This report examines whether NSW Health effectively planned and delivered major capital works to meet the demand for health services in New South Wales.

The report found that NSW Health has substantially expanded health infrastructure across New South Wales since 2015. However, the program was driven by Local Health District priorities without assessment of the State’s broader and future‑focussed health requirements.

The report found that unclear decision making roles and responsibilities between Health Infrastructure and the Ministry of Health limited the ability of NSW Health to effectively test and analyse investment options.

Project delays and budget overruns on some major projects indicate that Health Infrastructure's project governance, risk assessment and management systems could be improved.

The Auditor‑General recommends that NSW Health ensure its capital projects offer the greatest value to New South Wales by establishing effective policy guidance and enhancing project governance and management systems.

Read full report (PDF)

Since 2011–12, NSW Health has aimed to improve its facilities and build 'future focused' infrastructure. The NSW Government’s 2015–16 election commitments established a four-year $5.0 billion capital program for NSW Health to build and upgrade more than 60 hospitals and health services. The 2019–20 State Budget committed a further $10.1 billion over four years for another 29 projects. This is the largest investment to date on health capital works in New South Wales.

Recent reviews of infrastructure have recognised that population and demographic growth will require a change in the delivery and composition of health infrastructure, including considering greater use of non-traditional, non-capital health service options and assets.

To ensure that expenditure on capital works represents the best value for money, NSW Health's business cases need to be robust and supported by evidence that demonstrates they are worthy investments. The NSW Process of Facility Planning has been the main framework guiding the detailed planning and development of NSW Health's capital works proposals. This framework was developed by the then NSW Department of Health in 2010. Its aim is to ensure investment proposals are supported by rigorous planning processes that address health service needs and provide value for money.

Infrastructure projects of the complexity and scale being delivered by NSW Health carry inherent risks. For example, unplanned cost escalations can potentially impact on the State’s finances. Unforeseen delays can also reduce the intended benefits. The growth in the State’s health capital spend and project profile, means its exposure to such risks has increased over time.

The objective of this audit was to assess the effectiveness of planning and delivery of major capital works to meet demand for health services in New South Wales. To address this objective, the audit examined whether:

• the Ministry of Health has effective procedures for planning and prioritising investments in major health capital works
• Health Infrastructure develops robust business cases for initiated major capital works that reliably inform government decision making
• Health Infrastructure has effective project governance and management systems that support delivering projects on-time, within budget and achievement of intended benefits.

The audit focused on the Ministry of Health and Health Infrastructure – being the lead agencies within NSW Health responsible for prioritising, planning and delivering major health capital works across the State. The audit examined 13 business cases for eight discrete projects over a ten-year period.

Over the period of review, NSW Government policies for business case development and submission have emphasised that effective governance arrangements are critical to a proposal's successful implementation.

NSW Health's Process of Facility Planning similarly highlights the importance of effective governance and project management for achieving good outcomes. It prescribes a general governance structure managed by Health Infrastructure that can be tailored to the planning and delivery of health infrastructure projects greater than $10.0 million.

The three major hospital redevelopments examined in metropolitan, regional and rural areas had a combined Estimated Total Cost of more than $1.2 billion and comprised eight discrete projects and 13 separate business cases.

Almost all these projects experienced delivery challenges which impacted achievement of their original objectives and intended benefits. This is expected in complex and large-scale health infrastructure programs. However, in some projects the impacts were significant and resulted in substantial delays, unforeseen costs, and diversion of resources from other priority areas.

Our review of the selected case studies highlighted opportunities for enhancing governance and project management. Specifically, it indicates a need for improving transparency in the management of contingencies, risk management and assessments particularly relating to adverse site conditions and the selection of contractors. There is also a need to strengthen forward planning for options to address unfunded priorities within business cases that risk complicating the delivery of future project stages resulting in unforeseen costs and potentially avoidable budget overruns.

In February 2017, the Ministry's Capital Strategy Group approved the use of surplus funds of $13.76 million from Stage 1 of the Hornsby Ku-ring-gai Hospital Redevelopment for new works deemed needed to support Stage 2. Following this decision, Health Infrastructure finalised and submitted a business case addendum for Stage 1 to the Ministry in March 2017, addressing the new works comprising a two-storey building for medical imaging and paediatric floors. The business case addendum also addressed options to fit out and procure major medical imaging equipment. The Ministry approved the Stage 1 business case in July 2017, noting the Ministry's Capital Strategy Group had already approved the use of remaining Stage 1 funds to deliver the new works.

Stage 1 was completed in 2015, almost two years before the Stage 1 business case addendum was prepared in February 2017.

The Ministry's decision to approve the new works using $13.76 million of surplus Stage 1 funds did not comply with the NSW Treasury Circular TC 12/20. This policy establishes the Treasurer's approval must be sought and received before a new capital project with an Estimated Total Cost of $5.0 million or more can be approved by NSW Health. The Ministry therefore exceeded its delegated authority in making this decision, as it was not evident it had sought and received the Treasurer's approval prior to doing so.

Consequently, the surplus Stage 1 funds should not have been used by the Ministry to deliver new works in the circumstances. Instead, they should have been released from the Stage 1 project in accordance with established NSW Health procedures, and the Stage 1 Estimated Total Cost revised down accordingly. This did not occur, and NSW Health ultimately directed $11.0 million in surplus Stage 1 funds to the new works.

These circumstances indicate a need to strengthen transparency and accountability within NSW Health for the approval of new projects, and how contingency funds are used in the management of major health capital works. They also demonstrate the impact of weaknesses with options appraisal as the initial Stage 1 business case did not consider alternative options for addressing the initially unfunded works later covered by the Stage 1 business case addendum and ultimately funded from the Stage 1 contingency provision.

In addition to proposing the above-noted new works, the 2017 Stage 1 Business Case Addendum for the Hornsby-Ku-ring-gai development sought to retrospectively address the estimated funding gap of around $14.0 million for the internal fit out, supply of major medical imaging equipment, and cost to operate the medical imaging service at Hornsby Ku-ring-gai Hospital also not addressed in the originally Stage 1 business case.

The Stage 1 business case addendum considered various procurement options to purchase and run the medical imaging services ranging from State operation purchase options to private operation purchase options.

It recommended outsourcing the operation and provision of equipment to the private sector based on estimated savings to the public sector initially of around $650,000 per annum reducing over time to $270,000. The Ministry endorsed this option in June 2017, but it did not ultimately proceed.

A July 2018 report to the Executive Steering Committee on the project shows NSW Health later decided to deliver operation of the medical imaging unit 'traditionally' with an updated estimate of the cost at approximately $16.4 million. The report also shows the Ministry supported the costs now being met by the Northern Sydney Local Health District.

This means the funding gap previously identified in the Stage 1 business case addendum for fitting out the medical imaging building and supply of major medical equipment would need to be met fully by the State, representing a $16.4 million cost overrun for the project.

Examined reports to the Executive Steering Committee show this was largely funded by the Northern Sydney Local Health District via the disposal of land realising approximately $15.0 million in proceeds.

This initially unforeseen cost, along with the additional $11.0 million for the new works approved under the Stage 1 business case addendum, were ultimately merged with the Stage 2 project initially approved in 2017–18 with an Estimated Total Cost of $200 million.

The 2019–20 State Budget provided an additional $65.0 million for a further Stage 2A to deliver additional built capacity to support outpatient services, enhanced allied health services, re-housed community health services and the delivery of prioritised clinical services unfunded as part of Stage 2. The funds were approved based on an Investment Decision Template (IDT) that examined two options in addition to the base case representing scoping alternatives to the preferred master planned capital solution.

However, we found the IDT showed around 23 per cent of the $65.0 million sought (i.e. $15.0 million) was to be allocated to fund the deficit in Stage 2, which had arisen as a result of project delays due to adverse site conditions. This was not discussed in the IDT.

The February 2020 report to the Executive Steering Committee shows a combined Stage 2 and 2A final forecast cost of $292.6 million against a potential budget of $290.7 million representing an overall deficit for the project of around 0.6 per cent.

However, this favourable final budget position does not transparently show the funding challenges experienced over the project's implementation to-date. The three major budget issues include:

• inappropriate use of around $11.0 million in Stage 1 contingency for originally unfunded works contrary to Treasury policy
• the additional $16.4 million cost unforeseen in the Stage 1 business case for delivering medical imaging services mostly funded through the sale of land
• an additional $15.0 million from Stage 2A to cover the budget overrun in Stage 2 due to adverse site conditions.

The cumulative impact of these events is that Stages 1 and 2 of the Hornsby project cost approximately $42.4 million than it should have in the circumstances around 14 per cent more than what the revised combined Estimated Total Cost for both stages should have been after releasing the $11.0 million in surplus Stage 1 funds, with Stage 2 delayed by around 14 months.

Major construction projects often experience adverse site conditions which can be difficult to fully detect in advance. However, we found this was a common occurrence in the projects we examined sometimes with significant time and/or budget impacts indicating scope to enhance related risk and cost assessments. Specifically:

• Hornsby Ku-ring-gai Hospital Redevelopment Stage 2: adverse site conditions during demolition works resulted in an 11-month delay for delivering the medical imaging unit and 14-month delay completing Stage 2 main works including need for additional $15.0 million in funds to cover the resultant budget deficit for the project.
• Blacktown Mt Druitt Hospital Redevelopment Stage 2: adverse site conditions combined with project complexity delayed completion of the early works by approximately five months. This contributed to the delay in completing the main construction works which occurred around nine months later than planned in the business case.
• Dubbo Health Service Redevelopment Stages 3 and 4: Health Infrastructure advised adverse site conditions including asbestos containing materials and ground conditions delayed works for the main building with completion forecast for March 2021, around 21 months later than planned in the final business case. This resulted in the need for additional $13.5 million to cover increased construction costs and risks, increasing the Stage 3 and 4 forecast final cost from $150 million to $163.5 million as at February 2020.

These examples indicate a risk the cumulative impact of adverse site conditions may be substantial when measured across both time and Health Infrastructure's full delivery program. They also point to potential for Health Infrastructure to achieve efficiencies and improved outcomes from strengthening its approach to assessing and mitigating the risks from adverse site conditions.

Main construction works on Stage 1 of the Dubbo Health Service Redevelopment were completed in October 2015, approximately 13 months later than planned in the final business case. Delays were mainly due to insolvency of the early works contractor resulting in their departure from the project. The ensuing 11-month delay in completing the early works significantly impacted the overall schedule and delivery of main construction works.

The insolvency event was significant as it affected nine separate Health Infrastructure projects – three of which had yet to reach practical completion. It also affected state-funded projects in other sectors. It resulted in the need for additional funding of $11.5 million that was provided in the 2014–15 State Budget increasing the total Stage 1 and 2 budget from $79.8 million to $91.3 million.

Health Infrastructure’s analysis of lessons learned shows it worked actively to mitigate the impacts of the insolvency event across all affected projects. However, it also indicates a risk the lessons were mainly focused on mitigating the impacts after an insolvency event occurred rather than on prevention.

Although Health Infrastructure initially commissioned a financial assessment of the now insolvent early works contractor before engagement, it did not detect any risks of the impending insolvency and instead concluded the contractor was in a strong financial position. However, the contractor became insolvent shortly after commencement approximately seven months later. This indicates a risk of weaknesses in the assessment performed that was not explicitly addressed by the lessons learned.

Delivery of the main construction works were further impacted by disputes with the main works contractor over the scope of works for the renal unit resulting in Health Infrastructure terminating the contract in November 2016 following lengthy negotiations over several months.

The scope of works relating to the renal unit were ultimately transferred to Stages 3 and 4 and were delivered in December 2019, around five years later than originally planned in the business case.

Health Infrastructure advised the delay was ultimately beneficial to the project because the refurbishment works for the renal unit, initially scheduled for Stages 1 and 2, would have been demolished to accommodate the new Western Cancer Centre proposed after Stages 1 and 2 and currently being delivered in parallel with Stages 3 and 4.

Health Infrastructure advised the actual cost of Stages 1 and 2 was $84.7 million against the budget of $91.3 million. The residual $6.6 million relates to the renal works not delivered during Stage 1 and 2 and transferred to Stage 3 and 4.

Health Infrastructure advised the contractual provisions for mitigating insolvency events 'in-flight' are limited highlighting the importance of proactive and effective due diligence prior to engaging contractors for significant construction projects.

Health Infrastructure's 2017-20 Corporate Plan identifies the development of a quality framework to support delivery of future-focused outcomes as a key organisational priority. Related initiatives within the Corporate Plan describe a framework underpinned by a Quality Committee providing advice on:

• records management, to meet the requirements of the State Records Act 1998
• project assurance, to ensure future focused outcomes and enhance Health Infrastructure's Standards, Policies, Procedures and Guidelines, Templates and Design Guidance Notes
• knowledge management and library services, to promote and leverage from project learnings.

Although Health Infrastructure has some elements of a quality framework it is not yet fully in place. Health Infrastructure advised it had yet to establish the quality framework and related committee described in its Corporate Plan due in part to its focus on responding to the growth of its capital program.

Health Infrastructure's Development and Innovation team has been active in supporting continuous improvement in knowledge and project management including development of business cases. Although useful, these initiatives have relied heavily on leveraging and disseminating insights from Gateway reviews and have not formed part of a systematic quality and continuous improvement framework.

The limited focus on the quality of business cases is reflected in internal performance monitoring and reporting which focuses mainly on tracking the delivery of projects against internal benchmarks, often revised from the baselines in the business case, and expenditure against cashflow targets. There is no evident internal monitoring and/or reporting to the Chief Executive and Board on defined quality metrics linked to business case development and staff capability.

Performance reporting on balanced scorecard metrics has similarly focused mainly on process rather than quality and has been inconsistent in recent years.

Appendix one – Response from agency

Appendix two – About the audit

Appendix three – Performance auditing

Appendix four – Ministry of Health planning tools and guidelines

Appendix five – Streamlined investment decision process for Health Capital Projects

Appendix six – Timeline of business cases and relevant policy guidelines

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Parliamentary reference - Report number #338 - released 12 August 2020

The Auditor-General for New South Wales, Margaret Crawford, released a report today examining whether the Department of Communities and Justice had effective governance and partnership arrangements in place to deliver ‘Their Futures Matter’.

Their Futures Matter was intended to place vulnerable children and families at the heart of services, and direct investment to where funding and programs deliver the greatest social and economic benefits. It was a four-year whole-of-government reform in response to the 2015 Tune Review of out-of-home care.

The Auditor-General found that while important foundations were put in place, and new programs trialled, the key objective to establish an evidence-based whole-of-government early intervention approach for vulnerable children and families in NSW was not achieved.

Governance and cross-agency partnership arrangements to deliver Their Futures Matter were found to be ineffective. 'Their Futures Matter lacked mechanisms to secure cross portfolio buy‑in and did not have authority to drive reprioritisation of government investment', the Auditor-General said.

At the reform’s close, the majority of around $380 million in investment funding remains tied to existing agency programs, with limited evidence of their comparative effectiveness or alignment with Their Futures Matter policy objectives. The reform concluded on 30 June 2020 without a strategy or plan in place to achieve its intent.

The Auditor-General made four recommendations to the Department of Communities and Justice, aimed at improving implementation of outstanding objectives, revising governance arrangements, and utilising the new human services data set to address the intent of the reform. However, these recommendations respond only in part to the findings of the audit.

According to the Auditor-General, ‘Cross-portfolio leadership and action is required to ensure a whole-of-government response to delivering the objectives of Their Futures Matter to improve outcomes for vulnerable children, young people and their families in New South Wales.’

Read full report (PDF)

In 2016, the NSW Government launched 'Their Futures Matter' (TFM) - a whole-of-government reform aimed at delivering improved outcomes for vulnerable children, young people and their families. TFM was the government's key response to the 2015 Independent Review of Out of Home Care in New South Wales (known as 'the Tune Review').

The Tune Review found that, despite previous child protection reforms, the out of home care system was ineffective and unsustainable. It highlighted that the system was not client-centred and was failing to improve the long-term outcomes for vulnerable children and families. The review found that the greatest proportion of relevant expenditure was made in out of home care service delivery rather than in evidence-based early intervention strategies to support children and families when vulnerabilities first become evident to government services (such as missed school days or presentations to health services).

The then Department of Family and Community Services (FACS) designed the TFM reform initiatives, in consultation with central and human services agencies. A cross-agency board, senior officers group, and a new unit in the FACS cluster were established to drive the implementation of TFM. In the 2016–17 Budget, the government allocated $190 million over four years (2016–17 to 2019–20) to the reform. This resourced the design and commissioning of evidence-based pilots, data analytics work, staffing for the implementation unit and secretariat support for the board and cross-agency collaboration.

As part of the TFM reform, the Department of Premier and Cabinet, NSW Treasury and partnering agencies (NSW Health, Department of Education and Department of Justice) identified various existing programs that targeted vulnerable children and families (such as the preceding whole-of-government ‘Keep Them Safe’ reform coming to an end in June 2020). Funding for these programs, totalling $381 million in 2019–20, was combined to form a nominal ‘investment pool’. The government intended that the TFM Implementation Board would use this pool to direct and prioritise resource allocation to evidence-based interventions for vulnerable children and families in NSW.

This audit assessed whether TFM had effective governance and partnership arrangements in place to enable an evidence-based early intervention investment approach for vulnerable children and families in NSW. We addressed the audit objective with the following audit questions:

• Was the TFM reform driven by effective governance arrangements?
• Was the TFM reform supported by effective cross-agency collaboration?
• Has the TFM reform generated an evidence base to inform a cross-agency investment approach in the future?

The audit did not seek to assess the outcomes for children, young people and families achieved by TFM programs and projects.

Their Futures Matter (TFM) is a whole-of-government reform to deliver improved outcomes for vulnerable children, young people and their families.

Supported by a cross-agency TFM Board, and the TFM Unit in the then Department of Family and Community Services (FACS), the reform aimed to develop whole-of-government evidence-based early intervention investment approaches for vulnerable children and families in NSW.

Governance refers to the structures, systems and practices that an organisation has in place to:

• assign decision-making authorities and establish the organisation's strategic direction
• oversee the delivery of its services, the implementation of its policies, and the monitoring and mitigation of its key risks
• report on its performance in achieving intended results, and drive ongoing improvements.

We examined whether the TFM reform was driven by effective governance arrangements and cross-agency collaboration.

The reform agenda and timeframe set down for Their Futures Matter (TFM) were ambitious. This chapter assesses whether the TFM Board and TFM Unit had the capability, capacity and clout within government to deliver the reform agenda.

Creating a robust evidence base was important for Their Futures Matter, in order to:

• identify effective intervention strategies to improve supports and outcomes for vulnerable children and families
• make efficient use of taxpayer money to assist the maximum number of vulnerable children and families
• inform the investment-based approach for future funding allocation.

This chapter assesses whether the TFM reform has developed an evidence base to inform cross-agency investment decisions.

Appendix one – Response from agency

Appendix two – TFM governance entities

Appendix three – TFM Human Services Data Set

Appendix four – TFM pilot programs

Appendix five – About the audit

Appendix six – Performance auditing

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Parliamentary reference - Report number #337 - released 24 July 2020

This report examines whether the Department of Planning, Industry and Environment, and Sydney Water have effectively progressed water conservation initiatives in Greater Sydney.

The report found that the department and Sydney Water have not effectively investigated, implemented or supported water conservation initiatives in Greater Sydney. The agencies have not met key requirements of the current Metropolitan Water Plan and Sydney Water has not met all its operating licence requirements for water conservation. There has been little policy or regulatory reform, little focus on identifying new options and investments, and limited planning and implementation of water conservation initiatives.

As a result, Greater Sydney's water supply may be less resilient to population growth and climate variability, including drought.

The Metropolitan Water Plan states that water conservation, including recycling water, makes the drinking water supply go further. The plan also states that increasing water conservation efforts may be cheaper than building new large-scale supply options and can delay the timing of investment in new supply infrastructure.

The Auditor-General recommends the department develop a clear policy and regulatory position on water conservation options, improve governance and funding for water conservation, and work with Sydney Water to assess the viability of water conservation initiatives. The report also recommends improvements to Sydney Water’s planning for and reporting on water conservation, including the transparency of this information.

This report is part of a multi-volume series on the theme of water. Refer to ‘Support for regional town water infrastructure’ and ‘Water management and regulation – undertaking in 2020-21’.

Read full report (PDF)

The current, 2017 Metropolitan Water Plan states that water conservation, including recycling water, makes the drinking water supply go further. The plan also states that increasing water conservation efforts may be cheaper than building new large-scale supply options and can delay the timing of investment in new supply infrastructure.

Water conservation refers to water recycling, leakage management and programs to enhance water efficiency. Water recycling refers to both harvesting stormwater for beneficial use and reusing wastewater.

This audit examined whether water conservation initiatives for the Greater Sydney Metropolitan area are effectively investigated, implemented and supported. We audited the Department of Planning, Industry and Environment (the Department) and the Sydney Water Corporation (Sydney Water), with a focus on activities since 2016.

The Department is responsible for the integrated and sustainable management of the state’s water resources under the Water Management Act 2000, which includes encouraging ‘best practice in the management and use of water’ as an objective. The Department is also responsible for strategic water policy and planning for Greater Sydney, including implementing the Metropolitan Water Plan.

Sydney Water is a state-owned corporation and the supplier of water, wastewater, recycled water and some stormwater services to more than five million people in Greater Sydney. It is regulated by an operating licence that is issued by the Governor on the recommendation of the Independent Pricing and Regulatory Tribunal (IPART). The Tribunal determines Sydney Water’s maximum prices, reviews its operating licence and monitors compliance. Sydney Water's operating licence and reporting manual set out requirements for its planning, implementing and reporting of water conservation.

From 2007 to 2012, the Climate Change Fund was a source of funds for water conservation activities to be undertaken by the Department and Sydney Water. The Climate Change Fund was established under the Energy and Utilities Administration Act 1987. Four of its six objectives relate to water savings. Water distributors such as Sydney Water can be issued with orders to contribute funds for water-related programs. The Fund is administered by the Department.

In 2016, Sydney Water developed a method for determining whether and how much to invest in water conservation. Known as the ‘Economic Level of Water Conservation’ (ELWC), the method identifies whether it costs less to implement a water conservation initiative than the value of the water saved, in which case the initiative should be implemented.

Appendix one – Responses from agencies

Appendix two – About the audit

Appendix three – Glossary

Appendix four – Performance auditing

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Parliamentary reference - Report number #336 - released 23 June 2020

This is a follow-up to the Auditor-General's November 2016 report on the CBD South East Sydney Light Rail project. This follow-up report assessed whether Transport for NSW has updated and consolidated information about project costs and benefits.

The audit found that Transport for NSW has not consistently and accurately updated project costs, limiting the transparency of reporting to the public.

The Auditor-General reports that the total cost of the project will exceed $3.1 billion, which is above the revised cost of $2.9 billion published in November 2019. $153.84 million of additional costs are due to omitted costs for early enabling works, the small business assistance package and financing costs attributable to project delays.

The report makes four recommendations to Transport for NSW to publicly report on the final project cost, the updated expected project benefits, the benefits achieved in the first year of operations and the average weekly journey times.

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The CBD and South East Light Rail is a 12 km light rail network for Sydney. It extends from Circular Quay along George Street to Central Station, through Surry Hills to Moore Park, then to Kensington and Kingsford via Anzac Parade and Randwick via Alison Road and High Street.

Transport for NSW (TfNSW) is responsible for planning, procuring and delivering the Central Business District and South East Light Rail (CSELR) project. In December 2014, TfNSW entered into a public private partnership with ALTRAC Light Rail as the operating company (OpCo) responsible for delivering, operating and maintaining the CSELR. OpCo engaged Alstom and Acciona, who together form its Design and Construct Contractor (D&C).

On 14 December 2019, passenger services started on the line between Circular Quay and Randwick. Passenger services on the line between Circular Quay and Kingsford commenced on 3 April 2020.

In November 2016, the Auditor-General published a performance audit report on the CSELR project. The audit found that TfNSW would deliver the CSELR at a higher cost with lower benefits than in the approved business case, and recommended that TfNSW update and consolidate information about project costs and benefits and ensure the information is readily accessible to the public.

In November 2018, the Public Accounts Committee (PAC) examined TfNSW's actions taken in response to our 2016 performance audit report on the CSELR project. The PAC recommended that the Auditor-General consider undertaking a follow-up audit on the CSELR project. The purpose of this follow-up performance audit is to assess whether TfNSW has effectively updated and consolidated information about project costs and benefits for the CSELR project.

Appendix one – Response from agency

Appendix two – Governance and reporting arrangements for the CSELR

Appendix three – 2018 CSELR governance changes

Appendix four – About the audit

Appendix five – Performance auditing

Copyright notice

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

Parliamentary reference - Report number #335 - released 11 June 2020

This report contains findings on the results of financial audits of NSW universities for the year ended 31 December 2019.

All ten NSW universities received unqualified audit opinions. The 2019 financial results for universities are reported as at 31 December and reflect results from operations before the impact of the COVID‑19 pandemic.

The combined revenues for all NSW universities increased by $381 million to $11.4 billion in 2019, driven by increases in student revenues. Revenue from overseas students continued to grow faster than that from domestic students and contributed $3.6 billion in course fees to NSW universities in 2019.

Overseas students from the top three countries of origin, being China, India and Nepal, represented 72.4 per cent of all enrolments of overseas students and 65.4 per cent of all overseas student revenues for 2019. Revenue from students from these three countries comprised 40.9 per cent of total student revenues for all NSW universities, creating a considerable concentration risk for NSW universities.

The COVID‑19 pandemic may significantly impact the financial results of NSW universities in 2020. NSW universities provided data on COVID‑19 impacted student enrolments for semester one 2020. Overall numbers of student enrolments in semester one 2020 were 5.8 per cent beneath projections. Overseas student enrolments were 13.8 per cent beneath expectations and domestic student enrolments were 2.4 per cent below expectations.

The report makes recommendations to the NSW universities, aimed at strengthening controls over information technology, cyber security, validating published performance information, procurement practices and the oversight of their overseas controlled entities' legal and policy compliance functions.

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This report analyses the results of our audits of the financial statements of the ten NSW universities for the year ended 31 December 2019. The table below summarises our key observations.

1. Financial reporting

2. Internal controls and governance

3. Teaching and research

This report provides Parliament with the results of our financial audits of New South Wales universities and their controlled entities in 2019, including our analysis, observations and recommendations in the following areas:

• financial reporting
• internal controls and governance
• teaching and research.

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

This chapter outlines our audit observations on the financial reporting of NSW universities for 2019.

Appropriate and robust internal controls help reduce risks associated with managing finances, compliance and administration of NSW universities.

This chapter outlines the internal controls related observations and insights across NSW universities for 2019, including overall trends in findings, level of risk and implications.

Our audits do not review all aspects of internal controls and governance every year. The more significant issues and risks are included in this chapter. These along with the less significant ones are reported to universities for them to address.

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

This chapter outlines teaching and research outcomes for NSW universities for 2019.

Appendix one – List of 2019 recommendations

Appendix two – Status of 2018 recommendations

Appendix three – NSW universities’ controlled entities and associated entities

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This report focuses on how the NSW Police Force managed a $100 million program to acquire new technology. The program invested in technologies intended to make police work safer and quicker. These included body-worn video (BWV) cameras, smart phone devices, mobile fingerprint scanners and hand-held drug testing devices.

The audit found that while the NSW Police Force mostly managed the ‘Policing for Tomorrow’ program effectively, investment decision making could be improved in the future. The NSW Police Force missed an opportunity to take a whole-of-organisation approach to identify capability gaps and target the acquired technologies to plug these.

The NSW Police Force has processes in place to monitor the benefits of some of the larger technology, but it does not do this consistently for all procured technology. It could not demonstrate that smaller projects are improving the efficiency or effectiveness of policing.

The audit also found that the NSW Police Force does not routinely engage with external stakeholders on the use or impacts of new technology that changes how officers interact with the public, noting that this will not always be possible for particularly sensitive procurements that involve covert technologies or methodologies.

The Auditor-General made three recommendations to guide improvement of NSW Police Force ICT procurement, benefits management and stakeholder engagement processes.

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Ahead of the March 2015 election, the NSW Government announced a $100 million Policing for Tomorrow fund for the NSW Police Force to acquire technology intended to make police work safer and quicker. The announcement committed the NSW Police Force to several investment priorities, including body-worn video (BWV) cameras, smart phone devices (MobiPOL), mobile fingerprint scanners and hand-held drug testing devices. Otherwise, the NSW Police Force was allowed flexibility in identifying and resourcing suitable projects.

This audit assessed whether the Policing for Tomorrow fund was effectively managed to improve policing in New South Wales. We addressed the audit objective with the following audit questions:

• Did the NSW Police Force efficiently and effectively identify, acquire, implement and maintain technology resourced by the fund?
• Did the NSW Police Force establish effective governance arrangements for administering the fund, and for monitoring expected benefits and unintended consequences?
• Did technology implemented under the fund improve the efficiency and effectiveness of policing in New South Wales?

We examined how effectively the NSW Police Force governed the Policing for Tomorrow fund, to ensure that key accountability and decision-making arrangements were in place to direct the $100 million spend to appropriate technologies. We also assessed how the NSW Police Force acquired, implemented and maintained technology funded by Policing for Tomorrow to determine the effectiveness of the relevant asset management.

The Policing for Tomorrow election commitment aimed to invest in technology to ‘make police work safer and quicker – meaning more time on the street combatting crime’. We assessed whether the NSW Police Force ensured that funded technologies have improved policing efficiency and effectiveness. We did not seek to independently assure the benefits or outcomes resulting from the technologies.

Appendix one – Response from agency

Appendix two – Policing for Tomorrow projects and expenditure

Appendix three – About the audit

Appendix four – Performance auditing

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Parliamentary reference - Report number #334 - released 2 June 2020

This report focuses on how Transport for NSW and Sydney Trains manage crowding at selected metropolitan train stations.

The audit found that while Sydney Trains has identified platform crowding as a key strategic risk, it does not have an overarching strategy to manage crowding in the short to medium term. Sydney Trains 'do not have sufficient oversight to know if crowding is being effectively managed’, the Auditor-General said.

Sydney Trains' operational response to crowding involves restricting customer access to platforms or station entries before crowding reaches unsafe levels or when it impacts on-time running. Assuming rail patronage increases, it is likely that Sydney Trains will restrict more customers from accessing platforms or station entries, causing customer delay. ‘Restricting customer access to platforms or station entries is not a sustainable approach to manage station crowding’, said the Auditor-General.

The Auditor-General made seven recommendations to improve Transport for NSW and Sydney Trains' management of station crowding. Transport for NSW have accepted these recommendations on behalf of the Transport cluster.

Public transport patronage has been impacted by COVID-19. This audit was conducted before these impacts occurred.

Read full report (PDF)

Sydney Trains patronage has increased by close to 34 per cent over the last five years, and Transport for NSW (TfNSW) expects the growth in patronage to continue over the next 30 years. As patronage increases there are more passengers entering and exiting stations, moving within stations to change services, and waiting on platforms. As a result, some Sydney metropolitan train stations are becoming increasingly crowded.

There are three main causes of station crowding:

• patronage growth exceeding the current capacity limits of the rail network
• service disruptions
• special events.

Crowds can inhibit movement, cause discomfort and can lead to increased health and safety risks to customers. In the context of a train service, unmanaged crowds can affect service operation as trains spend longer at platforms waiting for customers to alight and board services which can cause service delays. Crowding can also prevent customers from accessing services.

Our 2017 performance audit, ‘Passenger Rail Punctuality’, found that rail agencies would find it hard to maintain train punctuality after 2019 unless they significantly increased the capacity of the network to carry trains and people. TfNSW and Sydney Trains have plans to improve the network to move more passengers. These plans are set out in strategies such as More Trains, More Services and in the continued implementation of new infrastructure such as the Sydney Metro. Since 2017, TfNSW and Sydney Trains have introduced 1,500 more weekly services to increase capacity. Additional network capacity improvements are in progress for delivery from 2022 onwards.

In the meantime, TfNSW and Sydney Trains need to use other ways of managing crowding at train stations until increased capacity comes on line.

This audit examined how effectively TfNSW and Sydney Trains are managing crowding at selected metropolitan train stations in the short and medium term. In doing so, the audit examined how TfNSW and Sydney Trains know whether there is a crowding problem at stations and how they manage that crowding.

TfNSW is the lead agency for transport in NSW. TfNSW is responsible for setting the standard working timetable that Sydney Trains must implement. Sydney Trains is responsible for operating and maintaining the Sydney metropolitan heavy rail passenger service. This includes operating, staffing and maintaining most metropolitan stations. Sydney Trains’ overall responsibility is to run a safe rail network to timetable.

Appendix one – Response from agency

Appendix two – Sydney rail network

Appendix three – Rail services contract

Appendix four – Crowding pedestrian modelling

Appendix five – Airport Link stations case study

Appendix six – About the audit

Appendix seven – Performance auditing

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© 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 #333 - released 30 April 2020

This report focuses on whether Destination NSW (DNSW) can demonstrate that its support for major events achieves value for money.

The audit found that DNSW’s processes for assessing and evaluating the major events it funds are mostly effective, but its public reporting does not provide enough transparency.

DNSW provides clear information to event organisers seeking funding and has a comprehensive methodology for conducting detailed event assessments. However, the reasons for decisions to progress events from the initial assessment to the detailed assessment stage are not documented in sufficient detail.

DNSW does not publish detailed information about the events it funds or the outcomes of these events. This means that members of the public are unable to see whether its activities achieve value for money. However, DNSW’s internal reporting to its key decision‑makers, including the CEO, the Board and the Minister is appropriate.

The Auditor-General made four recommendations to DNSW, aimed at improving the transparency of its activities, improving the documentation of decisions and certain compliance matters, and streamlining its approach to assessing and evaluating events that receive smaller amounts of funding.

Read full report (PDF)

Destination NSW (DNSW) provides funding to attract a range of major events to New South Wales, including high-profile professional sports matches and tournaments, musicals, art and museum exhibitions, and participation-focused events such as festivals and sports events that members of the public can enter. The NSW Government's rationale for providing funding is to encourage event organisers to hold events in New South Wales, and to ensure that events held in New South Wales maximise the potential for attracting overseas and interstate visitors.

This audit assessed whether DNSW can demonstrate that its support for major events achieves value for money. In making this assessment, the audit examined whether:

• DNSW effectively assesses proposals to support major events
• DNSW effectively evaluates the impact of its support for major events.

This audit focused on DNSW's work to attract major events to New South Wales. It did not assess DNSW's tourism promotion or development work, which includes developing tourism strategies, marketing and advertising campaigns, national and international partnerships, and regional programs.

Appendix one – Response from Destination NSW

Appendix two – About the audit 

Appendix three – Performance auditing

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Parliamentary reference - Report number #332 - released 9 April 2020.

The Auditor-General for New South Wales, Margaret Crawford, released a report today examining the Department of Education’s (the department’s) support and oversight of school planning and use of needs-based funding under the Local Schools, Local Decisions reform.

The report found the department has not had adequate oversight of how schools are using needs-based funding to improve student outcomes since it was introduced in 2014.

The department had not set measures or targets for needs-based equity funding. It had also not been clear enough in how it expected schools to report on the outcomes of additional funding. This means it has not been able to effectively demonstrate the impact of funding at a school, or state-wide level.

To assist with the transition to greater local decision-making, the department provided schools with guidance materials, additional resources and systems support. However, guidance material was not clear enough on the purpose of funding, school budgeting systems were not fit-for-purpose when initially introduced, and support for schools was spread across different areas of the department.

The department has recently increased executive oversight of progress to improve educational outcomes for Aboriginal students and students from a low socio-economic background. It has also developed a consistent set of school-level targets to be implemented from 2020. This may help the department more reliably monitor progress in lifting outcomes for students with additional learning needs.

The report makes eight recommendations aimed at clarifying requirements of schools, better coordinating support and strengthening oversight of the use of needs-based equity funding.

Read full report (PDF)

The Local Schools, Local Decisions reform was launched in 2012 to give public schools more authority to make local decisions about how best to meet the needs of their students. A major element of the reform was the introduction of a new needs-based school funding model. Core elements of the model address staffing and operational requirements, while needs-based elements reflect the characteristics of schools and students within them. This includes equity funding designed to support students with additional needs. The four categories of equity funding are:

• socio-economic background
• Aboriginal background
• English language proficiency
• low-level adjustment for disability. 

Around $900 million in equity funding was allocated in 2019. School principals decide how to use these funds and account for them through their school annual reports. The Department of Education (the department) supports schools in making these choices with tools and systems, guidelines, and good practice examples.

The objective of this audit was to assess the department's support and oversight of school planning and use of needs-based funding under the Local Schools, Local Decisions reform. To address this objective, the audit examined whether:

• effective accountability arrangements have been established
• effective support is provided to schools.  

Appendix one – Response from agency

Appendix two – About the audit

Appendix three – Performance auditing

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© 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 #331 - released 8 April 2020.

This report outlines whether the Department of Customer Service (the department) has effective controls in place to ensure the integrity of data in the Births, Deaths and Marriages Register (the register), and to prevent unauthorised access and misuse.

The audit found that the department has processes in place to ensure that the information entered in the register is accurate and that any changes to it are validated. Although there are controls in place to prevent and detect unauthorised access to, and activity in the register, there were significant gaps in these controls. Addressing these gaps is necessary to ensure the integrity of information in the register.

The Auditor-General made nine recommendations to the department, aimed at strengthening controls to prevent and detect unauthorised access to, and activity in the register. These included increased monitoring of individuals who have access to the register and strengthening security controls around the databases that contain the information in the register.

The NSW Registry of Births Deaths and Marriages is responsible for maintaining registers of births, deaths and marriages in New South Wales as well as registering adoptions, changes of names, changes of sex and relationships. Maintaining the integrity of this information is important as it is used to confirm people’s identity and unauthorised access to it can lead to fraud or identity theft.

Read full report (PDF)

The NSW Registry of Births Deaths and Marriages (BD&M) is responsible for maintaining registers of births, deaths and marriages in New South Wales. BD&M is also responsible for registering adoptions, changes of name, changes of sex and relationships. These records are collectively referred to as 'the Register'. The Births, Deaths and Marriages Registration Act 1995 (the BD&M Act) makes the Registrar (the head of BD&M) responsible for maintaining the integrity of the Register and preventing fraud associated with the Register. Maintaining the integrity of the information held in the Register is important as it is used to confirm people's identity. Unauthorised access to, or misuse of the information in the Register can lead to fraud or identity theft. For these reasons it is important that there are sufficient controls in place to protect the information.

BD&M staff access, add to and amend the Register through the LifeLink application. While BD&M is part of the Department of Customer Service, the Department of Communities and Justice (DCJ) manages the databases that contain the Register and sit behind LifeLink and is responsible for the security of these databases.

This audit assessed whether BD&M has effective controls in place to ensure the integrity of data in the Births, Deaths and Marriages Register, and to prevent unauthorised access and misuse. It addressed the following:

• Are relevant process and IT controls in place and effective to ensure the integrity of data in the Register and the authenticity of records and documents?
• Are security controls in place and effective to prevent unauthorised access to, and modification of, data in the Register?

Appendix one – Response from agency

Appendix two – About the audit

Appendix three – Performance auditing

Copyright notice

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

Parliamentary reference - Report number #330 - released 7 April 2020.