About this report

Financial audit results of the NSW public universities’ financial statements for the year ended 31 December 2024.

Findings

Unmodified audit opinions were issued for all ten universities.

Six universities reported net deficits in 2024, compared to eight in 2023. Nine universities’ net results improved from 2023.

The main driver of revenue growth in 2024 was a 25.5% increase in fees and charges revenue from overseas students, due to increased enrolments of 18.9%. Revenue from domestic students increased by 12%, however, enrolment numbers remain below 2020 levels.

In 2024, revenue growth of 14.9% exceeded the 9.4% growth rate of expenses. However, universities are still recovering from the shortfalls experienced in 2022 and 2023 following financial disruptions caused by the COVID-19 pandemic.

Half of the universities show indicators of financial risk in the form of liquidity ratios of less than one and having less than three months of cash reserves to fund operating and financing activities.

The number of reported audit findings has decreased from 111 in 2023 to 98 this year. Most control deficiencies related to information technology /cyber security, governance, and payroll.

Universities are not consistently following their own procedures for recording cyber incidents, data breaches and privacy breaches.

Data breaches that required mandatory notification resulted in unauthorised access and disclosure of personal information, and mainly caused by phishing attacks and human error.

Recommendations

Universities should:

• finalise mitigating actions to address the risk of future wage underpayments and prioritise repayments to affected staff
• adequately prepare themselves to comply with the climate disclosure requirements under NSW Treasury’s reporting framework
• clearly document the requirements for business cases and post-completion reviews for capital projects
• comply with established processes when recording cyber security incidents and data breaches
• require staff to complete cyber security training regularly, include simulated phishing attacks and provide students with basic cyber security training
• create a central artificial intelligence (AI) inventory, establish and implement an AI policy and consider the benefits of establishing an AI strategy.

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About this report

The report presents the results of the local government sector financial audits for the year ended 30 June 2024.

Audit results

Unqualified audit opinions were issued for 124 (of 128) councils, 8 (of 9) county councils, and 11 (of 13) joint organisations.

Disclaimers of opinion were issued for Glen Innes Severn Council and the New England Weeds Authority.

Qualified audit opinions were issued for Snowy Valleys Council and Moree Plains Shire Council.

Timeliness improved as 88% of councils lodged their audited financial statements by the statutory deadline of 31 October (67% in the previous year).

Findings

Financial sustainability is a concern for some councils

There were 35 councils that met none or just one of the three key financial sustainability benchmarks. Sixteen councils have insufficient cash and investments, not subject to external restrictions, to meet three months of their expenses (excluding depreciation and interest).

Revenue growth lags expenditure growth after adjusting for inflation, resulting in negative growth in real terms.

About 40% of councils did not break even in 2023–24.

Cyber security remains a risk

Cyber security controls have improved, especially regarding cyber governance. However, control gaps were identified in cyber security training and risk management of third-party systems.

Recommendations

• The Department of Planning, Housing and Infrastructure should reduce councils’ financial reporting burden, and remove non-value-adding disclosures from financial statements.
• Councils should perform more robust month-end processes, quality reviews of financial statements and supporting working papers before they are submitted for audit.

Financial reporting is an important element of good governance. Confidence in, and transparency of, local government decision-making is enhanced when financial reporting is accurate and timely.

This chapter outlines the financial reporting audit results of councils, county councils and joint organisations.

Financial sustainability is the ability to meet current and future financial obligations without reducing essential services or borrowing money to fund successive operational deficits. This is achieved by ensuring that over the medium and longer term, revenue is sufficient to cover expenses, cash flow and risks are well managed, long-term financial planning is effective and sources of revenue are diverse.

Councils are required to prepare long-term financial plans to help ensure they remain financially viable. Benchmarks established by the OLG are used to assess past performance and indicate areas where councils are under pressure.

The graphs and tables presented in this chapter are prepared from councils’ financial statement data and in many cases represent averages of the metropolitan, regional and rural councils.

Governance is the framework of rules, processes and systems that enable organisations to achieve goals and comply with legal requirements. Good governance promotes public confidence in the integrity and effectiveness of councils’ systems and operations. A strong system of internal controls enables councils to operate effectively and efficiently, produce reliable financial reports, comply with laws and regulations, and support ethical government.

This chapter outlines our findings on internal controls and governance across councils, county councils and joint organisations.

Financial audits focus on the key internal controls and governance that support the preparation of financial statements. Breakdowns and weaknesses in internal controls can increase the risk of fraud and error. Our management letters report deficiencies in internal controls, matters of governance interest and unresolved issues to those charged with governance. These letters also include risk ratings, implications, recommendations and management responses.

This chapter focuses on the cyber security environment for councils, how they have assessed and responded to the relevant risks, and the extent to which they have implemented or plan to implement controls. We also focus on how councils educate and raise awareness of cyber security risks for those with access to their IT systems and information.

The Audit Office’s Annual Work Program

Each year, the Audit Office’s Annual Work Program includes an ongoing strategic assessment of the risks and challenges facing government. It outlines future focus areas for financial audits, as well as planned performance audit topics published as a three-year rolling program. We aim to inform the NSW Parliament, the public sector and the community about key risks we identify, as well as priorities and expected timeframes for delivering our work. This helps give our stakeholders the best opportunity to prepare for, and engage with, our audits.

Our financial audit program for local government includes:

• assessments of controls and governance on cyber security
• analyses of financial sustainability
• reporting of findings and recommendations.

Audits will target the efficient and responsible use of public resources

The Government Sector Audit Act 1983 provides that the Auditor-General may have regard to the wastage of public resources in the exercise of their functions and may deal with reports made by public officials about serious and substantial waste of public money. The Audit Office defines serious and substantial waste as the uneconomical, inefficient or ineffective use of resources, whether authorised or unauthorised, and which could result in a loss of public funds or resources.

Waste can result in an opportunity cost for councils where money could have been used for better purposes, or better spent on achieving the same purpose. Waste can also lead to higher costs being incurred to address failings in either procurement, budgeting or contract management.

Our audits may focus on whether procurement practices, budgeting and contract management have effectively reduced waste.

Our performance audit program for local government includes the following performance audits in progress.

Coastal management reforms

The coast is one of NSW’s greatest assets and is home to nearly 85% of the state’s population. The NSW Government has established a framework to manage the coastal environment in a sustainable way for the wellbeing of the people of NSW. The key policy instruments are the Coastal Management Act 2016, under which local councils in the coastal zone prepare coastal management programs, and the State Environmental Planning Policy (Resilience and Hazards) 2021.

The Department of Climate Change, Energy and Water (DCCEEW) and the DPHI oversee and facilitate implementation of the coastal management framework by local councils.

This audit will answer the following questions:

• Are the DCCEEW and the DPHI effectively overseeing and facilitating councils’ implementation of the coastal management framework?
• Have councils effectively developed plans and priorities for coastal management?

Long-term financial planning

Sustainable financial management is a significant risk and priority for the local government sector. Under the legislative and policy requirements, all NSW local councils must prepare and adopt a long-term financial plan. This plan should reflect and inform decision-making for important processes like longer-term strategic planning, and immediate and short-term budget processes.

This audit will assess whether selected local councils have established effective and compliant long-term financial plans that promote financial sustainability and reflect their communities’ priorities for services and assets.

Appendix 1 – Response from the Office of Local Government within the Department of Planning, Housing and Infrastructure

Appendix 2 – Status of previous recommendations

Appendix 3 – Status of audits

Appendix 4 – Council liquidity

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About this report 

The land titles registry is a collection of registers established under the Real Property Act 1900 and related legislation. It is the source of truth for land and property ownership in NSW and underpins significant economic activity.

The registry is owned by the NSW Government. From 1 July 2017, a private operator has operated and maintained the registry under a 35-year concession granted by the NSW Government.

The Office of the Registrar General is the regulator of the private operator’s activity under the concession. It is a business unit in the Department of Customer Service.

This audit examined the effectiveness of the regulator in overseeing and monitoring the operation and maintenance of the registry to ensure its integrity and security.

Conclusion

The Office of the Registrar General has implemented an effective system and supporting processes to oversee and monitor the integrity and security of the land titles registry.

However, the audit found opportunities for the Office of the Registrar General to improve how it conducts its regulatory functions.

Recommendations

The audit recommended that the Office of the Registrar General should:

1. develop and publish its approach to exercising its regulatory functions and powers
2. publish a regulatory charter to ensure greater regulatory transparency
3. review the skills and capabilities required to regulate the land titles registry
4. ensure greater clarity on the rights to use data, and the application of privacy legislation
5. ensure compliance with the NSW Cyber Security Policy, including the requirements relating to third parties
6. perform an audit of the subscriber compliance process.

The land titles registry is a collection of registers that record property-related information

The registers collectively referred to in this report as the ‘land titles registry’ include the:

• Torrens Title Register – the primary register for land held in NSW under the Real Property Act 1900
• Register of Plans – comprises plans, that is a representation of a property’s boundary, submitted for registration by registered surveyors
• General Register of Deeds – established under the Registration of Deeds Act 1825, this was the first land register in NSW recording deeds in the system used prior to the introduction of the Torrens Title System, and includes the register of Causes Writs and Orders, Bills of Sale, Register of Resumptions, Powers of Attorney and other miscellaneous deeds
• Central Register of Restrictions – where participating organisations maintain up to date information about possible, or actual, interests they hold against NSW properties (for example for heritage or infrastructure reasons).

The 35-year concession for a private company to operate and maintain the land titles registry

In April 2017, the NSW Government granted a 35-year concession² to a private operator to operate and maintain the titling and registry services business area of NSW Land and Property Information (LPI). The private operator paid the State $2.6 billion for the concession, as well as committed to pay $8 million (indexed) annually in consideration for the ORG to perform the regulatory and enabling functions contemplated by the concession deed.

The private operator has the right to generate revenue by selling land information products and services, including through search and subscription fees, as well as by charging administrative fees, such as for registering land titles and other transactions. Each year, the operator facilitates over four million searches on titles and images, records 900,000 updates to land title records and creates 50,000 new titles.

NSW Treasury managed the bidding process for the concession and prepared the enabling legislation, the Land and Property Information NSW (Authorised Transaction) Act 2016. The concession deed was executed between the Minister for Finance, the Registrar General and the successful bidder.

The successful bidder was Australian Registry Investments (ARI), which in turn established NSW Land Registry Services (NSW LRS or ‘the private operator’) as a private, single purpose company to operate and maintain the land titles registry. ARI is a consortium of institutional investors and superannuation funds, which at the time of this audit included Aware Super, Macquarie Infrastructure Fund and UTA Registry Investments Trust.

The NSW Government retains ownership of the land titles registry, including the information it contains.

The land titles registry is a critical information asset for NSW as it is the basis of private ownership of property, which in turn supports property-related economic activity. In 2016, it was estimated that the land titles system underpinned over $130 billion dollars of economic activity in NSW each year. As of 2023, the total value of land in NSW was approximately $2.8 trillion.

The land titles registry is a ‘crown jewel’ IT asset under the NSW Government Cyber Security Policy. The land and titling information maintained by the private operator is provided to other government departments and agencies, such as Revenue NSW, Spatial Services and the Valuer General.

A key assurance provided by the NSW Government when granting the concession was that the ORG would be responsible for the regulation of the performance of the private operator under the concession deed. The ORG is a business unit in the Fair Trading and Regulatory Services division of the Department of Customer Service (‘the department’). The Registrar General is a statutory position and has a range of responsibilities, including under the Real Property Act 1900. The establishment of an ‘office’ to support the Registrar General accompanied the granting of the concession in 2017.

The ORG is not a separate auditable entity under the Government Sector Audit Act 1983. As such, the auditee for this performance audit is formally the Department of Customer Service.

NSW Treasury is also an auditee as it managed the scoping study, bidding process, legislation development process and the development of the concession arrangements. NSW Treasury does not have an ongoing role in the routine oversight and monitoring of the land titles registry. The audit has made no recommendations for NSW Treasury and the agency has elected not to provide a formal response to the audit.

Objectives of the concession

The concession deed includes a statement of the Government’s objectives for the concession. These objectives include achieving the following:

a) maintaining the security, integrity, performance and availability of the registers, core assets and core services

b) ensuring the registers are accurate and up-to-date, including that they accurately reflect all registered documents, plans and other matters that are required to be recorded in them

c) maintaining the confidence of the affected parties and the NSW public in the registers and the core services

d) promoting improvements, innovation and increased efficiency, and utilising greater expertise and investment in technology, in the delivery of the core services

e) minimising Torrens Assurance Fund Payments and

f) protecting current competition and the opportunities for future competition in the supply of downstream services by ensuring fair, transparent, predictable and non-discriminatory dealing by the operator with customers and prospective customers.

The deed also includes the private operator’s acknowledgment and agreement that its achievement of these objectives is of critical importance to NSW.

Regulation of the land titles system, including under the concession deed

The ORG has described its role as ‘... a regulator, advisor and litigator, working to ensure the integrity of NSW’s land title system’. While the ORG directly regulates the private operator of the land titles registry under the concession deed (as well as in accordance with any applicable legislation and delegations made by the Registrar General), the system of land titles is a complex one, with many different participants. These participants include:

• ELNOs – which provide the means for transacting parties to collaborate electronically on the preparation of registry instruments; there are currently two ELNOs operating in NSW, although PEXA is by far the dominant market participant compared to its competitor, Sympli
• subscribers – a person or business authorised to complete electronic conveyancing transactions using an ELNO, such as financial institutions, solicitors and licensed conveyancers
• government agencies – selected NSW government agencies and local governments are authorised to obtain information from the system, including Revenue NSW, Valuation NSW, the Surveyor General and local councils
• registered surveyors – who are responsible for conducting survey plans of property boundaries and lodging those plans for registration with the private operator
• information brokers – there are 12 wholesale information brokers with which the private operator has entered into agreements under the concession deed to provide access to NSW titling information held by the private operator
• users of the Central Register of Restrictions – including selected NSW government agencies and non-government entities, such as utility companies providing electricity, water and gas and the Commonwealth Department of Defence.

The data flows within the system are complex and interdependent. Many of the participants are critical to maintaining the integrity and security of the land titles registry. Each class of participant has different governance arrangements and controls for their participation. As shown in Figure 1, the ORG regulates and oversees, to varying degrees, this system of multi-layered rules, relationships and arrangements, with the concession deed between the NSW Government and private operator being at the core of the system.

In granting the concession, the government committed to a ‘robust regulatory regime’ and a ‘tight regulatory framework’ overseen by a ‘strong regulator’

In granting the 35-year concession to the private operator, the NSW Government committed to ensuring that the monopoly functions of providing titling and registry services would be ‘appropriately regulated’.

In commencing the process of granting the concession, the NSW Government set out what it described as a ‘robust regulatory regime’ that would apply to the concession. Of particular relevance to this audit, the government also established that:

• the Registrar General would monitor and enforce the operator’s compliance with regulatory requirements, including the terms of the concession deed
• the Registrar General would have a general power to direct the private operator to perform tasks ‘… in the public interest’.

In the September 2016 second reading speech accompanying the passage of the enabling legislation for the concession through NSW Parliament, the then Treasurer further highlighted that:

• the service standards defined in the concession would include ‘… a penalty regime should the private operator fail to comply’
• the Registrar General would have regulatory oversight of ensuring that the private operator adopted ‘appropriate data security and fraud detection practices’.

The second reading speech also highlighted the role of the Registrar General in overseeing how other participants in the land titling and registry system should perform. This included approving the standard terms on which the concession holder is to deal with its wholesale customers and intermediaries (including ‘subscribers’ to the operator’s services, such as banks, conveyancers and solicitors).

In January 2017, the then Registrar General explained his view that the arrangements for the concession would ensure that the ORG would be able to provide an ‘… independent, credible, stable and well mandated regulatory framework [that] will give confidence to customers and the business itself’. He further explained that:

On 6 April 2017, the then Registrar General further said that his office would follow a ‘modern regulatory approach’, which would include a ‘… focus on material things – where an operator’s actions are not in the spirit of the deed’s objectives’. The audit did not find evidence of how the ORG assesses deviation from the ‘spirit of the deed’s objectives’.

On 12 April 2017, the Premier and the Treasurer jointly announced the successful bidder for the concession. In doing so, their media release drew attention to the:

• ‘tight regulatory framework’
• ‘rigorous legislative and contractual safeguards around the concession to ensure the continued security of property rights and data’
• establishment of a ‘… new external regulator – the Registrar General – to enforce [the operator’s] performance during the concession, with power to monitor and audit performance, and even resume control of the LPI business if required’.

The Registrar General was not a newly established statutory position, although the role was provided with new regulatory functions and powers under the concession deed.

The task of overseeing and monitoring a private company operating and maintaining a monopoly service that uses government-owned systems (and where title is government-guaranteed) poses new and complex challenges for a regulator like the ORG, which previously performed stable and mature administrative and regulatory functions.

The ORG has made only limited use of the compliance and enforcement tools available to it under the concession deed

Seven years into the concession, the ORG is still in the relatively formative stages of settling its approach to the use of its regulatory powers under the concession deed.

The ORG has an experienced and highly qualified workforce, with substantial capability in areas such as property law, as well as a directorate focused on cadastral integrity. It has substantial capacity to administer its longstanding and relatively wide-ranging pre-concession responsibilities. This includes actioning matters under the Torrens Assurance Fund, conducting compliance audits of property plans prepared by registered surveyors and providing advice to government on relevant policy and reform.

In comparison to these longstanding, well-organised and well-understood responsibilities outlined above, the ORG is still forming its approach to exercising the full spectrum of its compliance and enforcement powers under the regulator–operator model. In some instances, this has limited its effectiveness in resolving regulatory issues raised later in this report.

The ORG has eight regulatory compliance and enforcement options available to it under the concession deed and the enabling legislation. The options are listed below, ranked according to their seriousness and frequency, with step-in and termination powers being both the most serious and least likely option to be applied:

• raise issues at governance forums
• informal letters escalating to formal letters
• approvals with conditions attached
• audit and review powers
• financial penalties for breach of service levels
• reserve power directions
• corrective action plans
• step-in and termination powers.

These options can be specific to circumstances and not all are available for all matters. For example, the ORG does have not a broad-based power to issue financial penalties for performance gaps except where specified in the concession deed.

Since the commencement of the concession, most issues with the private operator’s performance have been addressed without escalation beyond the exchange of formal letters. However, this approach has not always led to adequate or timely resolution.

A number of longstanding issues have been raised by the ORG regarding plan examination and subscriber compliance audits, as set out in section 5 of this report. Despite their significant importance to the integrity of the land titles registry and the potential for errors with financial and personal impacts on customers, these matters have not generally been escalated beyond discussions or letters.

The ORG does not have a formalised approach to how it will routinely and effectively exercise its compliance and enforcement functions and powers

The audit assessed whether the ORG has a clear statement of its regulatory posture or its approach to regulation on which to base its regulatory decision making. In its ‘Regulation insights’ report (March 2024), the Audit Office of NSW highlighted that regulators need clear escalation thresholds and enforcement policies to promote credible and proportionate regulatory actions. The concession deed sets out that the materiality of service level breaches is determined based on the operator’s culpability, the impact on the customer and whether the breach has occurred previously.

The ORG lacks a clear approach to how it would effectively exercise the regulatory tools available to it under the concession, such as:

• requiring ad hoc reports that are prepared in a timely manner and to an adequate standard
• issuing penalties for non-compliance
• conducting its own audits
• conducting a major review of the concession (the prospect of which was raised by the ORG with the private operator in 2022 but has not proceeded).

This is despite assurances (as described earlier) from the NSW Government at the commencement of the concession that these tools would be available and used by the regulator.

In September 2023, the ORG developed an initial approach to the use of concession deed levers to provide a ‘practical and proportionate approach’ to exercising its monitoring and oversight functions for the concession. However, neither these principles, nor any alternative, have been drawn upon to inform a codified regulatory or enforcement policy. The ORG advised that it is developing an approach to escalating matters through the hierarchy of available regulatory and enforcement tools.

The ORG is spending less on its regulatory functions than the fee paid by the private operator to support those functions

Under the concession, the private operator provides an annual indexed fee to fund the services delivered by the regulator. The concession deed says that this fee is paid ‘… in consideration for the [Registrar General] performing the regulatory and enabling functions contemplated by this Deed’.

In 2017–18, $8 million was allocated in the NSW Budget ‘… to be spent on regulating the operator of the NSW land title and registry system, ensuring its security and stability while enhancing service levels’.

In 2023–24, the department requested from NSW Treasury a budget of $8.26 million for the ORG, ($260,000 more than the 2017–18 allocation). This was also around 25% less than the mandatory fee paid by the private operator under the concession deed, which was $10.49 million. The balance of the fee paid by the private operator is retained by the NSW Government in the Consolidated Fund for general purposes.

The ORG undertakes a range of policy and reform projects that it tracks separately from its ‘business as usual’ activities. Not all these projects were envisaged when the concession was granted. For example, the interoperability project to support the introduction of national competition in the electronic lodgment network (ELN) is a substantial and complex national reform that has been led by the ORG on behalf of NSW.

NSW’s contribution to this project-based work is undertaken effectively within the same budget parameters and staffing as established when the concession was granted. At the time of the audit, the ORG’s project workplan includes 32 distinct projects, with one additional recent project being reclassified as ‘business as usual’ and two previous projects put on hold. The project plan includes activities relating to significant government reforms such as interoperability and digital survey plans reform, as well as matters that are regulatory in nature or which support regulatory priorities.

The audit heard from some stakeholders that the ORG’s focus on project-based work, including government reform initiatives, risks reducing resources available for its functions to monitor and oversee participants in the land titles registry system to the degree anticipated by government when the concession was granted.

As discussed in sections 6 and 9 of this report, this audit found that the ORG has capability and capacity gaps in specialist skills, particularly in strategic IT and regulatory policy and implementation. It is beyond the scope of this audit to consider whether these gaps could be addressed within the existing funding or whether the ORG required a revised budget that more closely aligns with the fee paid by the private operator.

The complexity of the land titles system limits the extent to which the ORG can oversee potential integrity and security risks on a whole of system basis

The ORG has varying approaches, powers and functions to regulate different participants in the land titles system, the complexity of which is increased by various third-party users and reseller arrangements that apply to land titles data. As discussed later, this complexity limits the ORG’s direct monitoring and oversight of potential risks or non-performance by system participants other than the private operator.

Table 1 provides further information on the regulatory arrangements for stakeholders accessing and informing the land titles registry.

Source: Audit Office analysis.

The ORG does not have a longer-term strategic plan for proactive compliance activities

Since December 2018, the ORG has issued the private operator an annual letter setting out ‘joint priorities’ for the forward year. While each letter is signed and issued by the Registrar General, the private operator has the opportunity to comment on proposed ‘joint’ priorities.

The annual priority letters are not issued under the terms of the concession deed and are statements of the regulator’s expectations, rather than binding obligations on the operator. The priorities are derived primarily from internal staff consultation, but also consider external stakeholders, existing or emerging reform topics, and progress achieved in meeting previous priorities. While the letters set out annual priorities, they are also intended to ‘… track progress on long-term objectives’.

These annual priority letters are effective in demonstrating a considered approach to articulating the regulator’s expectations of the private operator for that period. The ORG sets out specific ‘success measures’ (usually in the form of milestone progress or completion dates) for how priorities will be assessed.

The priorities set out in the annual letters are subsequently discussed and tracked at various governance meetings, as required under the concession deed. However, there have been few consequences if the private operator does not meet its priorities. Over the course of the concession, a number of reoccurring priorities point to intractable issues, about which the ORG has been dissatisfied. This has included matters that go directly to the integrity of the registers, such as the examination of submitted plans and subscriber compliance (particularly as assessed by the subscriber compliance examination process).

Until recently, the ORG did not include its own annual priorities in these letters. Rather, yearly priority letters to the private operator referenced government or joint priorities. In comparison, the most recent priority letter for 2025 provided a clearer articulation of the rationale between the annual priorities and the intended outcomes of the concession deed. The audit did not source evidence that the ORG set longer-term or strategic priorities for how it will proactively exercise its regulatory functions, such as a forward program of compliance activity, ad hoc reviews or audits.

The ORG ensures that the private operator meets its obligations to provide service level performance reporting

The concession deed provides for extensive performance reporting by the private operator against defined service levels or KPIs. While government statements at the commencement of the concession suggested there were 55 KPIs, this is inaccurate as it includes numerous sub-measures. Currently, 14 service level KPIs are reported quarterly on the ORG’s website. The publishing of service level performance has been explained by the ORG as bringing ‘… a new level of transparency to the NSW’s land titles registry’ to better hold to account the private operator and be a feature of the new regulator–operator model.

The private operator exceeded all published services for each of 24 consecutive quarters from the start of the concession until January–March 2024. This may suggest that the existing published service levels are not sufficiently challenging to support continuous improvement in the future. In addition, as discussed below, not all service level KPIs are published.

The ORG has proposed a review of service levels to identify those no longer relevant. This considers the substantial reforms to the land titles registry system have occurred since the concession commenced, including the move to 100% electronic conveyancing. Stakeholders also expressed a view to the audit that the existing published service levels are too focused on time measures, and do not sufficiently address quality and client satisfaction. It was also understood between the regulator and private operator early in the concession that ‘… as we move forward, customer behaviour will change, along with what is important to customers’.

The ORG has granted penalty relief for service level breaches, although there has been no public transparency about these decisions

There have been instances where the ORG has elected not to issue financial penalties where the private operator breached required service levels. While this discretion is a matter for the regulator to exercise, public transparency is lacking as to the underlying breach or the penalty decision. Service levels not achieved are not included among those published on the ORG’s website.

For example, from October 2020 to September 2023, the ORG granted penalty relief for 33 breaches of the private operator’s obligation to ensure specific data feeds to NSW Government agencies and local councils occurred within specified timeframes.³ A series of data feed failures in a legacy IT system was the catalyst for the private operator’s failure to meet the service level. The audit notes that the private operator’s interpretation of the relevant service level varied from the ORG’s interpretation, and suggested a smaller number of breaches than the 33 assessed by the regulator.

This penalty relief was initially granted in October 2020, then extended in May 2022 until September 2023. The ORG granted the penalty relief:

• in recognition of the private operator’s commitment to upgrade the legacy IT system causing the data feed failures
• because the ORG considered the impact on affected customers to be negligible.

As early as December 2019, the ORG had identified to the private operator that upgrading the legacy IT system was a priority. In August 2020, the ORG described the upgrade as ‘… critical to ensure accurate and complete data is provided to customers’ and asked the private operator to ensure that it is completed ‘… without further delay’.

The ORG did not extend its penalty relief beyond 30 September 2023. No breaches were reported to have occurred after this time. The upgrade to the legacy IT system is expected to be completed no earlier than January 2025.

The service level that was not met on up to 33 occasions is not included among the 14 service levels reported publicly on the ORG’s website. There was no public transparency about the operator’s non-compliance, or the ORG’s decision to provide penalty relief to the operator. The ORG did not publish a notice that it had afforded penalty relief to the operator, nor was this mentioned in the department’s annual report. The ORG’s view is that publication of these service level breaches was not required as they only affected government agencies.

This audit has not assessed the merits of the ORG’s evaluation of the service level breaches or its decision to extend penalty relief for non-compliance. The concession deed allows the ORG to make these types of decisions. However, when the concession commenced, the NSW Government stated that a consumer benefit of the concession would be ‘increased transparency’ due to the regulator being able to:

Prior to the concession, it was already the Registrar General’s practice to publish statistics about claims and payments under the Torrens Assurance Fund in the department’s annual reports. Since the concession, the only opportunity for increased transparency is through reporting on service levels and breaches, including about how the ORG responds to breaches, such as by extending penalty relief over extended periods of time.

When the concession commenced, the NSW Government also highlighted that, as the regulator, the ORG would have a range of regulatory options including ‘… a penalty regime should the private operator fail to comply’. The community and stakeholders were not told that the ORG could choose to waive penalties in response to breaches. Nor were the community and stakeholders told the circumstances in which such relief might be extended. This underscores the importance of the ORG being publicly transparent when it makes these decisions, including to explain their justification, so as to ensure that community trust and confidence in the regulator is maintained.

The ORG’s monitoring and oversight of how the private operator manages legacy IT systems is discussed further in section 6.

The detailed terms of the concession are not publicly available and there is a statutory presumption against their disclosure under the Government Information (Public Access) Act 2009

Much of the substantive detail about the regulatory requirements for granting the concession is contained in the concession deed document that was executed between the NSW Government and the private operator. This document is not public. Moreover, the enabling legislation for the concession included an amendment to the Government Information (Public Access) Act 2009. This amendment established that it is to be conclusively presumed that there is an overriding public interest against disclosure of information contained in any document ‒ including the concession deed ‒ prepared for the purposes of, or in connection with, the authorised transaction unless approved by the NSW Treasurer. NSW Treasury was not able to provide an explicit reason why this provision was included in the enabling legislation, other than to note that a similar provision was included in the 2015 electricity network transaction enabling legislation.

Key elements of the concession deed were modelled on the arrangements for the franchising of the Sydney ferries service, including:

• the model for service levels and penalties
• the transfer of administrative powers and functions to the operator
• the approach of adopting minimalist legislation supported by a detailed contract.

This framework is also similar to that adopted for the Greater Sydney Bus Contract. Both contracts (ferries and buses) are publicly available on Transport for NSW’s website (with redactions where necessary to maintain commercial confidentiality).

During consultation on the enabling legislation for the concession, external stakeholders noted that the delegation of key provisions to a confidential document detracts from promoting transparency and community confidence in the regulatory arrangements for the concession.

The ORG has not published a ‘regulatory charter’ as provided for under the concession deed

Clause 29.1(b) of the concession deed provides that the ORG may publish a ‘regulatory charter’ that contains:

• the division of responsibilities between the ORG and the private operator
• ring fencing and non-discrimination requirements
• dispute resolution processes
• the ORG’s rights in relation to reserve power directions
• the ‘customer terms’
• obligations in respect of ELNOs
• complaint handling arrangements.

The ORG has not published a regulatory charter, although some of the content envisaged by clause 29.1(b) is available across the ORG’s website. For example, the ORG’s website provides information about how individuals may apply to have a decision of the private operator reviewed by the ORG.

The ORG reviews an annual customer satisfaction survey conducted by the private operator, which has reported increased rates of satisfaction over the term of the concession

Regarding other measures of performance, the concession deed requires the private operator to conduct an annual customer satisfaction survey. The private operator has reported to the ORG improved levels of customer satisfaction with its services. While the audit has not assessed the survey data, the private operator has reported in its most recent survey that 71% of respondents were satisfied, up from around 50% at the start of the concession. Over the duration of the concession to date, these surveys have been run both internally by the private operator, and more recently by an external survey provider commissioned by the operator.

The private operator is also required to submit at regular intervals (annually or up to 18 months) updates to its technology roadmap and business plan. These documents are assessed by relevant subject matter experts within the ORG or the wider department and feedback is provided to the private operator on their adequacy. For example, a range of annual reporting requirements for FY23 relating to fraud and crime prevention, error reports, business continuity and incident management, and the technology roadmap were provided to Department of Customer Service IT for review.

The ORG has implemented an effective governance structure to support its regulation of the land titles registry system

The ORG has implemented a series of forums with the private operator to discuss strategic and operational matters. As required by the concession deed, these are:

• a Joint Consultation Committee (JCC)
• an Operations and Performance Committee (OPC)
• an Information Technology sub-committee (ITC).

The concession deed specifies that this governance framework is intended to:

• guide and monitor the performance of the concession
• oversee compliance with specified service levels
• resolve issues as required
• establish a framework to maintain an effective relationship between key personnel of the ORG and the operator.

These committees have clear terms of reference, which have been subject to review. The ORG has demonstrated, through meeting papers and minutes, that these committees meet regularly, consider substantive matters as envisaged by the concession deed, and are effectively administered and recorded.

The ORG has also established a stakeholder forum that includes senior representatives of key stakeholder groups. This forum is intended to foster multilateral communication between the regulator, operator and stakeholders. Some stakeholders expressed the view to the audit that the focus of this forum has evolved to facilitate feedback and updates from the regulator and operator, rather than provide opportunities for industry stakeholders to ask questions or raise issues. Notwithstanding, the ORG did provide evidence that issues raised by stakeholders at this forum were subsequently escalated to JCC or OPC meetings.

The ORG also has a series of bilateral regular engagements with key stakeholders, as well as specialist or project based working groups with the private operator and other system participants.

The ORG appropriately manages potential conflicts of interest

The ORG has recognised that the separation of the former Land and Property Information unit of the Department of Customer Service into separate regulator and operator entities meant that staff working in each entity may have close pre-existing professional and personal relationships. This heightens the need to identify and manage potential conflicts of interest to ensure credible and transparent regulation.

The ORG manages conflicts of interest by following applicable department policies. The audit reviewed conflict of interest declarations made by all ORG managers at NSW public service clerk levels 11/12 and above for the past three years. The audit found that declarations had been submitted and any conflicts addressed.
 

³ The breaches were of the ‘Core Data for Government Agencies Service Level’, which measures the number and availability of Core Data supplied to certain Government agencies that the operator successfully provides within required timeframes and hours of availability.

The land titles registry system is multi-party, with different powers and tools available to the ORG for each party. In summary, the ORG can address non-performance to varying degrees over:

• the private operator, through the multi-tiered framework described under section one of this report
• the ELNOs, which may be subject to suspension or termination (neither of which are practical options if the system is to function), as well as compliance examinations, remedial directions and application to the NSW Supreme Court for financial penalties
• authorised subscribers, who may have their access to the ELN suspended or cancelled (this regime is currently under review to broaden the Registrar General’s enforcement options)
• registered surveyors, who may be referred to the Board of Surveying and Spatial Information (BOSSI) for professional disciplinary action.

The number of claims and the total annual payments under the Torrens Assurance Fund have declined since 2014–15

The Torrens Assurance Fund (TAF) is a statutory compensation scheme designed to compensate people who, through no fault of their own, suffer loss or damage as a result of the operation of the Real Property Act 1900. This loss or damage can be a result of an error, misdescription or omission in the register. When granting the concession to the private operator, the government gave the assurance that the TAF would continue to operate and be administered by the ORG. The ORG has a longstanding function to receive and determine claims made under the TAF.

Relative to the number and value of matters addressed by the land titles system, the number of claims and total payments paid under the TAF is relatively small. As shown in Figure 2, between 2014–15 and 2022–23, the number of claims varied between seven and 40, while the payments paid under the TAF varied between $93,032.21 and $3,168,143.

This audit has focused on two primary processes when considering how the ORG obtains reasonable assurance about the quality of information held on the registers maintained by the private operator. These are:

• the examination and registration of plans by the private operator
• the registration of dealings by the private operator.

The concession deed requires that the private operator, in undertaking these functions, must, among other things, act in good faith, as well as act reasonably and on reasonable grounds. In each case, plans and documents must be entered promptly and accurately onto the relevant register.

These two processes and their role in supporting the integrity of the land titles registry are discussed in turn below.

The land titles registry is one of the department’s IT ‘crown jewels’

As the principal department for the ORG, the Department of Customer Service has identified the IT system supporting the land titles registry as a ‘crown jewel’ under the NSW Government Cyber Security Policy. Classification as a crown jewel provides the land titles registry with priority within the department when investment, fixes, patching and resource allocation are considered.

The ORG receives dedicated cyber security support from the department’s Office of the Chief Information Security Officer in the form of an identified business support officer. During the audit there did not appear to be a similar dedicated resource from the department’s general ICT division. The ORG has stated that the lack of dedicated support in this area risks that ‘institutional technology expertise is not built up or retained within Government to effectively monitor the [operator’s] management of this asset’.

However, from October 2024, DCS ICT has provided the ORG with a dedicated business partner who attends monthly meetings to discuss ICT matters and attends ICT Committee meetings on an as-needed basis.

While the IT system supporting the land titles registry is a critical IT asset, it is unclear how roles and responsibility are assigned for ensuring compliance with the NSW Government Cyber Security Policy

The NSW Cyber Security Policy provides guidance and mandatory requirements for agencies relating to cyber security. The ORG could not clarify whether it, or the department more widely, is responsible for ensuring compliance with the NSW Cyber Security Policy, as well as the role expected by the private operator. This creates a potential risk that protections contained in the policy will not be extended to the land titles registry and that there may be gaps in accountability.

The 2023–24 version of the policy contains three requirements relating specifically to crown jewels:

• agencies to identify and document external upstream and downstream dependencies of enterprise ICT (including cloud), operational technology and Internet of Things assets (specific requirement 1.6.4)
• agencies must assess and identify crown jewels and classify systems (mandatory requirement 1.7)
• agencies must conduct periodic reconciliation of data assets against data retention requirements (specific requirement 1.8.2).

The department appears to have complied with mandatory requirement 1.7, in that it has identified the land titles registry as a crown jewel. However, it explained that it did not have visibility or control over the upstream and downstream systems used by the private operator. Accordingly, to the extent that it may be responsible, the department acknowledged that it does not comply with specific requirement 1.6.4. While it was not specifically examined, the audit did not receive any evidence that the department complied with specific requirement 1.8.2.

While the department is not fully compliant with the requirements of the NSW Cyber Security Policy, its view is that:

• the concession deed requires the private operator to maintain technical and organisational measures that are no less rigorous than those that applied prior to the concession
• the cyber security measures taken surpass those that would apply under Department of Customer Service policies
• the regulator retains oversight of the private operator’s compliance with its requirements under the concession.

Notwithstanding these assurances, neither the department, nor the ORG itself, provided any evidence demonstrating that the protections provided by the private operator have been reconciled against all the requirements of the NSW Cyber Security Policy, including the specific clauses that apply to crown jewels. As discussed below, neither the department nor the ORG have considered the implications of the private operator being deemed a ‘third-party service provider’ under the NSW Cyber Security Policy.

The NSW Cyber Security Policy allows that not all its requirements must be uniformly implemented across the agency. However, where an agency seeks an exception to the policy, it should ensure that the exception is ‘… documented and approved by an appropriate authority through a formal process’. The ORG did not provide evidence that any exception to the requirements of the Cyber Security Policy (such as non-compliance with specific requirement 1.6.4) had been documented and approved.

The ORG has determined that the private operator is a third-party service provider under the NSW Cyber Security Policy, although the implications of this have not been fully examined by the ORG or the department

During this audit, in November 2024, the ORG obtained advice from Cyber Security NSW that the private operator is a ‘third-party service provider’ under the NSW Cyber Security Policy. The policy has a number of specific requirements relating to third-parties.

Mandatory requirement 1.10 of the NSW Cyber Security Policy requires agencies to ‘identify and manage third-party service provider risks, including shared ICT services supplied by other NSW Government agencies’.

Section 6.12 of the Cyber Security Policy provides agencies with guidance on their responsibilities for managing the cyber security requirements and risks posed by third-party providers to assist agencies implement mandatory requirement 1.10. This section includes responsibilities such as:

• ensuring third-party risks are considered in enterprise risk management processes
• conducting regular management of third-party risks through ongoing risk-based reviews to verify compliance with contractual agreements and security measures.

The designation of the operator as a third-party service provider to the ORG is a recent classification and the implications of this have not been fully considered by the ORG or the department.

The ORG has ensured that cyber security obligations are included in the private operator’s arrangements with its own contractors

The audit also considered what assurance the department or the ORG has obtained regarding the adequacy of cyber security provided by contractors to the private operator. Clause 39 of the concession deed establishes that:

• the private operator must ensure that its third-party service providers and subcontractors comply with all terms of the deed relevant to the operator’s obligations, including to maintain adequate cyber security
• the private operator is liable for all acts and omissions of its subcontractors.

The ORG and the private operator have agreed to a process whereby the latter notifies the regulator when new subcontractors are engaged and provides assurance that subcontractors comply with the requirements of clause 39.

The ORG has also approved a table of clauses that must be included in any subcontracting agreements that the private operator makes with its own third parties. These clauses include obligations for adequate cyber security.

The ORG has ensured security testing is conducted on the core systems and services of the land titles registry

The concession deed imposes requirements on the private operator relating to the security of the land titles registry, including that the private operator must:

• ‘… establish, maintain, enforce and continuously improve reasonable technical and organisational measures’ across a range of specific areas aimed at protecting data and preventing unauthorised access and use
• maintain technical and organisational measures that are no less rigorous than those the land registry was subject to prior to the concession
• engage in third-party audits in relation to its compliance with the applicable information security standard (ISO 27001), and provide these reports to the ORG.

The ORG has relied on subject matter expert advice from within the wider department to determine that the private operator is satisfying these requirements, including by providing third-party certification of its compliance with ISO 27001. The ORG provided evidence of this certification.

Clause 25.1 of the concession deed requires that the private operator must, to the extent reasonably requested by the ORG, test and evaluate the performance of core systems and services, which may include security testing such as ‘… vulnerability testing, penetration testing, manual configuration tests and reviews, self-assurance testing and other vulnerability and threat assessment testing’. This testing and evaluation has included assessment of the operator’s controls relevant to the System and Organisation Control 2 (SOC 2) Security and Availability Trust Services Criteria.

The ORG has ensured that the private operator has completed ISO2001 certification and has conducted SOC 2 assessments. Relevant materials are reviewed by subject matter experts from both the ORG and broader department and discussed at ITC meetings. This audit reviewed a sample of SOC 2 documents and found no significant weaknesses.

Consistent with clause 25.1 of the concession deed, the ORG has also required the private operator to conduct a program of penetration tests on its systems. Penetration testing is a useful mechanism for assessing the potential vulnerabilities of an IT system. However, penetration testing does not offer assurance of the security of a system. Reasonable assurance can only be derived by the effectiveness of security controls, including those implemented to address any vulnerabilities identified by penetration testing.

The ORG assesses and monitors how the private operator responds to vulnerabilities identified by its penetration testing program. The ORG reviewed test reports and discussed these with the private operator during ITC meetings. However, the effectiveness of this monitoring has been hampered by the ORG’s lack of a central registry of issues or vulnerabilities. This limits the ability of the regulator to easily monitor trends and risks or review historic issues.

The concession deed does not specify minimum acceptable standards for the conduct of penetration testing or other forms of system test. Moreover, it is the private operator that is responsible for conducting the testing. When the ORG reviews the results of the operator’s security testing, it also has the opportunity to assess the adequacy of the design and conduct of the tests (including to ensure that the scope and timing of each test provides adequate assurance that vulnerabilities have been identified).

However, as security testing is a requirement of the concession deed, the ORG – as the regulator and consistent with regulatory good practice – should be clear about its expectations for what constitutes appropriately rigorous test methods. These expectations should be effectively and proactively communicated to the private operator, and not left to be raised in retrospective review comments.

The ORG has become increasingly focused on potential risks posed by aging legacy IT systems and how any risks should be mitigated

When granting the concession, the NSW Government’s stated expectation was that the private sector would ‘… have strong incentives to invest in new technology, resulting in significant improvements to the system, and benefits for consumers’. There was an expectation at the outset of the transaction that the successful bidder would, at some time, ‘refresh’ the existing legacy IT systems on which the land titles system operates. While unspecific at the time, a system refresh could include either upgrade or replacement.

However, it was not clear in the bidding documents exactly when and how a successful bidder would be required to address the risks from legacy IT systems. The Information Memorandum provided by NSW Treasury to potential bidders noted that the expected response of the successful bidder:

Commitments to replace legacy systems were included in the private operator’s business plan and technology roadmap submitted as part of its bid, with the business plan committing to the ‘decommissioning of legacy systems by the end of 2019’.

The private operator has ‘de-risked’ some parts of the legacy environment, including the Historical Land Records Viewer and its website, and is currently working (albeit to a delayed schedule) to upgrade a key system, the Integrated Property Warehouse (IPW). However, the replacement of legacy systems ITS (Integrated Titling System) and DIIMS (Document and Integrated Imaging Management System) was removed from the operator’s 2023–24 technology roadmap. An external strategic technology review commissioned by the ORG in 2023 recommended to the regulator that the operator should be asked to re-include this work in future roadmaps. This was so that a ‘complete risk assessment and project complexity, cost and delivery schedule’ could be understood.

While the matter had been raised previously, it appears that since 2023, the ORG has become increasingly concerned about the private operator’s management of legacy IT systems. The ORG has noted that the private operator has not conducted discovery work or risk assessments on these systems. In 2023, the ORG assessed the removal of ITS discovery work from the 2023–24 technology roadmap as ‘highly concerning’ and noted that it would, in response, ‘… consider the full range of levers under the Concession Deed’.

In July 2024, after considering an ‘escalated regulatory response’ to the operator’s perceived reluctance to conduct its own risk assessment, the ORG determined to initiate its own risk-based review of the longevity of the legacy core systems in conjunction with Department of Customer Service ICT personnel.

This performance audit has not assessed the risks posed by legacy IT systems and notes that such questions can raise complex technical issues. It is not necessarily the case that a legacy system is inherently insecure and there is evidence that the private operator has conducted work to insulate the core legacy systems from potential risks. Accordingly, the audit has made no finding about any level of risk posed by the legacy systems underpinning the land titles registry.

The approach taken by the ORG from July 2024 seems consistent with guidance published by the Australian Signals Directorate and the Australian Cyber Security Centre. This guidance highlights the need for agencies to implement a sound strategy to manage legacy IT, starting with developing an understanding of the business and security risks posed by such systems.

The ORG has recognised the importance of privacy to retaining confidence in the land titles system and actively addresses privacy issues with the private operator

The registers operated and maintained under the concession deed are public registers. That is, they can be accessed by anyone (in some circumstances, after the payment of a fee). While there are public interest reasons for this information to be publicly available, public registers can create a tension with individual privacy, where the information held in a register is personal identifiable information about an individual.

This tension can be exacerbated when it is compulsory to record information in a public register, thereby reducing the individual’s choice and control over their personal information. In some circumstances, it has been found that community concerns are exacerbated where public registers are operated and maintained by the private sector, for example, when the UK Government considered privatising its land titles registry.

In its privacy policy, the private operator of the NSW land titles system explains that the personal information that it may collect can include:

• name, address, age or date of birth, contact details
• information collected in connection with maintaining the various registers, including information about an individual’s property dealings, such as transfer and leasehold documents
• information related to the operator’s products or services, such as credit card or bank account details
• verification of identity information, such as passport information, rates notices, Medicare card details and drivers licence details.

In recognition of the privacy risks inherent to public registers, and the potential volume of personal information collected, privacy issues are recognised and discussed between the ORG and the private operator, including at JCC meetings between the Registrar General and the chief executive officer of the private operator.

For example, the ORG recognised a potential privacy risk in how the private operator was collecting information for its subscriber compliance audit process. This resulted in the ORG requiring the private operator to put in place a more secure method for collecting this information. Similarly, the private operator itself identified a potential privacy issue regarding the length of time it retained personal information for the same process.

As discussed below, privacy is also considered by the ORG in regard to new non-core service proposals from the private operator.

New services proposed by the private operator are subject to approval by the Registrar General and have been subject to privacy impact assessments

Privacy risks inherent to public registers can become greater where there are pressures to use that information for purposes unrelated to the original purpose of the public register (‘function creep’).

It was explicit in the NSW Government’s announcement regarding the granting of the concession that it was expected, not just permitted, that the private operator would identify, develop and deliver additional services using information collected for the purposes of the registry, while ensuring appropriate recognition of potential privacy concerns.

The concession deed has a mechanism requiring ORG approval of proposed new ‘non-core services’ by the operator. Since the concession was made, there have been four additional non-core services approved. These have each been accompanied by a privacy impact assessment prepared by the private operator and at the instigation of the operator. The ORG does not have standards for an acceptable privacy impact assessment other than the assessment should be prepared by a ‘reputable organisation’. Guidance published by the NSW Privacy Commissioner is that, where possible, privacy impact assessments should be published, which has not been the case for those assessed by the ORG (although commercial and competition issues around potential new information products could offer a justification for not publishing).

The audit assessed a sample of privacy impact assessments submitted to the ORG by the private operator. Consistent with the NSW Privacy Commissioner’s guidance, the assessments were found to be fit for purpose, in that their size and scope appeared consistent with the inherent assessed risk. The same guidance highlights that privacy impact assessments should be more than just compliance checks. This good practice advice is similar to that published by the Australian Office of the Information Commissioner.

The ORG has developed a template for assessing new non-core services. The template requires ORG staff to consider a range of issues, including privacy, when new non-core services are proposed by the private operator.

The ORG has limited visibility of how effectively other system participants ensure privacy of personal information

The ORG maintains a regulatory role over the operator. However, there are numerous other system participants who could adversely impact the integrity and security of the registry, including by impacting the privacy of personal information (whether deliberately or incidentally). The extent of the ORG’s regulatory oversight and powers varies according to the type of system participant.

For example, the ORG has powers under the concession deed to regulate the private operator directly, although it relies on the private operator to conduct compliance activities for subscribers. Its range of regulatory enforcement options also vary between system participants. Similarly, the concession deed provides for the ORG to issue penalties against the private operator, although not against subscribers or surveyors for non-compliance with their respective obligations.

In December 2018, the then Registrar General nominated a ‘joint comprehensive review of all potential privacy risks to LRS’ as a priority for the coming year to be completed by December 2019. By July 2019, minutes of the JCC record this priority as ‘deferred’. Subsequently, a comprehensive review of privacy risks has not been conducted. Such a review may assist in better understanding any potential system-wide privacy risks to the land titles system.

The ORG and NSW Treasury offered strong public assurance at the start of the concession that statutory privacy protections would apply to the land titles registry

The handling of personal information by NSW Government agencies is regulated by the Privacy and Personal Information Protection Act 1988 (PPIP Act). As well as setting out privacy principles with which NSW government agencies are required to comply, the PPIP Act also provides a statutory right for individuals to take complaints about the handling of their personal information to the NSW Privacy Commissioner, who may make binding decisions on agencies. The PPIP Act does not generally extend to private sector companies.

While NSW government agencies are covered by the PPIP Act, most private sector companies in Australia (as well as most Commonwealth government agencies) are covered by the Commonwealth Privacy Act 1988 (Privacy Act). The Privacy Act contains similar protections to the PPIP Act, although the regulator and dispute handler is the Australian Privacy Commissioner. Unlike the NSW Privacy Commissioner, the Australian Privacy Commissioner may make an enforceable determination requiring that a complainant be paid compensation for financial or non-financial loss. Section 39 of the enabling legislation for the transaction that underpinned the concession established that:

This was made clear in the second reading speech to the bill for the enabling legislation, which stated that the PPIP Act ‘… applies to the private operator as if it were a public sector agency in the same way that it currently applies to LPI titling and registry Services’.

In April 2017, NSW Treasury published a fact sheet offering ‘consumer assurance’ that:

Similarly, in March and April 2017, the then Registrar General made public presentations highlighting that the private operator was subject to statutory privacy obligations:

Accordingly, there appears to have been clear intention to offer assurance to the community that statutory privacy protections would apply to the land titles registry once the concession was made.

The ORG has not obtained assurance whether the private operator is covered by the Commonwealth Privacy Act

Despite the strong public assurances outlined above, there was uncertainty when the concession was granted about whether and how the Commonwealth Privacy Act applied to the operator.

As outlined above, the Commonwealth Privacy Act does not cover NSW government agencies. While it does generally cover private sector businesses (such as the private operator), there is an exemption for private sector contract service providers to NSW Government agencies for the purpose of providing services under their contract. Specifically, s. 7B(5) provides that the ‘acts or practices’ of private sector organisation are exempt where:

• the organisation is a contracted service provider for a state contract
• the act is done, or the practice is engaged in for the purposes of meeting (directly or indirectly) an obligation under the contract.

This was recognised in an information memorandum provided to bidders during the bid process for the concession. The information memorandum explained that the successful bidder may be subject to the Commonwealth Privacy Act, including to the exemption available ‘… as a provider of services to State Government’. The information memorandum concluded that ‘Compliance with the Commonwealth Privacy Act will be a matter for the private operator to assess’.

Accordingly, notwithstanding the confidence inherent in government public statements around the time that the concession was made, it appears unclear whether (and to what extent) Commonwealth privacy legislation applies to the land titles registry operator.

The ORG has not clarified whether an individual would complain about a privacy breach to the NSW or Australian Privacy Commissioner

Part 6 of the PPIP Act provides specific provisions for ‘public registers’ operated and maintained by NSW government agencies (noting that the private operator is deemed to be a NSW government agency by s. 39 of the enabling legislation for the transaction).

Part 6 of the PPIP Act sets out two specific protections for public registers held by NSW government agencies, these being:

• an agency keeping a public register must not disclose any personal information kept in the register unless the agency is satisfied that it is to be used for a purpose relating to the purpose of the register or the Act under which the register is kept
• an individual may request that their personal information be suppressed from a public register if they can establish that its open inclusion would affect their safety or well-being.

However, clause 7 of the Privacy and Personal Information Protection Regulation 2019 exempts public sector agencies responsible for keeping certain prescribed public registers from the requirements set out in Part 6 of the PPIP Act. The registers operated and maintained under the land titles registry are included in the list of the public registers that are exempt from Part 6.

Accordingly, the two statutory protections specifically focused on public registers in the PPIP Act do not apply to the land titles registry.

While there are equivalent contractual restrictions in the concession deed, these measures are not accompanied by a statutory right for individuals to complain to the NSW Privacy Commissioner if their personal information is handled in a manner that would otherwise breach Part 6. In these same circumstances, for the reasons discussed above, it is also unclear whether an individual could complain to the Australian Privacy Commissioner if the potential breach relates to the private operator performing functions as a contract service provider to the NSW Government.

This jurisdictional complexity is further complicated by the private operator collecting different types of personal information, namely:

• personal information that must be collected onto registers to meet titling and registry legal requirements, such as the name of the title owner or mortgage information
• personal information that is collected by the private operator to support the operation and maintenance of the register and other products offered by the operator, such as payment and identity verification information.

The private operator publishes a detailed privacy policy on its website. This policy states that the private operator is required to comply with both the PIPP Act and Privacy Act, and to the extent of any inconsistency, it would comply with the latter. While this demonstrates a clear intention to ensure compliance with legislative privacy obligations, further clarity is required as to how this intention can be reconciled with the issues outlined above.

As the lead agency in managing the transaction and overseeing the preparation of its enabling legislation and concession arrangements, NSW Treasury could not provide evidence that the NSW Privacy Commissioner had been consulted during the drafting of either the enabling legislation for the concession transaction or the concession deed document.

The ORG has detailed policy and procedures for ordering the suppression of personal information on the land titles registry, although third-party information reseller arrangements mean that the ORG cannot ensure that personal information will be fully suppressed

The ORG may direct the private operator, as well as other parties, such as specific government agencies that use land registry information, to suppress personal information held on the land titles registry. Information about this option is provided on the ORG website. A suppression may be ordered in response to a request from a member of the public advising that their well-being or safety is at risk because the register may disclose their whereabouts.

In the 12 months to July 2024:

• 107 applications to suppress personal information were assessed
• 60 were accepted
• 47 were declined.

Due to the critical nature of name suppressions and the potential danger to the individual, it is a requirement that a suppression application be actioned on the day it is received by the private operator (when received during business hours).

The ORG has detailed policy and process documents for the suppression of personal information. These documents detail the information that is required to be provided by an applicant, as well as describing the decision-making process and how an accepted application will be actioned. The Suppression Policy requires the private operator and a specific government agency that uses and distributes land registry information to complete the suppression request within one business day.

Analysis performed by the ORG in September and October 2019 found that action in response to at least six suppression applications had been delayed by periods between three and six days. The ORG’s policy on the suppression of personal information now specifies that its privacy contact officer will actively monitor the action time of a suppression direction to ensure that the private operator actions any suppression order within one working day. For a sample period of January to June (inclusive) 2024, the ORG reported that the performance measure was met for each month. However, the complex flows of land titles information, and the multiple parties who may handle it, mean that it could reasonably be expected to take up to two weeks for suppression orders to be given full effect.

The audit reviewed a small sample of successful and unsuccessful suppression applications that had been received and determined during 2023–24. These are discussed below.

A sample of five successful applications highlighted the difficulties that the complexity of the land titles system poses in managing data. From the sample, it was found that the private operator actioned suppression orders in a timely manner. However, the time taken to action suppression orders was longer in the case of the government user.

When the government user receives a suppression notice from the ORG, it informs its seven data customers that they (and in turn their own unknown number of customers or resellers) have seven days to ‘remove all elements of personal information including the property sales information from any record held’. As the ORG is not a party to this data sharing arrangement and has no visibility of the agreements between the various parties, it has no mechanism to offer assurance about the effectiveness of the suppression process.

The ORG was able to demonstrate that the sample of unsuccessful suppression applications had been handled in accordance with its policy, including by explaining the process to the unsuccessful applicant and affording them the opportunity to provide further information.

The ORG is preparing a policy to explain the rights of the private operator, government agencies and other third parties to use land titles registry data for new services and products

The concession deed sets out a number of clearly defined ‘core services’ that the private operator is required to provide. In addition, the private operator may apply to the ORG for permission to use land titles registry data for other ‘non-core’ services. These non-core services can generate revenue for the private operator.

The NSW Government made clear when granting the concession that a policy objective was to promote innovation and improved customer service, including by permitting the private operator to develop new services, while also ensuring that the principles of the NSW Government Open Data policy were maintained. An objective of the Open Data policy is to promote the release of government data ‘… for use by the community, research, business and industry’ and to ‘inform the design of policy, programs and procurement’. The Open Data Policy is not a ‘free data’ policy but is based on the principle of ‘free, where appropriate’.

Under the concession deed, the private operator is entitled to claim compensation for prescribed ‘compensation events’. In broad terms, compensation events include where the private operator loses its exclusive right to maintain and operate the NSW land titles registry, including to facilitate authoritative searches of titles.

On 28 September 2021, the private operator submitted a claim for compensation under the concession deed. This claim concerned the use of data by the Spatial Services business unit of the department to create the NSW Spatial Digital Twin (‘Spatial Digital Twin’).

The Spatial Digital Twin is described by the department as ‘… a cross-sector, collaborative digital workbench for whole-of-government use, that will visualise location information, in a 4D model of the real world (3D plus time)’. It brings together many data elements from multiple sources across government, including information from strata plans registered in the land titles registry.

On 23 October 2021, the NSW Government rejected the private operator’s compensation claim. However, while rejected, the claim has not been withdrawn. The department has assessed the claim as being unfounded and, consistent with financial audit standards, it is not recorded as a liability in the department’s financial accounts. However, the department does include the claim in its ‘emerging issues return’ that agencies are required to provide to NSW Treasury.

It was beyond the scope of this audit to assess the merits of this specific claim. However, at a general level, the matter highlights that there may be different interpretations of the concession deed in regard to the permitted uses of land titles registry data and the related compensation provisions. This includes NSW Government agencies that had existing pre-concession rights to obtain data for specific purposes, as well as other system participants that obtain land titles data, such as ELNOs. If a common understanding is not established, then there are dual risks that:

• the potential for compensation claims may mute innovation in how NSW government agencies, and potentially others, use land titles registry data
• current or further claims for compensation by the private operator for uses of data by third parties may create financial liabilities for the State.

The concession deed includes provisions that permit certain government agencies to obtain land registry data. Those agencies may also enter into individual memoranda of understanding (MOU) with the ORG. These MOUs set out details about how and for what purposes each agency may obtain data. Consistent with the deed, the MOUs also permit agencies to use land titles registry data for ‘similar governmental purposes’ to those purposes specified in the concession deed. There is no guidance on the interpretation of ‘similar governmental purposes’.

The ORG first formally proposed an approach to resolve this matter in August 2021. However, it remains a live issue. The ORG’s annual priorities letter to the private operator for 2023–24 identified the need to achieve ‘clarity around the use of land registry data’, explaining that:

Achieving greater clarity in this matter remains one of the ORG’s annual priorities for both itself and the private operator for 2024–25. The ORG is developing a data use policy intended to assist in addressing risks around data use by clearly communicating to stakeholders the ORG's position on the use of data from the various registers operated under the concession. This policy was still in draft form during this audit.

The ORG has ensured that business continuity and recovery planning has been prepared for the land titles registry

The private operator is required by the concession deed to develop, submit and test a business continuity plan. During the concession, the private operator has met this requirement by providing the ORG with required and related documents, including its Business Continuity Plan, Business Continuity Management System and Disaster Recovery Strategy, as well as a third-party assessment of the adequacy of the planning.

The private operator is required to annually test its continuity planning. The audit team sighted evidence of third-party testing of the business continuity plan, as well as ORG feedback on the adequacy of business continuity plans and engagement with tests.

The audit team assessed a sample of business continuity plans provided by the private operator to the ORG against the applicable international standard (ISO 22332). In addition, a sample of incident management and recovery plans were assessed against both ISO 22332: 2022 and ISO 27035.1:2017.

The audit team found that while the plans did not expressly claim to be prepared in accordance with any formal standard, they were broadly consistent with the requirements of the standards. For example:

• there was evidence that sampled plans had been reviewed annually or as required as a result of organisational changes or post incident review
• assumptions for the operation of the plan, and intersections with other key documents were clear
• specific roles and team members, including alternates where available, were identified with defined roles and responsibilities
• where scenarios were detailed, there were specific steps and tasks clearly outlined
• plans contained rating frameworks that defined the criticality of events, and the subsequent recovery objectives.

The private operator also has a business continuity management framework that sits across business continuity plans for specific functions, as well as a disaster recovery strategy. These higher-level documents also provide detail on the operator’s requirements for more specific plans and processes to be tested. The business continuity management framework, for example, requires annual business continuity exercises to take place.

The ORG has a local business unit continuity plan, although this has not been tested

As part of Department of Customer Service business continuity planning, the ORG has a local business continuity plan for its own business unit. This plan addresses three specific critical business functions:

• managing the concession
• administering the TAF
• regulating ELNOs.

Each of these critical business functions has a maximum acceptable outage time of one day, with a recovery time objective of three days. The ORG has not tested these recovery time objectives, or the operation of continuity plans for critical business functions.

The alignment of regulator and operator response and recovery plans is a recent improvement that has been identified through joint scenario testing

A joint exercise was conducted in November 2023. An external cyber security consultant was commissioned to design and deliver a cyber incident response exercise between the department, the ORG and the private operator.

The consultant produced a report that identified strengths across the engaged stakeholders, including the collaborative culture with clear decision-making protocols, awareness of the current threat landscape, and active involvement and identification of areas of improvement.

The report broadly identified the need for interconnected communication plans, harmonised incident response plans and pre-defined authority to act as key opportunities for improvement. This was due to uncertainty regarding who should initiate contact with different parties, the need for enhanced coordination and uncertainty during the exercise about who had the authority to engage with the threat actor.

This seems to be the only joint exercise that has been conducted between the regulator and operator to date. No further joint exercises are currently planned.

The ORG has not tested whether it could use back-up data to operationally manage the land titles registry

The concession deed requires the private operator to provide the ORG with a daily back-up of the ‘core data’ contained in the land titles registry (except for core imaging repository data, which is subject to weekly back-up). This is consistent with pre-concession disaster recovery arrangements where core databases and transaction logs were replicated to an off-site disaster recovery centre daily.

The ORG has taken steps to ensure that the back-up data provided by the operator is reliable. The content of the back-ups provided by the private operator was validated by Department of Customer Service ICT in August 2024, with a regular automated testing protocol now in place. This was not always the case, as ORG audits of back-up data had identified deficiencies earlier in the concession.

While the ORG has access to accurate back-up data, the value of the back-ups and whether the ORG can effectively restore the state back-up (for example, if it is ever required to exercise its step-in powers) has not been determined. The audit was told ‘there is no guarantee’ that existing back-ups could be used to restore the system.

The appropriate use, utility and purpose of the state back-up is a current issue for the ORG. This issue was also identified in the 2023 strategic technology review, which noted the potential for developing a real time replica of the land titles registry data. As a result of this review, the ORG is reviewing best practice for the use of the state back-up, including analysing its purpose, situational need and methods to audit and assess back-ups in the future. These findings are due in mid-2025. Any changes to state back-up arrangements will likely require changes to the concession deed.

If future circumstances require the ORG to rely on the state back-up of the registry data, the ability of the ORG to use the state back-up would be critical, including if there was a technical or operational failure with the private operator. The ORG has commenced initial analysis on the required documentation, procedures and scenarios required to exercise its step-in powers. However, the ORG has not tested how effectively it could restore the state back-up, or how it would use the back-up data in practice, if it was needed.

There is evidence that the ORG has taken steps to identify regulatory weaknesses and areas for improvement

The ORG has several internal processes to identify and review issues around its own performance. These include weekly and fortnightly team meetings at various levels, quarterly executive meetings, and an annual team development day. The ORG also notes that a weekly email identifies good regulatory practice, however there is no formalised approach in terms of a framework that benchmarks the ORG’s performance in comparison to similar regulators or guides its continuous improvement processes.

The ORG has identified several internal improvement areas. These include workforce capability or capacity gaps and managing the risk of regulatory capture.

• Workforce capability: while the ORG has a small IT team, it does not have senior or strategic IT expertise. Workforce capability in this area is a key risk to the long-term regulation of the land titles registry. It was raised by several stakeholders in interviews with the audit team and identified as a risk in both the Strategic Technology Review, and the ORG’s 2023 annual team development day.
• Regulatory capture: ORG staff should refrain from becoming involved in discussions with the private operator and surveyors about plan issues, due to its role as the decision-making authority in administrative reviews.

The ORG is addressing a gap in strategic technology and regulatory practice capability to ensure it can effectively regulate the land titles registry in the long term

The land titles registry is an increasingly technology-focused system, having transitioned since the early 1980s from a paper-based system, where documents were submitted or searched for in-person, to a digital system with remote online access. This means that the ORG is increasingly regulating technology solutions and operations.

While the ORG has identified strategic technology expertise as a gap, it does not yet have a long-term capability development and retention plan. It has also not mapped its existing skills base to ongoing requirements of overseeing the concession deed and regulating the land titles registry. Its existing workforce plans respond to workforce survey findings and focus on developing and retaining its current workforce.

To address this capability gap in the immediate term, the ORG has engaged an external consultant to address strategic technology skills, reallocated its spending on consultancies to fund ongoing roles and requested support from Department of Customer Service ICT.

In 2024, as part of Fair Trading and Regulatory Services, the ORG was provided with a dedicated business information support officer from the department’s cyber security area who supports it with advice related to cyber security. Prior to this the ORG was also able to receive advice from the department’s Chief Information Security Officer. Advice has included risk assessments, responses to ad hoc requests and formal advice on reporting required from the operator. There is a potential risk in relation to this key role being outside the ORG’s structure and therefore not able to be fully managed by the ORG.

Broader Department of Customer Service ICT support has been more limited outside of cyber security. Leadership meetings have occurred inconsistently, for example, limiting ORG’s ability to influence the department’s ICT support.

The NSW Public Service Commission (now located within the Premier’s Department) has published a Strategic Workforce Planning Framework that provides guidance for agencies to understand and prepare for their future workforce needs. This framework identifies three levels of workforce planning.

• Strategic workforce planning: identifies actions and addresses challenges, risks and opportunities, entailing longer term planning covering a 3–5 year period. The framework notes that strategic planning is not ‘resource management to fill immediate operational needs’.
• Tactical workforce planning: specifies how work should be done in a specific area to efficiently achieve goals outlined in the strategic workforce plan.
• Operational workforce planning: Ensures daily work is done effectively.

ORG activity to address this capability gap is mainly tactical and operational. Quarterly executive meetings review resourcing needs with an 18-month time horizon, while the Strategic Workforce Planning Framework recommends a longer time horizon. Executive review assesses anticipated workload and, in addition to specific technological capability, has identified the need for additional capacity across the ORG in the areas of policy, regulation and cadastral integrity.

The ORG advises that it is currently reviewing the most effective approach to engaging strategic technology expertise and relies on expertise from within the Department of Customer Service for guidance on workforce planning.

The ORG’s wider regulatory context also creates capability needs in regulatory policy and practice. The ORG performs regulatory functions over a complex and multi-participant system. Its primary regulated entity, the private operator, has unique characteristics, being a monopoly exercising important titling functions using an asset that remains the property of the NSW Government.

At the same time, there are a range of other system participants, such as lawyers, conveyancers, surveyors and banks, who are primarily regulated by other bodies. The other main group of participants, the ELNOs, are themselves subject to new and dynamic market pressures as the industry evolves from a monopoly to a competitive market. The Australian Registrars' National Electronic Conveyancing Council has described a future-state in which multiple ELNOs inter-operate, resulting in a ‘growing compliance burden for government’ within ten years.

The concession deed contains mechanisms to support continuous improvement in the operation of the concession, including an optional five-year major review clause that has not yet been exercised

The concession deed provides for the ORG to conduct:

• ‘annual reviews’ of the operator’s performance, including its achievement of service levels and a review of its latest business plan, as well as a broad range of other matters
• ‘ad hoc and other reviews’, whereby the ORG may review or ‘spot check’ the operator’s performance of any core service provided under the concession
• a ‘major review’ of the operator’s performance under the deed no more than once every five years, including the extent to which the operator is acting consistently with the objectives of the concession and a broad range of other matters – a major review may also consider whether any changes are required under the concession deed.

The ORG conducts annual reviews of the private operator’s performance, including by reviewing and providing feedback on iterations of the private operator’s business plan. As discussed earlier, the ORG has also required the private operator to provide ad hoc reports on two occasions relating to the quality of the private operator’s plan examinations. While the annual priority letters described earlier in this report (see section 3) also encompass an element of performance review, that process is not a function of the concession deed.

To date, the ORG has not exercised its option to conduct a major review of the concession. The ORG did consider conducting a major review in 2022, but it was determined at the time that progressively evolving the concession using iterative contract variations agreed with the private operator was an adequate course of action.

The range of matters anticipated by the major review mechanism is substantial and would prompt consideration of matters that may not emerge iteratively or ad hoc, including matters that are more than simply routine or operational. For example, the major review mechanism provides for the review of significant and strategic matters, including those ‘… that were not anticipated as at the execution date, but which ought to be addressed having regard to the objectives’. Notwithstanding the long duration of the concession, and the complex and evolving environment in which it operates, the ORG has not commenced preparatory work to scope when, or in what circumstances, a major review would be appropriate.

Appendix 1 – Response from Department of Customer Service

Appendix 2 – Glossary

Appendix 3 – About the audit

Appendix 4 – Performance auditing

© 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 #403 released 12 February 2025.

About this report

Internal controls are key to the accuracy and reliability of agencies’ financial reporting processes. This report analyses the internal controls and governance of 26 of the NSW public sector’s largest agencies for the 2023–24 financial year.

Findings

There are gaps in key business processes, which expose agencies to risks. These gaps are identified in 121 findings across the 26 agencies—including 4 high risk, 73 moderate risk and 44 low risk findings. All four high-risk issues related to IT controls and 19% of control deficiencies were repeat issues. Thirty-five per cent of agencies had deficiencies in control over privileged access.

Shared IT services

Six agencies provide IT shared services to 120 other customer agencies. All six had control deficiencies—three of these were high risk. Four agencies provide no independent assurance to their customers about the effectiveness of their own IT controls.

Cyber security

Eighteen agencies assessed cyber risk as being above their risk appetite. Fourteen of these agencies had not set a timeframe to resolve these risks and two agencies have not funded plans to improve cyber security.

Fraud and corruption control

Agencies need to improve fraud and corruption control. Instances of non-compliance with TC18-02 NSW Fraud and Corruption Policy were identified, including gaps such as a lack of comprehensive employment screening policies and not reporting matters to the audit and risk committee.

Gifts and benefits

Management of gifts and benefits requires better governance and transparency. All agencies had policy and guidance but all had gaps in management and implementation—such as not publishing registers nor providing ongoing training.

Information Technology

Nine agencies did not effectively restrict or monitor user access to privileged accounts.

Recommendations

The report makes recommendations to agencies to implement proper controls and improve processes in relation to:

• organisational processes
• information technology
• cyber security
• fraud and corruption, and
• gifts and benefits.

Read the PDF report

Internal controls are processes, policies and procedures that help agencies to:

• operate effectively and efficiently
• produce reliable financial reports
• comply with laws and regulations
• support ethical government.

This chapter outlines the overall trends for agency controls and governance issues, including the number of audit findings, the degree of risk those deficiencies pose to the agency, and a summary of the most common deficiencies found across agencies.

This chapter outlines our audit observations, conclusions and recommendations arising from our review of agency controls to manage key financial systems.

This chapter outlines our audit observations, conclusions and recommendations arising from our review of agencies' cyber security.

This chapter outlines our audit observations, conclusions and recommendations from our review of agencies' fraud and corruption control framework, policies and practices. Our Internal Controls and Governance 2018 found a number of fraud and corruption control gaps in NSW Government.

The NSW Treasury Circular TC18-02 NSW Fraud and Corruption Control Policy (the Circular) requires NSW government agencies to develop, implement and maintain a fraud and corruption control framework. The Circular sets out minimum standards for a NSW Government agency’s fraud and corruption control framework.

Previous Audit Office report on agency fraud and corruption control

This chapter outlines our audit observations, conclusions and recommendations arising from our review of agencies' managing of gifts and benefits.

About this report

Financial audit results of the NSW public universities’ financial statements for the year ended 31 December 2023.

Audit findings

Unmodified audit opinions were issued for all ten universities.

Eight universities reported net deficits. Three of these improved on their 2022 results.

Total fees and charges returned to pre-pandemic levels, with 40.5% earned from overseas students from three countries.

Employee related expenses increased 10.2% in 2023 mainly due to an additional 2,830 full time equivalent staff, in response to increased teaching and research activities.

Key issues

The number of findings reported to management has increased to 111 matters in 2023 up from 88 in 2022.

These included one high risk finding and 62 moderate risk findings, a 72% increase from last year.

Gaps identified in universities governance processes included delays in responding to findings and recommendations; staff not attesting compliance with codes of conduct annually; and not capturing and recording staff conflicts of interests within central registers.

Seven of the ten universities have cyber security risks above what they determine as an acceptable risk. Four universities did not have a cyber security uplift program.

Recommendations

Universities should address all recommendations made in the report (see Appendix one for a summary of these).

In particular, there should be a focus on prioritising remediation of wage underpayments to affected employees; ensuring a centralised conflict of interest register is maintained for all staff; considering emerging risks in university risk registers; ensuring controlled entities are considered when determining internal audit plans; and focusing efforts to improve cyber security risk management and cyber resilience capability.

This report provides NSW Parliament with the results of our 2023 financial audits of universities in New South Wales and their controlled entities, including analysis, observations and recommendations in the following areas:

• financial reporting
• internal controls and governance
• teaching and enrolments
• cyber security.

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

This chapter outlines audit observations related to the financial reporting of universities in NSW for 2023.

Appropriate financial controls help to ensure the efficient and effective use of resources and administration of policies. They are essential for quality and timely decision-making. Effective governance is essential for the stability, sustainability and ethical operation of universities. It ensures accountability, transparency and promotes responsible decision making.

This chapter outlines our observations and insights from our financial statement audits of NSW universities.

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 matters, are reported to universities for management to address.

Universities' primary objectives are the functions of teaching and research. They invest most of their resources aiming to achieve quality outcomes in academia and student experience. Universities have committed to achieving certain government targets and compete to advance their reputation and their standing in international and Australian rankings.

This chapter outlines teaching and enrolment outcomes for universities in NSW for 2023.

This chapter of the report focuses on the cyber risk environment for universities, how universities have assessed that risk, what frameworks they use to strategically identify controls that respond to those risks, and the extent to which they have implemented or have plans to implement those controls. We also address some specific controls in respect of cyber resilience.

Appendix one – List of 2023 recommendations

Appendix two – Status of 2022 recommendations

Appendix three – Universities' controlled 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.

Schools collect and maintain detailed student data, including sensitive personal information. Schools can also require or encourage students, parents and carers to use third party software applications for learning and other school related activities. This audit will consider how effectively schools ensure student data is secure within their own systems and when provided to third or fourth parties.

What this report is about

NSW local councils provide a wide range of essential services and infrastructure to their communities and are increasingly reliant on digital technologies.

Councils need to manage cyber security risks to ensure their information, data and systems are appropriately safeguarded. Councils also need to be prepared to detect, respond and recover when a cyber security incident occurs.

The audit assessed how effectively three selected councils identified and managed cyber security risks.

The audit also included the Department of Planning, Housing and Infrastructure (Office of Local Government) and Department of Customer Service (Cyber Security NSW), due to their roles in providing guidance and support to local councils.

Audit findings

The audit found that the selected councils are not effectively identifying and managing cyber security risks. Each of the councils undertook activities to improve their cyber security during the audit period, but this audit found significant gaps in their cyber security risk management and cyber security processes.

Such gaps result in unmitigated risks to the security of information and assets which, if compromised, could impact their local communities, service delivery and public infrastructure.

Cyber Security NSW and the Office of Local Government recommend that councils adopt requirements in the Cyber Security Guidelines for Local Government, but could do more to monitor whether the Guidelines are enabling better cyber security risk management in the sector.

Audit recommendations

In summary, the councils should:

• integrate assessment and monitoring of cyber security risks into corporate governance processes
• self-assess their performance against Cyber Security NSW's guidelines for local government
• develop and implement a risk-based cyber security improvement plan and program of activities
• develop, implement and test a cyber incident response plan.

Cyber Security NSW and the Office of Local Government should regularly consult on cyber security risks facing local government, and review the effectiveness of guidelines and related resources for the sector.

While this report focuses on the performance of the selected councils, the findings and recommendations should be considered by all councils to better understand their risks and challenges relevant to managing cyber security risks.

Local councils in New South Wales (NSW) provide a wide range of essential services and infrastructure to their communities and are increasingly reliant on digital technologies for this.

Councils use various information systems and software to manage significant amounts of information and data relevant to their corporate functions, infrastructure and service delivery. This may include sensitive information about residents, customers and staff.

Audit Office of New South Wales reports to Parliament have highlighted gaps in councils' cyber security risk management approaches since 2020. The Local Government 2023 report, tabled in March 2024, found that 50 councils were yet to implement cyber security governance frameworks and related internal controls.

The threat from cyber security incidents continues to rise. Such incidents can harm local government service delivery and may include the theft of information, denial of access to critical technology, or even the hijacking of systems for profit or malicious intent.

It is important that councils are effectively identifying and managing cyber security risks to:

• protect their information, data and systems
• be prepared to detect, respond to and recover from cyber security incidents 
• ensure confidence in the services they are providing for their communities.

This report outlines important findings and recommendations from a performance audit of three councils: City of Parramatta Council, Singleton Council and Warrumbungle Shire Council. This audit report has deidentified findings for each council, but the specific findings have been directly shared with each council to enable them to remediate and improve cyber safeguards. The findings and recommendations in this report are likely to be relevant to most local councils in NSW and councils are encouraged to ensure they have sufficient cyber safeguards.

This audit assessed how effectively the selected councils identified and managed cyber security risks. The audit considered whether the councils:

• effectively identify and plan for cyber security risks
• have controls in place to effectively manage identified cyber security risks
• have processes in place to detect, respond to, and recover from cyber security incidents.

This audit also included the Department of Customer Service and the Office of Local Government (OLG) within the Department of Planning and Environment (DPE) due to their roles in providing guidance and support to local government.¹

Cyber Security NSW, part of the Department of Customer Service, supports local councils to improve their cyber resilience through a range of services and guidance, including the Cyber Security Guidelines – Local Government issued in December 2022.

The OLG is responsible for strengthening the sustainability, performance, integrity, transparency and accountability of the local government sector.

¹ The OLG was part of DPE up to 1 January 2024, when DPE was abolished and the OLG became part of the Department of Planning, Housing and Infrastructure (DPHI).

Local councils in New South Wales (NSW) provide a wide range of essential services and infrastructure to their communities. In doing so, councils use a range of information technology (IT) systems, assets, and digital services.

This audit follows several audit reports by the Audit Office of New South Wales that have considered how effectively NSW Government entities, including local councils have managed cyber security risks (see Appendix three).

The Audit Office of New South Wales has reported on how councils have managed cyber security risks since 2020. In the Local Government 2023 report, tabled in March 2024, gaps in cyber security frameworks and related internal controls were reported in 50 councils.

This chapter includes a summary of thematic key findings for the selected councils.

Cyber Security NSW is responsible for supporting local councils to improve their cyber resilience through a range of services and guidance and published its Local Government Engagement Plan in 2023 (discussed below).

The Office of Local Government (OLG) is responsible for strengthening the sustainability, performance, integrity, transparency and accountability of the local government sector. It does this through a range of activities including monitoring sector-wide and council-specific risks, issuing guidance, engaging with councils to build capacity and supporting the Minister for Local Government’s discretionary intervention powers.

Appendix one - Response from entities Cyber security in LG

Appendix two - Glossary-  Cyber security in local government

Appendix three – Overview of Audit Office of New South Wales reports that consider cyber security - Cyber security in local government

Appendix four – Cyber Security Guidelines – Local Government foundational requirements- Cyber security in local government

Appendix five – About the audit- Cyber security in local government

Appendix six – Performance auditing -Cyber security in local government

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 #392- released 26 March 2024

What this report is about

Results of the local government sector financial statement audits for the year ended 30 June 2023.

Findings

Unqualified audit opinions were issued for 85 councils, eight county councils and 12 joint organisations.

Qualified audit opinions were issued for 36 councils due to non-recognition of rural firefighting equipment vested under section 119(2) of the Rural Fires Act 1997.

The audits of seven councils, one county council and one joint organisation remain in progress at the date of this report due to significant accounting issues.

Fifty councils, county councils and joint organisations missed the statutory deadline of submitting their financial statements to the Office of Local Government, within the Department of Planning, Housing and Infrastructure, by 31 October.

Audit management letters included 1,131 findings with 40% being repeat findings and 91 findings being high-risk. Governance, asset management and information technology continue to represent 65% of the key areas for improvement.

Fifty councils do not have basic governance and internal controls to manage cyber security.

Recommendations

To improve quality and timeliness of financial reporting, councils should:

• adopt early financial reporting procedures, including asset valuations
• ensure integrity and completeness of asset source records
• perform procedures to confirm completeness, accuracy and condition of vested rural firefighting equipment.

To improve internal controls, councils should:

• track progress of implementing audit recommendations, and prioritise high-risk repeat issues
• continue to focus on cyber security governance and controls.

Pursuant to the Local Government Act 1993 I am pleased to present my Auditor-General’s report on Local Government 2023. My report provides the results of the 2022–23 financial audits of 121 councils, eight county councils and 12 joint organisations. It also includes the results of the 2021–22 audits for two councils and two joint organisations which were completed after tabling of the Auditor-General’s report on Local Government 2022. The 2022–23 audits for eight councils, one county council and one joint organisation remain in progress due to significant accounting issues.

This will be my last consolidated report on local councils in NSW as my term as Auditor-General ends in April. Without a doubt, the change in mandate to make me the auditor of the local government sector has been the biggest challenge in my term. Challenging for councils as they adjust to consistent audit arrangements and for the staff of the Audit Office of NSW as they learn about the issues facing NSW councils.

The change in mandate aimed to improve the quality of financial management and reporting across the sector. This will take time. But this report does show some ‘green shoots’ with more councils submitting financial reports to the Office of Local Government by 31 October and more councils having Audit, Risk and Improvement Committees. 

I also want to acknowledge that councils face significant challenges responding to and recovering from emergency events whilst cost and resourcing pressures have been persistent.

The findings from our audits identify opportunities to further improve timeliness and quality of financial reporting and integrity of systems and processes. The recommendations in this report are also intended to improve financial management and reporting capability, encourage sound governance, and boost cyber resilience.

Margaret Crawford PSM
Auditor-General for New South Wales

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

This chapter outlines audit observations related to the financial reporting audit results of councils, county councils and joint organisations.

A strong system of internal controls enables 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 in governance and internal controls across councils, county councils and joint organisations in 2022–23.

Financial audits focus on key governance matters and internal controls supporting the preparation of councils’ financial statements. Breakdowns and weaknesses in internal controls increase the risk of fraud and error. Deficiencies in internal controls, matters of governance interest and unresolved issues are reported to management and those charged with governance through audit management letters. These letters include our observations with risk ratings, related implications, and recommendations.

Appendix one – Response from the Office of Local Government within the Department of Planning, Housing and Infrastructure

Appendix two – NSW Crown Solicitor’s advice

Appendix three – Status of previous recommendations

Appendix four – Status of audits

Appendix five – Councils received qualified audit opinions for non-recognition of rural firefighting equipment

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

What this report is about

In this report, we present findings and recommendations relevant to regulation from selected reports between 2018 and 2024.

This analysis includes performance audits, compliance audits and the outcomes of financial audits.

Effective regulation is necessary to ensure compliance with the law as well as to promote positive social and economic outcomes and minimise risks with certain activities.

The report is a resource for public sector leaders. It provides insights into the challenges and opportunities for more effective regulation.

Audit findings

The analysis of findings and recommendations is structured around four key themes related to effective regulation:

• governance and accountability
• processes and procedures
• data and information management
• support and guidance.

The report draws from this analysis to present insights for agencies to promote effective regulation. It also includes relevant examples from recent audit reports.

In this report, we also draw out insights for agencies that provide a public sector stewardship role.

The report highlights the need for agencies to communicate a clear regulatory approach. It also emphasises the need to have a consistent regulatory approach, supported by robust information about risks and accompanied with timely and proportionate responses.

The report highlights the need to provide relevant support to regulated parties to facilitate compliance and the importance of transparency through reporting of meaningful regulatory information.

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I am pleased to present this report, Regulation insights. This report highlights themes and generates insights about effective regulation from the last six years of audit.

Effective regulation is necessary to ensure compliance with the law. Effective regulation also promotes social, economic, and environmental outcomes, and minimises risks or negative impacts associated with certain activities. But regulation can be challenging and costly for governments to implement. It can also involve costs and impact on the regulated parties, including other public sector and private entities, and individuals. As such, effective regulation needs to be administered efficiently, and with integrity.

Having a clearly articulated and communicated regulatory approach is essential to achieving this outcome, particularly when this promotes voluntary compliance and sets performance standards that are informed by community expectations. A consistent approach to exercising regulatory powers is important: it should be supported by robust information about regulatory risks and issues, and accompanied with timely, proportionate responses. Providing relevant support to the regulated parties and coordinating activities to facilitate compliance and performance can generate efficiencies.

Finally, transparency matters. It matters so that government has oversight of and can be held accountable for its leadership of public sector compliance, and in regulating the activities of third parties. Transparency also matters because it can provide insights into the effective exercise of government power. To achieve this, meaningful regulatory information needs to be reported.

While these issues are most pertinent for government agencies that exercise traditional regulatory functions, they are also relevant to lead government agencies that provide a stewardship role in promoting compliance and performance by other government agencies in relation to particular areas of risk.

Over the past six years, our audit work has found many common and repeat performance gaps, creating risks, inefficiencies, and limiting outcomes of regulatory activities. In considering these gaps, this report provides public sector leaders with insights into the challenges and opportunities they may encounter when aiming for more effective regulation, including the good governance of regulatory activities. This includes insights for lead agencies that provide a public sector stewardship role. Through applying these insights and maximising regulatory effectiveness, unintended impacts on the people and sectors government serves and protects can be avoided or at the very least minimised.

Margaret Crawford PSM
Auditor-General for NSW

This report brings together key findings and recommendations relevant to regulation from selected performance and compliance audits between 2018 and early 2024 (19 in total), and from two reports that summarise results of financial audits during the same period. It aims to provide insights into the challenges and opportunities the public sector may encounter when aiming to enhance regulatory effectiveness.

The report is structured in two sections, each setting out insights from relevant audits and providing summaries as illustrative examples.

Section 3 is focused on insights from audits of agencies that administer regulatory powers and functions over other entities or activities (typically known as 'regulators'). The powers and functions of regulators are defined in law, and often relate to issuing approvals (e.g., licensing) for certain activities, and/or monitoring allowable activities within certain limits. Regulators often have compliance and enforcement powers that can be exercised in particular circumstances, such as when a regulated entity has not complied with relevant requirements.

Agencies may be primarily established as regulators or perform regulatory activities alongside other functions. Depending on the context, the regulated activity may relate to other state agencies, local government entities, non-government entities or individuals.

Section 4 summarises insights from a selection of audits of agencies that provide a stewardship role in promoting compliance by and performance of other state agencies and local government entities in relation to specific regulations or policies. These policies may or may not be mandatory and, unlike a more traditional regulator, the coordinating agency may not have enforcement powers to ensure compliance.

These policies, and accompanying guidelines and frameworks, are typically issued by ‘central agencies’ such as the Premier's Department that have a public sector stewardship role. They can also be issued by agencies with a leadership role in particular policy areas ('lead agencies'). While individual agencies and local government entities implementing these policies are responsible for their own compliance and performance, lead and central agencies have an oversight role including by promoting accountability and coordinating activities towards achieving compliance and performance outcomes across the public sector.

Readers are encouraged to view the full reports for further information. Links to versions published on our website are provided throughout this document, and a full list is in Appendix one. An overview of the rationale for selecting these audits and the approach to developing this report is in Appendix two.

The status of agencies' responses to audit recommendations

Findings from the audits referred to in this report were current at the time each respective report was published. In many cases, agencies accepted audit recommendations, as reflected in the letters from agency heads that are included in the appendix of each audit report.

The Public Accounts Committee of the NSW Parliament has a role in reporting on and ensuring that agencies respond appropriately to audit recommendations. Readers are encouraged to review the Public Accounts Committee's inquiries on agencies' implementation of audit recommendations, which can be found on the Committee's website.

Appendix one – Included reports 2018–2024 Regulation insights

Appendix two – About this report- Regulation insights

What this report is about

Transport for NSW (TfNSW) uses the Driver vehicle System (DRIVES) to support its regulatory functions. The system covers over 6.2 million driver licences and over seven million vehicle registrations.

DRIVES first went live in 1991 and has been significantly extended and updated since, though is still based around the same core system. The system is at end of life but has become an important service for Service NSW and the NSW Police Force.

DRIVES now includes some services to other parts of government and non-government entities which have little or no connection to transport. There are 141 users of DRIVES in total, including commercial insurers, national regulators, and individual citizens.

This audit assessed whether TfNSW is effectively managing DRIVES and planning to transition it to a modernised system.

Audit findings

TfNSW has not effectively planned the replacement of DRIVES.

It is now working on its third business case for a replacement system but has failed to learn lessons from its past attempts.

In the meantime, TfNSW has not taken a strategic approach to managing DRIVES’ growth.

TfNSW has been slow to reduce the risk of misuse of personal information held in DRIVES. With its delivery partner Service NSW, TfNSW has also been slow to develop and implement automatic monitoring of access.

TfNSW uses recognised processes for managing most aspects of DRIVES, but has not kept the system consistently available for users. TfNSW has lacked accurate service availability information since June 2022, when it changed its technology support provider.

TfNSW needs to significantly prioritise cyber security improvements to DRIVES. TfNSW is seeking to lift DRIVES’ cyber defences, but it will not achieve its stated target safeguard level until December 2025.

Even then, one of the target safeguards will not be achieved in full until DRIVES is modernised.

Audit recommendations

TfNSW should:

• implement a service management framework including insight into the views of DRIVES users, and ensuring users can influence the service
• ensure it can accurately and cost effectively calculate when DRIVES is unavailable due to unplanned downtime
• ensure implementation of a capability to automatically detect anomalous patterns of access to DRIVES
• ensure that DRIVES has appropriate cyber security and resilience safeguards in place as a matter of priority
• develop a clear statement of the future role in whole of government service delivery for the system
• resolve key issues currently faced by the DRIVES replacement program including by:
  • clearly setting out a strategy and design for the replacement
  • preparing a specific business case for replacement.

The DRIver VEhicle System_¹ (often known as DRIVES) is the Transport for NSW (TfNSW) system which is used to manage over 6.2 million driver licences and over seven million vehicle registrations in New South Wales.

DRIVES first went live in 1991 and has been significantly extended and enhanced over the past 33 years. DRIVES is a significant NSW Government information system — containing personal information such as home addresses for most of the NSW adult population, sensitive health information such as medical conditions, and biometric data in photographs.

Service NSW, part of the Department of Customer Service, is the NSW Government's 'one stop shop' for services to NSW citizens and businesses. It uses DRIVES when it delivers many transport-related services to NSW citizens such as licence renewals and checks the identity information stored in DRIVES as part of other services delivered to NSW citizens, such as a 'working with children check'.

DRIVES supports TfNSW's regulatory functions and the collection of more than $5 billion in revenue annually for the NSW Government. The system is also used by many organisations outside of the NSW Government including commercial insurers and national regulators, as well as individual citizens who access DRIVES for services such as 'Renew my registration' or 'Book a driver knowledge test'.

TfNSW owns and manages DRIVES. It intends to replace DRIVES with a modernised system to improve its cost, performance, and security.

The objective of this performance audit was to assess whether TfNSW is effectively:

• managing the current system, and 
• planning to transition DRIVES to a modernised system.

The auditee is TfNSW. We have consulted with the Department of Customer Service as a key stakeholder during the audit process.

This part of the report considers whether Transport for NSW (TfNSW) is effectively managing the current system. It considers DRIVES’:

• role in NSW Government service delivery
• ease of use and appropriateness for a modern system
• mechanisms to ensure the service is available for users.

This part of the report considers whether Transport for NSW (TfNSW) is effectively planning to transition DRIVES to a modernised system. It makes findings on the:

•  effort to develop a business case to fund the replacement of DRIVES
• issues which have contributed to the slow progress of the replacement program.

Appendix one – Response from entity 

Appendix two – Statutory and regulatory framework related to DRIVES 

Appendix three – About the audit 

Appendix four – Performance auditing 

Parliamentary reference - Report number #388 - released 20 February 2024.