according to a report released today by the Deputy Auditor-General for New South Wales, Ian Goodwin.
In recent decades, policy makers and legislators in Australian states and territories have developed and implemented initiatives to manage antisocial behaviour in public housing environments. All jurisdictions now have some form of legislation or policy to encourage public housing tenants to comply with rules and obligations of ‘good neighbourliness’. In November 2015, the NSW Parliament changed legislation to introduce a new approach to manage antisocial behaviour in public housing. This approach is commonly described as the ‘strikes’ approach.
When introduced in the NSW Parliament, the ‘strikes’ approach was described as a means to:
- improve the behaviour of a minority of tenants engaging in antisocial behaviour
- create better, safer communities for law abiding tenants, including those who are ageing and vulnerable.
FACS has a number of tasks as a landlord, including a responsibility to collect rent and organise housing maintenance. FACS also has a role to support tenants with complex needs and manage antisocial behaviour. These roles have some inherent tensions. The FACS antisocial behaviour management policy aims are:
to balance the responsibilities of tenants, the rights of their neighbours in social housing, private residents and the broader community with the need to support tenants to sustain their public housing tenancies.
This audit assessed the efficiency and effectiveness of the ‘strikes’ approach to managing antisocial behaviour in public housing environments.
We examined whether:
- the approach is being implemented as intended and leading to improved safety and security in social housing environments
- FACS and its partner agencies have the capability and capacity to implement the approach
- there are effective mechanisms to monitor, report and progressively improve the approach.
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Conclusion
FACS has not adequately supported or resourced its staff to implement the antisocial behaviour policy. FACS antisocial behaviour data is incomplete and unreliable. Accordingly, there is insufficient data to determine the nature and extent of the problem and whether the implementation of the policy is leading to improved safety and security. FACS management of minor and moderate incidents of antisocial behaviour is poor. FACS has not dedicated sufficient training to equip frontline housing staff with the relevant skills to apply the antisocial behaviour management policy. At more than half of the housing offices we visited, staff had not been trained to:
When frontline housing staff are informed about serious and severe illegal antisocial behaviour incidents, they generally refer them to the FACS Legal Division. Staff in the Legal Division are trained and proficient in managing antisocial behaviour in compliance with the policy and therefore, the more serious incidents are managed effectively using HOMES ASB.
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Parliamentary reference - Report number #306 - released 10 August 2018
Matching skills training with market needs
In 2012, governments across Australia entered into the National Partnership Agreement on Skills Reform. Under the National Partnership Agreement, the Australian Government provided incentive payments to States and Territories to move towards a more contestable Vocational Education and Training (VET) market. The aim of the National Partnership Agreement was to foster a more accessible, transparent, efficient and high quality training sector that is responsive to the needs of students and industry.
The New South Wales Government introduced the Smart and Skilled program in response to the National Partnership Agreement. Through Smart and Skilled, students can choose a vocational course from a list of approved qualifications and training providers. Students pay the same fee for their chosen qualification regardless of the selected training provider and the government covers the gap between the student fee and the fixed price of the qualification through a subsidy paid to their training provider.
Smart and Skilled commenced in January 2015, with the then Department of Education and Communities having primary responsibility for its implementation. Since July 2015, the NSW Department of Industry (the Department) has been responsible for VET in New South Wales and the implementation of Smart and Skilled.
The NSW Skills Board, comprising nine part-time members appointed by the Minister for Skills, provides independent strategic advice on VET reform and funding. In line with most other States and Territories, the Department maintains a 'Skills List' which contains government subsidised qualifications to address identified priority skill needs in New South Wales.
This audit assessed the effectiveness of the Department in identifying, prioritising, and aligning course subsidies to the skill needs of NSW. To do this we examined whether:
- the Department effectively identifies and prioritises present and future skill needs
- Smart and Skilled funding is aligned with the priority skill areas
- skill needs and available VET courses are effectively communicated to potential participants and training providers.
Smart and Skilled is a relatively new and complex program, and is being delivered in the context of significant reform to VET nationally and in New South Wales. A large scale government funded contestable market was not present in the VET sector in New South Wales before the introduction of Smart and Skilled. This audit's findings should be considered in that context.
The Department needs to better use the data it has, and collect additional data, to support its analysis of priority skill needs in New South Wales, and direct funding accordingly.
- funding scholarships and support for disadvantaged students
- funding training in regional and remote areas
- providing additional support to deliver some qualifications that the market is not providing.
The Department needs to evaluate these funding strategies to ensure they are achieving their goals. It should also explore why training providers are not delivering some priority qualifications through Smart and Skilled.
Training providers compete for funding allocations based on their capacity to deliver. The Department successfully manages the budget by capping funding allocated to each Smart and Skilled training provider. However, training providers have only one year of funding certainty at present. Training providers that are performing well are not rewarded with greater certainty.
The Department needs to improve its communication with prospective students to ensure they can make informed decisions in the VET market.
The Department also needs to communicate more transparently to training providers about its funding allocations and decisions about changes to the NSW Skills List.
The Department relies on stakeholder proposals to update the NSW Skills List. Stakeholders include industry, training providers and government departments. These stakeholders, particularly industry, are likely to be aware of skill needs, and have a strong incentive to propose qualifications that address these needs. The Department’s process of collecting stakeholder proposals helps to ensure that it can identify qualifications needed to address material skill needs.
It is also important that the Department ensures the NSW Skills List only includes priority qualifications that need to be subsidised by government. The Department does not have robust processes in place to remove qualifications from the NSW Skills List. As a result, there is a risk that the list may include lower priority skill areas. Since the NSW Skills List was first created, new additions to the list have outnumbered those removed by five to one.
The Department does not always validate information gathered from stakeholder proposals, even when it has data to do so. Further, its decision making about what to include on, or delete from, the NSW Skills List is not transparent because the rationale for decisions is not adequately documented.
The Department is undertaking projects to better use data to support its decisions about what should be on the NSW Skills List. Some of these projects should deliver useful data soon, but some can only provide useful information when sufficient trend data is available.
Recommendation
The Department should:
- by June 2019, increase transparency of decisions about proposed changes to the NSW Skills List and improve record-keeping of deliberations regarding these changes
- by December 2019, use data more effectively and consistently to ensure that the NSW Skills List only includes high priority qualifications
Only qualifications on the NSW Skills List are eligible for subsidies under Smart and Skilled. As the Department does not have a robust process for removing low priority qualifications from the NSW Skills list, some low priority qualifications may be subsidised.
The Department allocates the Smart and Skilled budget through contracts with Smart and Skilled training providers. Training providers that meet contractual obligations and perform well in terms of enrolments and completion rates are rewarded with renewed contracts and more funding for increased enrolments, but these decisions are not based on student outcomes. The Department reduces or removes funding from training providers that do not meet quality standards, breach contract conditions or that are unable to spend their allocated funding effectively. Contracts are for only one year, offering training providers little funding certainty.
Smart and Skilled provides additional funding for scholarships and for training providers in locations where the cost of delivery is high or to those that cater to students with disabilities. The Department has not yet evaluated whether this additional funding is achieving its intended outcomes.
Eight per cent of the qualifications that have been on the NSW Skills List since 2015 are not delivered under Smart and Skilled anywhere in New South Wales. A further 14 per cent of the qualifications that are offered by training providers have had no student commencements. The Department is yet to identify the reasons that these high priority qualifications are either not offered or not taken up by students.
Recommendation
The Department should:
- by June 2019, investigate why training providers do not offer, and prospective students do not enrol in, some Smart and Skilled subsidised qualifications
- by December 2019, evaluate the effectiveness of Smart and Skilled funding which supplements standard subsidies for qualifications on the NSW Skills List, to determine whether it is achieving its objectives
- by December 2019, provide longer term funding certainty to high performing training providers, while retaining incentives for them to continue to perform well.
In a contestable market, it is important for consumers to have sufficient information to make informed decisions. The Department does not provide some key information to prospective VET students to support their decisions, such as measures of provider quality and examples of employment and further education outcomes of students completing particular courses. Existing information is spread across numerous channels and is not presented in a user friendly manner. This is a potential barrier to participation in VET for those less engaged with the system or less ICT literate.
The Department conveys relevant information about the program to training providers through its websites and its regional offices. However, it could better communicate some specific information directly to individual Smart and Skilled training providers, such as reasons their proposals to include new qualifications on the NSW Skills List are accepted or rejected.
While the Department is implementing a communication strategy for VET in New South Wales, it does not have a specific communications strategy for Smart and Skilled which comprehensively identifies the needs of different stakeholders and how these can be addressed.
Recommendation
By December 2019, the Department should develop and implement a specific communications strategy for Smart and Skilled to:
- support prospective student engagement and informed decision making
- meet the information needs of training providers
Appendix one - Response from agency
Appendix two - About the audit
Appendix three - Performance auditing
Parliamentary reference - Report number #305 - released 26 July 2018
Performance audit insights: key findings from 2014-2018
A report released today by the Auditor-General for New South Wales, Margaret Crawford, presents key findings from four years of performance audits. The report findings are presented around six areas of government activity including planning for the future, meeting community expectations for key services, investment in infrastructure, managing natural resources, ensuring good governance and digital disruption.
In this report, we present common findings and lessons from the past four years of performance audits, and offer insights to the public sector on elements of effective performance. We have analysed the key findings and recommendations from 61 performance audits tabled in the NSW Parliament between July 2014 and June 2018, spanning varied areas of government activity. We will also use this report to help determine areas of unaddressed risk across all parts of government, and to shape our future audit priorities.
Governments play an important stewardship role. Their decisions need to consider intergenerational equity by ensuring that investment strategies are sustainable. Governments also need to consider the impact of their decisions on different parts of the community. We recognise that governments face challenges in delivering programs and services, targeting complex social issues with finite resources.
Governments are changing how they deliver services to respond to citizen needs and deliver greater value for money. In this section, we reflect on audits that looked at how government entities are planning their activities to meet the needs of the community into the future.
State and local government exist to provide services to citizens, and citizens are playing a greater role in defining what services they want or need. Expectations about consultation, ease of access, timeliness, and customisation of services are rising. Governments face challenges to continually improve the way they plan and deliver services to meet these expectations. Governments also need to provide quality services for a growing and ageing population whilst working within a constrained financial environment.
Over the past four years, our performance audits have assessed aspects of State and local government services, including education, health services, disability support, corrective services, and many others. In this section, we draw together common findings that government entities should reflect on when providing services to the community.
The NSW Government’s 2018–19 Budget forecasts an $87.2 billion infrastructure investment program over the next four years. Infrastructure investment of this size carries significant opportunities and risks. Competition for resources is high and maintaining the capability to manage and deliver projects effectively is challenging. Governments also need to plan effectively to ensure infrastructure built today will meet future needs.
Over the past four years, we have looked at some of the ways NSW Government agencies justify and prioritise projects for funding, work with contractors to deliver projects, and track and report on progress. In this section, we draw together common findings from our audits that government entities should consider when planning future infrastructure projects.
Governments face challenges in balancing the use of natural resources to meet diverse interests, while supporting a sustainable natural environment for the future. They need to supply communities with water, produce energy, protect natural habitats, and support farming, industry, and economic development.
Some of our recent audits have considered how government agencies are managing natural resources and protecting the environment for future generations. In this section, we have drawn together common findings across our audits that government entities should consider in managing the environment and natural resources.
A range of checks and balances is needed to support public confidence in government decision making. To maintain trust, government agencies should act transparently, and in accordance with relevant legislation and policy. This is particularly important as the public sector increasingly engages with external partners to deliver services and provide a more contestable environment.
Good governance arrangements should result in improved service delivery and more effective and efficient use of resources. Our audits have looked at many different elements of governance, including making sure the necessary processes and workplace cultures are in place to help government entities achieve their aims. In this section, we have drawn together various aspects of governance that government entities should consider.
The global increase in digital technology provides governments with opportunities to interact with citizens in more immediate and responsive ways than was previously possible. Data can be used in powerful ways such as predicting future demand for services, targeting interventions, responding to crises, and evaluating outcomes. Governments face challenges in doing this while maintaining secure digital environments that protect citizen interests, privacy, and autonomy.
Our audits have assessed some of the ways that government entities are incorporating digital change into their work. In this section, we draw together common themes that governments could consider in protecting their digital assets, or expanding their digital capabilities.
Regulation of water pollution in drinking water catchments and illegal disposal of solid waste
There are important gaps in how the Environmental Protection Authority (EPA) implements its regulatory framework for water pollution in drinking water catchments and illegal solid waste disposal. This limits the effectiveness of its regulatory responses, according to a report released today by the Auditor-General for New South Wales, Margaret Crawford.
| By 31 December 2018, to improve governance and oversight, the EPA should: | |
| 1. | implement a more effective performance framework with regular reports to the Chief Executive Officer and to the EPA Board on outcomes-based key result areas that assess its environmental and regulatory performance and trends over time |
| By 30 June 2019, to improve consistency in its practices, the EPA should: | |
| 2. | progressively update and make accessible its policies and procedures for regulatory operations, and mandate procedures where necessary to ensure consistent application |
| 3. | implement internal controls to monitor the consistency and quality of its regulatory operations. |
| By 30 June 2019, to address worsening water quality in Lake Burragorang, the EPA should: | |
| 4. | (a) review the impact of its licensed activities on water quality in Lake Burragorang, and |
| (b) develop strategies relating to its licensed activities (in consultation with other relevant NSW Government agencies) to improve and maintain the lake's water quality. | |
| To improve compliance monitoring, the EPA should implement procedures to: | |
| 5. | by 30 June 2019, validate self-reported information, eliminate hardcopy submissions and require licensees to report on their breaches of the Act and associated regulations in their annual returns |
| 6. | by 31 December 2018, conduct mandatory site inspections under the risk-based licensing scheme to assess compliance with all regulatory requirements and licence conditions. |
| By 31 December 2018 to improve enforcement, the EPA should: | |
| 7. | Implement procedures to systematically assess non-compliances with licence conditions and breaches of the Act and to implement appropriate and consistent regulatory actions. |
Appendix one – Response from agency
Appendix two – List of enforcement tools
Appendix three – The EPA's organisational structure
Appendix four – The EPA's regions and branches
Appendix five – About the audit
Appendix six – Performance auditing
Parliamentary reference - Report number #304 - released 28 June 2018
Assessment of the use of a training program
The Department of Finance, Services and Innovation (DFSI) and Service NSW's use of Franklin Covey's '7 Habits' program (the Program) met identified business needs according to a report released today by the Auditor-General for New South Wales Margaret Crawford.
This audit assesses the effectiveness and economy of the Department of Finance, Services and Innovation's, including Service NSW's, use of the Franklin Covey ‘7 Habits’ program (the Program). On 15 March 2018, the Hon. Victor Dominello MP, Minister for Finance, Services and Property, requested the Auditor General conduct this audit under section 27(B)(3)(c) of the Public Finance and Audit Act 1983 (the Act).
About the agencies
The Department of Finance, Services and Innovation (the Department) is the lead agency of the Finance, Services and Innovation cluster. The Department has a number of divisions and business units, including: ICT and Digital Government, Property and Advisory Group, Better Regulation, NSW Fair Trading, Government and Corporate Services, and Revenue NSW. At 30 June 2017, the Department (excluding Service NSW) had 5,239 full-time equivalent staff.
Service NSW is a central point of contact for customers accessing NSW Government Services. It is a Division of the Finance, Services and Innovation cluster and operates as an executive agency. As an executive agency, Service NSW is led by a Chief Executive Officer, who is responsible to the Minister for Finance, Services and Property but appointed by the Secretary of the Department of Finance, Services and Innovation. Service NSW was established in 2013 and has operated under the Finance, Services and Innovation cluster since July 2015. At 30 June 2017, Service NSW had 1,989 full-time equivalent staff.
About the Program
The Program that the Department and Service NSW are implementing, and which is the subject of this audit, is a professional development training course which focusses on organisational culture emphasising personal effectiveness, leadership development and change management. All staff in the Department and Service NSW will receive the training, which involves:
- a 360-degree assessment where every staff member receives feedback from their manager, direct reports, and peers
- a two-day training workshop, which will be delivered face to face by accredited facilitators
- 2 years of online access to all training materials created by the provider of the Program.
As part of the licensing arrangement purchased by the agencies, the Program also provides access (at no extra cost) to the full range of the provider's training and development courses that might be useful for other learning and development activities. This includes courses to improve staff capability in communication skills, leadership, productivity and customer engagement. The Department is considering using one of these courses to develop leadership capabilities. Service NSW has integrated three of these courses into its people development curriculum.
Service NSW commenced the first sessions of the Program in May 2017. At 24 April 2018, around 1,000 staff had undertaken the training. Service NSW expects all staff to complete the Program by June 2019.
The Department of Finance, Services and Innovation commenced the first sessions of the Program in August 2017. At 18 April 2018, around 175 staff had undertaken the training. The Department expects all staff to complete the Program by December 2019.
Audit objective and criteria
The audit sought to assess the effectiveness and economy of the Finance, Services and Innovation cluster’s use of the Program. In making this assessment, we considered whether:
- the Program is being used effectively, including whether
- there is an identified need for the Program
- the use of the Program meets the identified need
- Finance, Services and Innovation cluster agencies evaluate the effectiveness of the Program
- the Program is economical, including whether:
- the procurement complies with all relevant policies and processes
- funding and resources allocated to the Program are reasonable.
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Sector-wide learnings Implementing robust learning and development frameworks
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Fraud controls in local councils
Many local councils need to improve their fraud control systems, according to a report released today by the Auditor-General for New South Wales, Margaret Crawford. The report highlights that councils often have fraud control procedures and systems in place, but are not ensuring people understand them and how they work. There is also significant variation between councils in the quality of their fraud controls.
Fraud can directly influence councils’ ability to deliver services, and undermine community confidence and trust. ICAC investigations, such as the recent Operation Ricco into the former City of Botany Bay Council, show the financial and reputational damage that major fraud can cause. Good fraud control practices are critical for councils and the community.
The Audit Office of New South Wales 2015 Fraud Control Improvement Kit (the Kit) aligns with the Fraud and Corruption Control Standard AS8001-2008 and identifies ten attributes of an effective fraud control system. This audit used the Kit to assess how councils manage the risk of fraud. It identifies areas where fraud control can improve.
Fraud can disrupt the delivery and quality of services and threaten the financial stability of councils.
Recent reviews of local government in Queensland and Victoria identify that councils are at risk of fraud because they purchase large quantities of goods and services using devolved decision making arrangements. The Queensland Audit Office in its 2014–15 report 'Fraud Management in Local Government' found that ‘Councils are exposed to high-risks of fraud and corruption because of the high volume of goods and services they procure, often from local suppliers; and because of the high degree of decision making vested in councils'. They also highlight some common problems faced by councils including the absence of fraud control plans and failure to conduct regular reviews of their internal controls. Also, in 2008 and 2012 the Victorian Auditor-General identified the importance of up-to-date fraud control planning, clearly documented related policies, training staff to identify fraud risks and the importance of controls such as third party management.
Investigations into councils by the NSW Independent Commission Against Corruption (ICAC), such as the recent Operation Ricco, show the impact that fraud can have on councils. These impacts include significant financial loss, and negative public perceptions about how well councils manage fraud. The findings of these investigations also show the importance of good fraud controls for councils.
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Operation Ricco In its report on Operation Ricco, the ICAC found that the Chief Financial Officer (CFO) of the City of Botany Bay Council and others dishonestly exercised official functions to obtain financial benefits for themselves and others by causing fraudulent payments from the Council for their benefit. It also identified the CFO received inducements for favourable treatment of contractors. The report noted that there were overwhelming failures in the council’s procedures and governance framework that created significant opportunities for corruption, of which the CFO and others took advantage. It found weaknesses across a wide variety of governance processes and functions, including those involving the general manager, the internal audit function, external audit, and the operation of the audit committee. |
The strength of fraud control systems varies significantly across New South Wales local councils, and many councils we surveyed need to improve significantly.
Most surveyed councils do not have fraud control plans that direct resources to mitigating the specific fraud risks they face. Few councils reported that they conduct regular risk assessments or health checks to ensure they respond effectively to the risks they identify.
There are sector wide weaknesses that impact on the strength of councils' fraud control practice. Less than one-third of councils that responded to the survey:
- communicate their expectations about ethical conduct and responsibility for fraud control to staff
- regularly train staff to identify and respond to suspected fraud
- inform staff or the wider community how to report suspected fraud and how reports made will be investigated.
The audit also identified a pattern of councils developing policies, procedures or systems without ensuring people understand them, or assessing that they work. This reduces the likelihood that staff will actually use them.
In general, metropolitan and regional councils surveyed have stronger fraud control systems than rural councils.
Newly amalgamated councils are operating with systems inherited from two or more pre-amalgamated councils. These councils are developing new systems for their changed circumstances.
Five councils surveyed reported that they did not comply with the Public Interest Disclosure Act 1994.
Observations for the sector:
Councils should improve their fraud controls by:
- tailoring fraud control plans to their circumstances and specific risks
- systematically and regularly reviewing their fraud risks and fraud control systems to keep their plans up to-date
- effectively communicating fraud risks, and how staff and the community can report suspected fraud
- ensuring that they comply with the Public Interest Disclosure Act 1994.
Recommendation:
That the Office of Local Government:
- work with councils to ensure they comply with the Public Interest Disclosure Act 1994.
That the Office of Local Government:
- work with state entities and councils to develop a common approach to how fraud complaints and incidences are defined and categorised so that they can:
- better use data to provide a clearer picture of the level of fraud within councils
- measure the effectiveness of, and drive improvement in councils' fraud controls systems
Appendix one – Response from agency
Appendix three – About the audit
Appendix four – Performance auditing
Parliamentary reference - Report number #303 - released 22 June 2018
Shared services in local government
Local councils need to properly assess the performance of their current services before considering whether to enter into arrangements with other councils to jointly manage back-office functions or services for their communities. This is one of the recommended practices for councils in a report released today by the Auditor-General for New South Wales, Margaret Crawford. ‘When councils have decided to jointly provide services, they do not always have a strong business case, which clearly identifies the expected costs, benefits and risks of shared service arrangements’, said the Auditor-General.
Councils provide a range of services to meet the needs of their communities. It is important that they consider the most effective and efficient way to deliver them. Many councils work together to share knowledge, resources and services. When done well, councils can save money and improve access to services. This audit assessed how efficiently and effectively councils engage in shared service arrangements. We define ‘shared services’ as two or more councils jointly managing activities to deliver services to communities or perform back-office functions.
The information we gathered for this audit included a survey of all general-purpose councils in NSW. In total 67 councils (52 per cent) responded to the survey from 128 invited to participate. Appendix two outlines in more detail some of the results from our survey.
First, not all surveyed councils are assessing the performance of their current services before deciding on the best service delivery model. Where they have decided that sharing services is the best way to deliver services, they do not always build a business case which outlines the costs, benefits and risks of the proposed shared service arrangement before entering into it.
The Office of Local Government should, by April 2019:
Develop guidance which outlines the risks and opportunities of governance models that councils can use to share services. This should include advice on legal requirements, transparency in decisions, and accountability for effective use of public resources.
Appendix one – Response from agency
Appendix two – Survey findings
Appendix three – About the audit
Appendix four – Performance auditing
Parliamentary reference - Report number #302 - released 21 June 2018
Universities 2017
The Auditor-General, Margaret Crawford released her report today on the results of financial audits of NSW universities for the year ended 31 December 2017. No qualified audit opinions were issued for any university and the quality and timeliness of financial reporting continues to improve.
This report analyses the results of our audits of financial statements of the ten NSW universities and their controlled entities for the year ended 31 December 2017. The table below summarises our key observations.
This report focuses on our observations on the common issues identified in our audits of the financial statements of the ten NSW universities and their controlled entities in 2017. The universities and controlled entities are listed in Appendix three and four respectively.
The report provides our analysis of universities’ results and findings in the following areas:
- Financial reporting and performance
- Teaching and research
- Financial controls and governance.
Accurate and timely financial reporting is important for universities to make efficient and effective economic decisions. Sound financial performance provides the platform for universities to deliver high quality teaching and research outcomes.
This chapter outlines our audit observations on the financial reporting and performance of NSW universities for 2017.
| Observation | Conclusion or recommendation |
| 3.1 Financial reporting | |
| Audit results | |
| The financial statements of all ten NSW universities and 66 out of 69 of their controlled entities received unmodified audit opinions. | Two controlled entities did not fully comply with the financial reporting and audit requirements of the Public Finance and Audit Act 1983 as they did not submit their financial statements to the Auditor-General. One of these entities was audited under the requirements applicable in its foreign jurisdiction. A third controlled entity submitted financial statements, but only after the statutory due date. |
| Quality and timeliness of financial reporting | |
| The number of uncorrected misstatements continues to decrease. | The quality of financial statements of the universities improved in 2017. |
| Two universities simplified disclosures in their financial statements. | The financial statements of the University of Sydney and Macquarie University are more concise, readable and understandable than those of other universities. |
| Six universities finalised their financial statements earlier than in previous years. | Universities that performed aspects of early close procedures improved the timeliness of their financial reporting and helped us conclude our audits earlier. |
| Eight universities are yet to quantify the impact of new accounting standards applicable in future years. | The two universities that have assessed the impact of the new accounting standards believe the impact will be material. |
| An accounting issue was identified relating to the recognition and measurement of payroll tax liabilities on employees' defined benefit superannuation contributions payable to the superannuation funds. | Recommendation: NSW universities should clarify the recognition and measurement of their liability for payroll tax on their defined benefit superannuation obligations before 31 December 2018. |
| 3.2 Financial performance | |
| Sources of revenue from operations | |
| Government grants as a proportion of total revenue decreased over the past five years by 6.4 per cent. |
The Australian Government announced funding freezes to Australian Government grants revenue for the next two years. Universities are expanding other revenue streams to decrease their reliance on grant funding. The revenue stream that has increased the most significantly over the past five years is overseas student revenue. |
| Revenue from overseas student course fees increased by 23 per cent in the last year and contributed $2.8 billion to the NSW university sector in 2017. | Overseas student revenue exceeded domestic student revenue by 37 per cent, and comprised over a quarter of NSW universities' total revenues in 2017. The growth in overseas student revenue has not been shared equally in the sector. Some universities are more dependent on overseas student revenue than others. |
| Revenue from overseas students from four countries comprised 37 per cent of total student revenues for all NSW universities. | Recommendation: NSW universities should assess their student market concentration risk where they rely heavily on students from a single country of origin. This increases their sensitivity to economic or political changes in that country. Universities' data shows as much as 71 per cent of their overseas student revenue comes from a single country of origin. |
| Research income of NSW universities was $1.1 billion in 2016 and has grown by 9.8 per cent between 2012 and 2016. | Two universities attracted 65.2 per cent of the total research income received by all NSW universities. |
| Other revenues | |
| Total philanthropic revenue increased by 1.0 per cent to $151 million in 2017. |
Philanthropic revenue has been increasing for the past five years. Two universities attracted 76.8 per cent of the total philanthropic dollars received by all NSW universities. |
| Average investment returns fell from 7.0 per cent in 2013 to 5.8 per cent in 2017, while total investments grew to $5.4 billion in 2017 from $3.5 billion in 2013. |
Universities have structured their investment portfolios between fixed and non-fixed income assets, seeking to optimise their returns in a low interest rate environment within the limits of their risk management strategies. Investment income is a significant source of revenue for some, but not all universities. Two universities' investment funds represented 52.3 per cent of the total investment funds of all NSW universities combined. |
| Low interest rates have made investment in fixed income assets less attractive for universities. Over the last five years universities have increased their investment in non-fixed income (or market based) assets by 67.1 per cent. | |
| Most NSW universities have established investment governance frameworks. | |
| Financial sustainability indicators | |
| Operating expenditure per equivalent full-time student load (EFTSL) increased by 3.0 per cent in 2017. | The universities that have been able to attract international students to grow their operational revenues have been able to leverage economies of scale to maximise their average margin per EFTSL. Other universities have had to rely on containing costs to achieve higher EFTSL margins. |
| For six universities, the growth in operating expenditure has exceeded the growth in operating revenue, reducing operating margins. The risk associated with narrowing margins is compounded where universities have a high reliance on student revenues from a single source. Sudden changes in demand can challenge the ability of those universities to adjust their cost structures. |
As the margin between operating revenue and operating expenditure decreases, operational results are more at risk from unexpected fluctuations, such as Australian Government higher education reforms and reduced overseas student enrolments. Smaller operating margins reduce the funds available to invest in upgrading infrastructure and implement corporate strategies to meet future challenges. |
| Eight universities have current ratios greater than one in 2017. | |
| Controlled entities | |
| Sixteen of the universities' 58 controlled entities that operate business activities reported losses in 2017 (15 in 2016). | Overall, the financial performance of controlled entities operating business activities was positive, but results in 2017 were lower than in 2016. |
| The total profit of controlled entities operating business activities decreased 5.5 per cent to $77.5 million in 2017 ($82.6 million in 2016). | Universities may be able to improve their overall performance by reassessing the viability of business ventures that continue to make losses and/or rely on them for financial support. |
| Eighteen controlled entities relied on guarantees of financial support from their parent entity in 2017 (19 in 2016). | |
Teaching and research are key objectives of universities and they invest most of their resources in achieving high quality academic and research outcomes to maintain or advance their reputations and rankings in Australia and abroad. Universities have also committed to achieving certain government objectives.
This chapter outlines teaching and research outcomes for NSW universities for 2017.
| Observation | Conclusion or recommendation |
| 4.1 Teaching outcomes | |
| Achieving Australian Government target | |
| NSW universities met the Australian Government target of having 40 per cent of 25 to 34 year-olds with bachelor degrees ten years earlier than the original target date of 2025. |
The proportion of 25 to 34 year-olds in NSW holding a bachelor degree increased to 43.4 per cent in 2017. In 2009, when the target was originally set, only 35.5 per cent of 25 to 34 year-olds held a bachelor degree. |
| Graduate employment rates | |
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Seven universities exceeded the national average of 71.8 per cent for the proportion of their undergraduates who obtain full-time employment. Four universities achieved better than the national average of 86.1 per cent for the proportion of their postgraduates who obtain full-time employment. |
Most NSW universities' employment outcomes are better than the national average. |
| Student enrolments by field of education | |
| NSW universities have increased enrolments in fields of study that align with known skills shortages in NSW identified by the Australian Government for 2016 and 2017. | Alignment of student intake with identified shortages helps ensure graduates secure timely employment on completion of their studies. |
| Achieving diversity outcomes | |
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NSW universities agreed to targets set by the Australian Government for enrolments of students from low socio economic status (SES) and Aboriginal or Torres Strait Islander backgrounds. |
NSW universities can improve outcomes for these students by implementing policies to increase enrolments and support students to graduation. |
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Three universities exceeded the target of 20 per cent of low SES student enrolments in 2017. Six universities met their Indigenous student enrolment target in 2017. The target is having a growth rate in the enrolment of Indigenous students that is more than 50 per cent higher than the growth rate of non-Indigenous student enrolments. |
At the current rate, it is unlikely most universities will reach the agreed low SES target by 2020. |
Appropriate financial controls help ensure efficient and effective use of resources, and the implementation and monitoring of university policies. Governance consists of frameworks, processes and behaviours that enable the universities to operate effectively and comply with relevant laws and policies.
This chapter outlines our audit observations on the financial control and governance of NSW universities for 2017.
| Observation | Conclusion or recommendation |
| 5.1 Internal controls | |
| Internal control findings | |
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Eighty-three internal control deficiencies were identified during our audits, of which 40 related to Information Technology (IT). |
Recommendation: NSW universities should ensure controls, including information technology controls, are properly designed and operate effectively to protect intellectual property, staff and student data, and assets. Universities should rectify identified deficiencies in a timely manner. |
| Repeat findings Twenty-four findings were repeat internal control deficiencies, of which 18 related to IT. |
IT issues can take some time to rectify because specialist skill and/or partnering with software suppliers is often required to implement new controls. However, until rectified, the vulnerabilities those control deficiencies present can be significant. |
| Cyber security Our audits identified opportunities to improve cyber security controls and processes to reduce risks, including risks relating to financial loss, reputational damage and breaches of privacy laws. |
Recommendation: NSW universities should strengthen their cyber security frameworks to manage cyber security risks. This includes developing:
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Use of credit card and work-related travel The risks of unauthorised use can be mitigated by regular monitoring, and reporting breaches for investigation and disciplinary action. |
Appropriately designed and implemented preventive and detective controls are most effective when enforcement and disciplinary activities are oversighted by university audit and risk committees. |
HealthRoster benefits realisation
The HealthRoster system is delivering some business benefits but Local Health Districts are yet to use all of its features, according to a report released today by the Auditor-General for New South Wales, Margaret Crawford. HealthRoster is an IT system designed to more effectively roster staff to meet the needs of Local Health Districts and other NSW health agencies.
The NSW public health system employs over 100,000 people in clinical and non-clinical roles across the state. With increasing demand for services, it is vital that NSW Health effectively rosters staff to ensure high quality and efficient patient care, while maintaining good workplace practices to support staff in demanding roles.
NSW Health is implementing HealthRoster as its single state-wide rostering system to more effectively roster staff according to the demands of each location. Between 2013–14 and 2016–17, our financial audits of individual LHDs had reported issues with rostering and payroll processes and systems.
NSW Health grouped all Local Health Districts (LHDs), and other NSW Health organisations, into four clusters to manage the implementation of HealthRoster over four years. Refer to Exhibit 4 for a list of the NSW Health entities in each cluster.
- Cluster 1 implementation commenced in 2014–15 and was completed in 2015–16.
- Cluster 2 implementation commenced in 2015–16 and was completed in 2016–17.
- Cluster 3 began implementation in 2016–17 and was underway during the conduct of the audit.
- Cluster 4 began planning for implementation in 2017–18.
Full implementation, including capability for centralised data and reporting, is planned for completion in 2019.
This audit assessed the effectiveness of the HealthRoster system in delivering business benefits. In making this assessment, we examined whether:
- expected business benefits of HealthRoster were well-defined
- HealthRoster is achieving business benefits where implemented.
The HealthRoster project has a timespan from 2009 to 2019. We examined the HealthRoster implementation in LHDs, and other NSW Health organisations, focusing on the period from 2014, when eHealth assumed responsibility for project implementation, to early 2018.
Business benefits identified for HealthRoster accurately reflect business needs.
NSW Health has a good understanding of the issues in previous rostering systems and has designed HealthRoster to adequately address these issues. Interviews with frontline staff indicate that HealthRoster facilitates rostering which complies with industrial awards. This is a key business benefit that supports the provision of quality patient care. We saw no evidence that any major business needs or issues with the previous rostering systems are not being addressed by HealthRoster.
In the period examined in this audit since 2015, NSW Health has applied appropriate project management and governance structures to ensure that risks and issues are well managed during HealthRoster implementation.
HealthRoster has had two changes to its budget and timeline. Overall, the capital cost for the project has increased from $88.6 million to $125.6 million (42 per cent) and has delayed expected project completion by four years from 2015 to 2019. NSW Health attributes the increased cost and extended time frame to the large scale and complexity of the full implementation of HealthRoster.
NSW Health has established appropriate governance arrangements to ensure that HealthRoster is successfully implemented and that it will achieve business benefits in the long term. During implementation, local steering committees monitor risks and resolve implementation issues. Risks or issues that cannot be resolved locally are escalated to the state-wide steering committee.
NSW Health has grouped local health districts, and other NSW Health organisations, into four clusters for implementation. This has enabled NSW Health to apply lessons learnt from each implementation to improve future implementations.
NSW Health has a benefits realisation framework, but it is not fully applied to HealthRoster.
NSW Health can demonstrate that HealthRoster has delivered some functional business benefits, including rosters that comply with a wide variety of employment awards.
NSW Health is not yet measuring and tracking the value of business benefits achieved. NSW Health did not have benefits realisation plans with baseline measures defined for LHDs in cluster 1 and 2 before implementation. Without baseline measures NSW Health is unable to quantify business benefits achieved. However, analysis of post-implementation reviews and interviews with frontline staff indicate that benefits are being achieved. As a result, NSW Health now includes defining baseline measures and setting targets as part of LHD implementation planning. It has created a benefits realisation toolkit to assist this process from cluster 3 implementations onwards.
NSW Health conducted post-implementation reviews for clusters 1 and 2 and found that LHDs in these clusters were not using HealthRoster to realise all the benefits that HealthRoster could deliver.
By September 2018, NSW Health should:
- Ensure that Local Health Districts undertake benefits realisation planning according to the NSW Health benefits realisation framework
- Regularly measure benefits realised, at state and local health district levels, from the statewide implementation of HealthRoster
- Review the use of HealthRoster in Local Health Districts in clusters 1 and 2 and assist them to improve their HealthRoster related processes and practices.
By June 2019, NSW Health should:
- Ensure that all Local Health Districts are effectively using demand based rostering.
Appendix one - Response from agency
Appendix two - About the audit
Appendix three - Performance auditing
Parliamentary reference - Report number #301 - released 7 June 2018
