Reports
Progress and measurement of the Premier's Priorities
The Premier’s Implementation Unit uses a systematic approach to measuring and reporting progress towards the Premier’s Priorities performance targets, but public reporting needed to improve, according to a report released today by the Auditor-General of NSW, Margaret Crawford.
The Premier of New South Wales has established 12 Premier’s Priorities. These are key performance targets for government.
| The 12 Premier's Priorities | |
|---|---|
|
|
|
|
|
|
|
|
|
|
|
|
Source: Department of Premier and Cabinet, Premier’s Priorities website.
Each Premier’s Priority has a lead agency and minister responsible for achieving the performance target.
The Premier’s Implementation Unit (PIU) was established within the Department of Premier and Cabinet (DPC) in 2015. The PIU is a delivery unit that supports agencies to measure and monitor performance, make progress toward the Premier’s Priorities targets, and report progress to the Premier, key ministers and the public.
This audit assessed how effectively the NSW Government is progressing and reporting on the Premier's Priorities.
The Premier’s Implementation Unit (PIU) is effective in assisting agencies to make progress against the Premier’s Priorities targets. Progress reporting is regular but transparency to the public is weakened by the lack of information about specific measurement limitations and lack of clarity about the relationship of the targets to broader government objectives.The PIU promotes a systematic approach to measuring performance and reporting progress towards the Premier’s Priorities’ performance targets. Public reporting would be improved with additional information about the rationale for choosing specific targets to report on broader government objectives.
The PIU provides a systematic approach to measuring performance and reporting progress towards the Premier's Priorities performance targets. Public reporting would be improved with additional information about the rationale for choosing specific targets to report on broader government objectives. The data used to measure the Premier’s Priorities comes from a variety of government and external datasets, some of which have known limitations. These limitations are not revealed in public reporting, and only some are revealed in progress reported to the Premier and ministers. This limits the transparency of reporting.
The PIU assists agencies to avoid unintended outcomes that can arise from prioritising particular performance measures over other areas of activity. The PIU has adopted a collaborative approach to assisting agencies to analyse performance using data, and helping them work across organisational silos to achieve the Premier’s Priorities targets.
Data used to measure progress for some of the Premier’s Priorities has limitations which are not made clear when progress is reported. This reduces transparency about the reported progress. Public reporting would also be improved with additional information about the relationship between specific performance measures and broader government objectives.
The PIU is responsible for reporting progress to the Premier, key ministers and the public. Agencies provide performance data and some play a role in preparing progress reports for the Premier and ministers. For 11 of the Premier's Priorities, progress is reported against measurable and time-related performance targets. For the infrastructure priority, progress is reported against project milestones.
Progress of some Priorities is measured using data that has known limitations, which should be noted wherever progress is reported. For example, the data used to report on housing completions does not take housing demolitions into account, and is therefore overstating the contribution of this performance measure to housing supply. This known limitation is not explained in progress reports or on the public website.
Data used to measure progress is sourced from a mix of government and external datasets. Updated progress data for most Premier’s Priorities is published on the Premier’s Priorities website annually, although reported to the Premier and key ministers more frequently. The PIU reviews the data and validates it through fieldwork with front line agencies. The PIU also assists agencies to avoid unintended outcomes that can arise from prioritising single performance measures. Most, but not all, agencies use additional indicators to check for misuse of data or perverse outcomes.
We examined the reporting processes and controls for five of the Premier’s Priorities. We found that there is insufficient assurance over the accuracy of the data on housing approvals.
The relationships between performance measures and broader government objectives is not always clearly explained on the Premier’s Priority website, which is the key source of public information about the Premier’s Priorities. For example, the Premier’s Priority to reduce litter volumes is communicated as “Keeping our Environment Clean.” While the website explains why reducing litter is important, it does not clearly explain why that particular target has been chosen to measure progress in keeping the environment clean.
By December 2018, the Department of Premier and Cabinet should:
- improve transparency of public reporting by:
- providing information about limitations of reported data and associated performance
- clarifying the relationship between the Premier’s Priorities performance targets and broader government objectives.
- ensure that processes to check and verify data are in place for all agency data sources
- encourage agencies to develop and implement additional supporting indicators for all Premier’s Priority performance measures to prevent and detect unintended consequences or misuse of data.
The Premier's Implementation Unit is effective in supporting agencies to deliver progress towards the Premier’s Priority targets.
The PIU promotes a systematic approach to monitoring and reporting progress against a target, based on a methodology used in delivery units elsewhere in the world. The PIU undertakes internal self-evaluation, and commissions regular reviews of methodology implementation from the consultancy that owns the methodology and helped to establish the PIU. However, the unit lacks periodic independent reviews of their overall effectiveness. The PIU has adopted a collaborative approach and assists agencies to analyse performance using data, and work across organisational silos to achieve the Premier’s Priorities targets.
Agency representatives recognise the benefits of being responsible for a Premier's Priority and speak of the value of being held to account and having the attention of the Premier and senior ministers.
By June 2019, the Department of Premier and Cabinet should:
- establish routine collection of feedback about PIU performance including:
- independent assurance of PIU performance
- opportunity for agencies to provide confidential feedback.
Appendix one: Response from agency
Appendix three: About the audit
Appendix four: Performance auditing
Parliamentary reference - Report number #307 - released 13 September 2018
Matching skills training with market needs
In 2012, governments across Australia entered into the National Partnership Agreement on Skills Reform. Under the National Partnership Agreement, the Australian Government provided incentive payments to States and Territories to move towards a more contestable Vocational Education and Training (VET) market. The aim of the National Partnership Agreement was to foster a more accessible, transparent, efficient and high quality training sector that is responsive to the needs of students and industry.
The New South Wales Government introduced the Smart and Skilled program in response to the National Partnership Agreement. Through Smart and Skilled, students can choose a vocational course from a list of approved qualifications and training providers. Students pay the same fee for their chosen qualification regardless of the selected training provider and the government covers the gap between the student fee and the fixed price of the qualification through a subsidy paid to their training provider.
Smart and Skilled commenced in January 2015, with the then Department of Education and Communities having primary responsibility for its implementation. Since July 2015, the NSW Department of Industry (the Department) has been responsible for VET in New South Wales and the implementation of Smart and Skilled.
The NSW Skills Board, comprising nine part-time members appointed by the Minister for Skills, provides independent strategic advice on VET reform and funding. In line with most other States and Territories, the Department maintains a 'Skills List' which contains government subsidised qualifications to address identified priority skill needs in New South Wales.
This audit assessed the effectiveness of the Department in identifying, prioritising, and aligning course subsidies to the skill needs of NSW. To do this we examined whether:
- the Department effectively identifies and prioritises present and future skill needs
- Smart and Skilled funding is aligned with the priority skill areas
- skill needs and available VET courses are effectively communicated to potential participants and training providers.
Smart and Skilled is a relatively new and complex program, and is being delivered in the context of significant reform to VET nationally and in New South Wales. A large scale government funded contestable market was not present in the VET sector in New South Wales before the introduction of Smart and Skilled. This audit's findings should be considered in that context.
The Department needs to better use the data it has, and collect additional data, to support its analysis of priority skill needs in New South Wales, and direct funding accordingly.
- funding scholarships and support for disadvantaged students
- funding training in regional and remote areas
- providing additional support to deliver some qualifications that the market is not providing.
The Department needs to evaluate these funding strategies to ensure they are achieving their goals. It should also explore why training providers are not delivering some priority qualifications through Smart and Skilled.
Training providers compete for funding allocations based on their capacity to deliver. The Department successfully manages the budget by capping funding allocated to each Smart and Skilled training provider. However, training providers have only one year of funding certainty at present. Training providers that are performing well are not rewarded with greater certainty.
The Department needs to improve its communication with prospective students to ensure they can make informed decisions in the VET market.
The Department also needs to communicate more transparently to training providers about its funding allocations and decisions about changes to the NSW Skills List.
The Department relies on stakeholder proposals to update the NSW Skills List. Stakeholders include industry, training providers and government departments. These stakeholders, particularly industry, are likely to be aware of skill needs, and have a strong incentive to propose qualifications that address these needs. The Department’s process of collecting stakeholder proposals helps to ensure that it can identify qualifications needed to address material skill needs.
It is also important that the Department ensures the NSW Skills List only includes priority qualifications that need to be subsidised by government. The Department does not have robust processes in place to remove qualifications from the NSW Skills List. As a result, there is a risk that the list may include lower priority skill areas. Since the NSW Skills List was first created, new additions to the list have outnumbered those removed by five to one.
The Department does not always validate information gathered from stakeholder proposals, even when it has data to do so. Further, its decision making about what to include on, or delete from, the NSW Skills List is not transparent because the rationale for decisions is not adequately documented.
The Department is undertaking projects to better use data to support its decisions about what should be on the NSW Skills List. Some of these projects should deliver useful data soon, but some can only provide useful information when sufficient trend data is available.
Recommendation
The Department should:
- by June 2019, increase transparency of decisions about proposed changes to the NSW Skills List and improve record-keeping of deliberations regarding these changes
- by December 2019, use data more effectively and consistently to ensure that the NSW Skills List only includes high priority qualifications
Only qualifications on the NSW Skills List are eligible for subsidies under Smart and Skilled. As the Department does not have a robust process for removing low priority qualifications from the NSW Skills list, some low priority qualifications may be subsidised.
The Department allocates the Smart and Skilled budget through contracts with Smart and Skilled training providers. Training providers that meet contractual obligations and perform well in terms of enrolments and completion rates are rewarded with renewed contracts and more funding for increased enrolments, but these decisions are not based on student outcomes. The Department reduces or removes funding from training providers that do not meet quality standards, breach contract conditions or that are unable to spend their allocated funding effectively. Contracts are for only one year, offering training providers little funding certainty.
Smart and Skilled provides additional funding for scholarships and for training providers in locations where the cost of delivery is high or to those that cater to students with disabilities. The Department has not yet evaluated whether this additional funding is achieving its intended outcomes.
Eight per cent of the qualifications that have been on the NSW Skills List since 2015 are not delivered under Smart and Skilled anywhere in New South Wales. A further 14 per cent of the qualifications that are offered by training providers have had no student commencements. The Department is yet to identify the reasons that these high priority qualifications are either not offered or not taken up by students.
Recommendation
The Department should:
- by June 2019, investigate why training providers do not offer, and prospective students do not enrol in, some Smart and Skilled subsidised qualifications
- by December 2019, evaluate the effectiveness of Smart and Skilled funding which supplements standard subsidies for qualifications on the NSW Skills List, to determine whether it is achieving its objectives
- by December 2019, provide longer term funding certainty to high performing training providers, while retaining incentives for them to continue to perform well.
In a contestable market, it is important for consumers to have sufficient information to make informed decisions. The Department does not provide some key information to prospective VET students to support their decisions, such as measures of provider quality and examples of employment and further education outcomes of students completing particular courses. Existing information is spread across numerous channels and is not presented in a user friendly manner. This is a potential barrier to participation in VET for those less engaged with the system or less ICT literate.
The Department conveys relevant information about the program to training providers through its websites and its regional offices. However, it could better communicate some specific information directly to individual Smart and Skilled training providers, such as reasons their proposals to include new qualifications on the NSW Skills List are accepted or rejected.
While the Department is implementing a communication strategy for VET in New South Wales, it does not have a specific communications strategy for Smart and Skilled which comprehensively identifies the needs of different stakeholders and how these can be addressed.
Recommendation
By December 2019, the Department should develop and implement a specific communications strategy for Smart and Skilled to:
- support prospective student engagement and informed decision making
- meet the information needs of training providers
Appendix one - Response from agency
Appendix two - About the audit
Appendix three - Performance auditing
Parliamentary reference - Report number #305 - released 26 July 2018
Regulation of water pollution in drinking water catchments and illegal disposal of solid waste
There are important gaps in how the Environmental Protection Authority (EPA) implements its regulatory framework for water pollution in drinking water catchments and illegal solid waste disposal. This limits the effectiveness of its regulatory responses, according to a report released today by the Auditor-General for New South Wales, Margaret Crawford.
| By 31 December 2018, to improve governance and oversight, the EPA should: | |
| 1. | implement a more effective performance framework with regular reports to the Chief Executive Officer and to the EPA Board on outcomes-based key result areas that assess its environmental and regulatory performance and trends over time |
| By 30 June 2019, to improve consistency in its practices, the EPA should: | |
| 2. | progressively update and make accessible its policies and procedures for regulatory operations, and mandate procedures where necessary to ensure consistent application |
| 3. | implement internal controls to monitor the consistency and quality of its regulatory operations. |
| By 30 June 2019, to address worsening water quality in Lake Burragorang, the EPA should: | |
| 4. | (a) review the impact of its licensed activities on water quality in Lake Burragorang, and |
| (b) develop strategies relating to its licensed activities (in consultation with other relevant NSW Government agencies) to improve and maintain the lake's water quality. | |
| To improve compliance monitoring, the EPA should implement procedures to: | |
| 5. | by 30 June 2019, validate self-reported information, eliminate hardcopy submissions and require licensees to report on their breaches of the Act and associated regulations in their annual returns |
| 6. | by 31 December 2018, conduct mandatory site inspections under the risk-based licensing scheme to assess compliance with all regulatory requirements and licence conditions. |
| By 31 December 2018 to improve enforcement, the EPA should: | |
| 7. | Implement procedures to systematically assess non-compliances with licence conditions and breaches of the Act and to implement appropriate and consistent regulatory actions. |
Appendix one – Response from agency
Appendix two – List of enforcement tools
Appendix three – The EPA's organisational structure
Appendix four – The EPA's regions and branches
Appendix five – About the audit
Appendix six – Performance auditing
Parliamentary reference - Report number #304 - released 28 June 2018
Fraud controls in local councils
Many local councils need to improve their fraud control systems, according to a report released today by the Auditor-General for New South Wales, Margaret Crawford. The report highlights that councils often have fraud control procedures and systems in place, but are not ensuring people understand them and how they work. There is also significant variation between councils in the quality of their fraud controls.
Fraud can directly influence councils’ ability to deliver services, and undermine community confidence and trust. ICAC investigations, such as the recent Operation Ricco into the former City of Botany Bay Council, show the financial and reputational damage that major fraud can cause. Good fraud control practices are critical for councils and the community.
The Audit Office of New South Wales 2015 Fraud Control Improvement Kit (the Kit) aligns with the Fraud and Corruption Control Standard AS8001-2008 and identifies ten attributes of an effective fraud control system. This audit used the Kit to assess how councils manage the risk of fraud. It identifies areas where fraud control can improve.
Fraud can disrupt the delivery and quality of services and threaten the financial stability of councils.
Recent reviews of local government in Queensland and Victoria identify that councils are at risk of fraud because they purchase large quantities of goods and services using devolved decision making arrangements. The Queensland Audit Office in its 2014–15 report 'Fraud Management in Local Government' found that ‘Councils are exposed to high-risks of fraud and corruption because of the high volume of goods and services they procure, often from local suppliers; and because of the high degree of decision making vested in councils'. They also highlight some common problems faced by councils including the absence of fraud control plans and failure to conduct regular reviews of their internal controls. Also, in 2008 and 2012 the Victorian Auditor-General identified the importance of up-to-date fraud control planning, clearly documented related policies, training staff to identify fraud risks and the importance of controls such as third party management.
Investigations into councils by the NSW Independent Commission Against Corruption (ICAC), such as the recent Operation Ricco, show the impact that fraud can have on councils. These impacts include significant financial loss, and negative public perceptions about how well councils manage fraud. The findings of these investigations also show the importance of good fraud controls for councils.
|
Operation Ricco In its report on Operation Ricco, the ICAC found that the Chief Financial Officer (CFO) of the City of Botany Bay Council and others dishonestly exercised official functions to obtain financial benefits for themselves and others by causing fraudulent payments from the Council for their benefit. It also identified the CFO received inducements for favourable treatment of contractors. The report noted that there were overwhelming failures in the council’s procedures and governance framework that created significant opportunities for corruption, of which the CFO and others took advantage. It found weaknesses across a wide variety of governance processes and functions, including those involving the general manager, the internal audit function, external audit, and the operation of the audit committee. |
The strength of fraud control systems varies significantly across New South Wales local councils, and many councils we surveyed need to improve significantly.
Most surveyed councils do not have fraud control plans that direct resources to mitigating the specific fraud risks they face. Few councils reported that they conduct regular risk assessments or health checks to ensure they respond effectively to the risks they identify.
There are sector wide weaknesses that impact on the strength of councils' fraud control practice. Less than one-third of councils that responded to the survey:
- communicate their expectations about ethical conduct and responsibility for fraud control to staff
- regularly train staff to identify and respond to suspected fraud
- inform staff or the wider community how to report suspected fraud and how reports made will be investigated.
The audit also identified a pattern of councils developing policies, procedures or systems without ensuring people understand them, or assessing that they work. This reduces the likelihood that staff will actually use them.
In general, metropolitan and regional councils surveyed have stronger fraud control systems than rural councils.
Newly amalgamated councils are operating with systems inherited from two or more pre-amalgamated councils. These councils are developing new systems for their changed circumstances.
Five councils surveyed reported that they did not comply with the Public Interest Disclosure Act 1994.
Observations for the sector:
Councils should improve their fraud controls by:
- tailoring fraud control plans to their circumstances and specific risks
- systematically and regularly reviewing their fraud risks and fraud control systems to keep their plans up to-date
- effectively communicating fraud risks, and how staff and the community can report suspected fraud
- ensuring that they comply with the Public Interest Disclosure Act 1994.
Recommendation:
That the Office of Local Government:
- work with councils to ensure they comply with the Public Interest Disclosure Act 1994.
That the Office of Local Government:
- work with state entities and councils to develop a common approach to how fraud complaints and incidences are defined and categorised so that they can:
- better use data to provide a clearer picture of the level of fraud within councils
- measure the effectiveness of, and drive improvement in councils' fraud controls systems
Appendix one – Response from agency
Appendix three – About the audit
Appendix four – Performance auditing
Parliamentary reference - Report number #303 - released 22 June 2018
Managing risks in the NSW public sector: risk culture and capability
The Ministry of Health, NSW Fair Trading, NSW Police Force, and NSW Treasury Corporation are taking steps to strengthen their risk culture, according to a report released today by the Auditor-General, Margaret Crawford. 'Senior management communicates the importance of managing risk to their staff, and there are many examples of risk management being integrated into daily activities', the Auditor-General said.
We did find that three of the agencies we examined could strengthen their culture so that all employees feel comfortable speaking openly about risks. To support innovation, senior management could also do better at communicating to their staff the levels of risk they are willing to accept.
Effective risk management is essential to good governance, and supports staff at all levels to make informed judgements and decisions. At a time when government is encouraging innovation and exploring new service delivery models, effective risk management is about seizing opportunities as well as managing threats.
Over the past decade, governments and regulators around the world have increasingly turned their attention to risk culture. It is now widely accepted that organisational culture is a key element of risk management because it influences how people recognise and engage with risk. Neglecting this ‘soft’ side of risk management can prevent institutions from managing risks that threaten their success and lead to missed opportunities for change, improvement or innovation.
This audit assessed how effectively NSW Government agencies are building risk management capabilities and embedding a sound risk culture throughout their organisations. To do this we examined whether:
- agencies can demonstrate that senior management is committed to risk management
- information about risk is communicated effectively throughout agencies
- agencies are building risk management capabilities.
The audit examined four agencies: the Ministry of Health, the NSW Fair Trading function within the Department of Finance, Services and Innovation, NSW Police Force and NSW Treasury Corporation (TCorp). NSW Treasury was also included as the agency responsible for the NSW Government's risk management framework.
In assessing an agency’s risk culture, we focused on four key areas:
Executive sponsorship (tone at the top)
In the four agencies we reviewed, senior management is communicating the importance of managing risk. They have endorsed risk management frameworks and funded central functions tasked with overseeing risk management within their agencies.
That said, we found that three case study agencies do not measure their existing risk culture. Without clear measures of how employees identify and engage with risk, it is difficult for agencies to tell whether employee's behaviours are aligned with the 'tone' set by the executive and management.
For example, in some agencies we examined we found a disconnect between risk tolerances espoused by senior management and how these concepts were understood by staff.
Employee perceptions of risk management
Our survey of staff indicated that while senior leaders have communicated the importance of managing risk, more could be done to strengthen a culture of open communication so that all employees feel comfortable speaking openly about risks. We found that senior management could better communicate to their staff the levels of risk they should be willing to accept.
Integration of risk management into daily activities and links to decision-making
We found examples of risk management being integrated into daily activities. On the other hand, we also identified areas where risk management deviated from good practice. For example, we found that corporate risk registers are not consistently used as a tool to support decision-making.
Support and guidance to help staff manage risks
Most case study agencies are monitoring risk-related skills and knowledge of their workforce, but only one agency has addressed the gaps it identified. While agencies are providing risk management training, surveyed staff in three case study agencies reported that risk management training is not adequate.
NSW Treasury provides agencies with direction and guidance on risk management through policy and guidelines. In line with better practice, NSW Treasury's principles-based policy acknowledges that individual agencies are in a better position to understand their own risks and design risk management frameworks that address those risks. Nevertheless, there is scope for NSW Treasury to refine its guidance material to support a better risk culture in the NSW public sector.
Recommendation
By May 2019, NSW Treasury should:
- Review the scope of its risk management guidance, and identify additional guidance, training or activities to improve risk culture across the NSW public sector. This should focus on encouraging agency heads to form a view on the current risk culture in their agencies, identify desirable changes to that risk culture, and take steps to address those changes.
Appendix one - Response from agencies
Appendix three - About the audit
Appendix four - Performance auditing
Parliamentary reference - Report number #298 - released 23 April 2018
Internal Controls and Governance 2017
Agencies need to do more to address risks posed by information technology (IT).
Effective internal controls and governance systems help agencies to operate efficiently and effectively and comply with relevant laws, standards and policies. We assessed how well agencies are implementing these systems, and highlighted opportunities for improvement.
1. Overall trends
|
New and repeat findings |
The number of reported financial and IT control deficiencies has fallen, but many previously reported findings remain unresolved. |
|
High risk findings |
Poor systems implementations contributed to the seven high risk internal control deficiencies that could affect agencies. |
|
Common findings |
Poor IT controls are the most commonly reported deficiency across agencies, followed by governance issues relating to cyber security, capital projects, continuous disclosure, shared services, ethics and risk management maturity. |
2. Information Technology
|
IT security |
Only two-thirds of agencies are complying with their own policies on IT security. Agencies need to tighten user access and password controls. |
|
Cyber security |
Agencies do not have a common view on what constitutes a cyber attack, which limits understanding the extent of the cyber security threat. |
|
Other IT systems |
Agencies can improve their disaster recovery plans and the change control processes they use when updating IT systems. |
3. Asset Management
|
Capital investment |
Agencies report delays delivering against the significant increase in their budgets for capital projects. |
|
Capital projects |
Agencies are underspending their capital budgets and some can improve capital project governance. |
|
Asset disposals |
Eleven per cent of agencies were required to sell their real property through Property NSW but didn’t. And eight per cent of agencies can improve their asset disposal processes. |
4. Governance
|
Governance arrangements |
Sixty-four per cent of agencies’ disclosure policies support communication of key performance information and prompt public reporting of significant issues. |
|
Shared services |
Fifty-nine per cent of agencies use shared services, yet 14 per cent do not have service level agreements in place and 20 per cent can strengthen the performance standards they set. |
5. Ethics and Conduct
|
Ethical framework |
Agencies can reinforce their ethical frameworks by updating code‑of‑conduct policies and publishing a Statement of Business Ethics. |
|
Conflicts of interest |
All agencies we reviewed have a code of conduct, but they can still improve the way they update and manage their codes to reduce the risk of fraud and unethical behaviour. |
6. Risk Management
|
Risk management maturity |
All agencies have implemented risk management frameworks, but with varying levels of maturity. |
|
Risk management elements |
Many agencies can improve risk registers and strengthen their risk culture, particularly in the way that they report risks to their lead agency. |
This report covers the findings and recommendations from our 2016–17 financial audits related to the internal controls and governance of the 39 largest agencies (refer to Appendix three) in the NSW public sector. These agencies represent about 95 per cent of total expenditure for all NSW agencies and were considered to be a large enough group to identify common issues and insights.
The findings in this report should not be used to draw conclusions on the effectiveness of individual agency control environments and governance arrangements. Specific financial reporting, controls and service delivery comments are included in the individual 2017 cluster financial audit reports tabled in Parliament from October to December 2017.
This new report offers strategic insight on the public sector as a whole
In previous years, we have commented on internal control and governance issues in the volumes we published on each ‘cluster’ or agency sector, generally between October and December. To add further value, we then commented more broadly about the issues identified for the public sector as a whole at the start of the following year.
This year, we have created this report dedicated to internal controls and governance. This will help Parliament to understand broad issues affecting the public sector, and help agencies to compare their own performance against that of their peers.
Without strong control measures and governance systems, agencies face increased risks in their financial management and service delivery. If they do not, for example, properly authorise payments or manage conflicts of interest, they are at greater risk of fraud. If they do not have strong information technology (IT) systems, sensitive and trusted information may be at risk of unauthorised access and misuse.
These problems can in turn reduce the efficiency of agency operations, increase their costs and reduce the quality of the services they deliver.
Our audits do not review every control or governance measure every year. We select a range of measures, and report on those that present the most significant risks that agencies should mitigate. This report divides these into the following six areas:
- Overall trends
- Information technology
- Asset management
- Governance
- Ethics and conduct
- Risk management.
Internal controls are processes, policies and procedures that help agencies to:
- operate effectively and efficiently
- produce reliable financial reports
- comply with laws and regulations.
This chapter outlines the overall trends for agency controls and governance issues, including the number of findings, level of risk and the most common deficiencies we found across agencies. The rest of this volume then illustrates this year’s controls and governance findings in more detail.
|
Issues |
Recommendations |
|
1.1 New and repeat findings |
|
|
The number of internal control deficiencies reduced over the past three years, but new higher-risk information technology (IT) control deficiencies were reported in 2016–17. Deficiencies repeated from previous years still make up a sizeable proportion of all internal control deficiencies. |
Recommendation Agencies should focus on emerging IT risks, but also manage new IT risks, reduce existing IT control deficiencies, and address repeat internal control deficiencies on a more timely basis. |
|
1.2 High risk findings |
|
|
We found seven high risk internal control deficiencies, which might significantly affect agencies. |
Recommendation Agencies should rectify high risk internal control deficiencies as a priority |
|
1.3 Common findings |
|
|
The most common internal control deficiencies related to poor or absent IT controls. We found some common governance deficiencies across multiple agencies. |
Recommendation Agencies should coordinate actions and resources to help rectify common IT control and governance deficiencies. |
Information technology (IT) has become increasingly important for government agencies’ financial reporting and to deliver their services efficiently and effectively. Our audits reviewed whether agencies have effective controls in place over their IT systems. We found that IT security remains the source of many control weakness in agencies.
| Issues | Recommendations |
2.1 IT security |
|
|
User access administration While 95 per cent of agencies have policies about user access, about two-thirds were compliant with these policies. Agencies can improve how they grant, change and end user access to their systems. |
Recommendation Agencies should strengthen user access administration to prevent inappropriate access to sensitive systems. Agencies should:
|
|
Privileged access Sixty-eight per cent of agencies do not adequately manage who can access their information systems, and many do not sufficiently monitor or restrict privileged access. |
Recommendation Agencies should tighten privileged user access to protect their information systems and reduce the risks of data misuse and fraud. Agencies should ensure they:
|
|
Password controls Forty-one per cent of agencies did not meet either their own standards or minimum standards for password controls. |
Recommendation Agencies should review and enforce password controls to strengthen security over sensitive systems. As a minimum, password parameters should include:
|
2.2 Cyber Security |
|
|
Cyber security framework Agencies do not have a common view on what constitutes a cyber attack, which limits understanding the extent of the cyber security threat. |
Recommendation The Department of Finance, Services and Innovation should revisit its existing framework to develop a shared cyber security terminology and strengthen the current reporting requirements for cyber incidents. |
|
Cyber security strategies While 82 per cent of agencies have dedicated resources to address cyber security, they can strengthen their strategies, expertise and staff awareness. |
Recommendations The Department of Finance, Services and Innovation should:
Agencies should ensure they adequately resource staff dedicated to cyber security. |
2.3 Other IT systems |
|
|
Change control processes Some agencies need to improve change control processes to avoid unauthorised or inaccurate system changes. |
Recommendation Agencies should consistently perform user acceptance testing before system upgrades and changes. They should also properly approve and document changes to IT systems. |
|
Disaster recovery planning Agencies can do more to adequately assess critical business systems to enforce effective disaster recovery plans. This includes reviewing and testing their plans on a timely basis. |
Recommendation Agencies should complete business impact analyses to strengthen disaster recovery plans, then regularly test and update their plans. |
Agency service delivery relies on developing and renewing infrastructure assets such as schools, hospitals, roads, or public housing. Agencies are currently investing significantly in new assets. Agencies need to manage the scale and volume of current capital projects in order to deliver new infrastructure on time, on budget and realise the intended benefits. We found agencies can improve how they:
- manage their major capital projects
- dispose of existing assets.
| Issues | Recommendations or conclusions |
3.1 Capital investment |
|
|
Capital asset investment ratios Most agencies report high capital investment ratios, but one-third of agencies’ capital investment ratios are less than one. |
Recommendation Agencies with high capital asset investment ratios should ensure their project management and delivery functions have the capacity to deliver their current and forward work programs. |
|
Volume of capital spending Most agencies have significant forward spending commitments for capital projects. However, agencies’ actual capital expenditure has been below budget for the last three years. |
Conclusion The significant increase in capital budget underspends warrant investigation, particularly where this has resulted from slower than expected delivery of projects from previous years. |
3.2 Capital projects |
|
|
Major capital projects Agencies’ major capital projects were underspent by 13 percent against their budgets. |
Conclusion The causes of agency budget underspends warrant investigation to ensure the NSW Government’s infrastructure commitment is delivered on time. |
|
Capital project governance Agencies do not consistently prepare business cases or use project steering committees to oversee major capital projects. |
Conclusion Agencies that have project management processes that include robust business cases and regular updates to their steering committees (or equivalent) are better able to provide those projects with strategic direction and oversight. |
3.3. Asset disposals |
|
|
Asset disposal procedures Agencies need to strengthen their asset disposal procedures. |
Recommendations Agencies should have formal processes for disposing of surplus properties. Agencies should use Property NSW to manage real property sales unless, as in the case for State owned corporations, they have been granted an exemption. |
Governance refers to the high-level frameworks, processes and behaviours that help an organisation to achieve its objectives, comply with legal and other requirements, and meet a high standard of probity, accountability and transparency.
This chapter sets out the governance lighthouse model the Audit Office developed to help agencies reach best practice. It then focuses on two key areas: continuous disclosure and shared services arrangements. The following two chapters look at findings related to ethics and risk management.
| Issues | Recommendations or conclusions |
4.1 Governance arrangements |
|
|
Continuous disclosure Continuous disclosure promotes improved performance and public trust and aides better decision-making. Continuous disclosure is only mandatory for NSW Government Businesses such as State owned corporations. |
Conclusion Some agencies promote transparency and accountability by publishing on their websites a continuous disclosure policy that provides for, and encourages:
|
4.2 Shared services |
|
|
Service level agreements Some agencies do not have service level agreements for their shared service arrangements. Many of the agreements that do exist do not adequately specify controls, performance or reporting requirements. This reduces the effectiveness of shared services arrangements. |
Conclusion Agencies are better able to manage the quality and timeliness of shared service arrangements where they have a service level agreement in place. Ideally, the terms of service should be agreed before services are transferred to the service provider and:
|
|
Shared service performance Some agencies do not set performance standards for their shared service providers or regularly review performance results. |
Conclusion Agencies can achieve better results from shared service arrangements when they regularly monitor the performance of shared service providers using key measures for the benefits realised, costs saved and quality of services received. Before agencies extend or renegotiate a contract, they should comprehensively assess the services received and test the market to maximise value for money. |
All government sector employees must demonstrate the highest levels of ethical conduct, in line with standards set by The Code of Ethics and Conduct for NSW government sector employees.
This chapter looks at how well agencies are managing these requirements, and where they can improve their policies and processes.
We found that agencies mostly have the appropriate codes, frameworks and policies in place. But we have highlighted opportunities to improve the way they manage those systems to reduce the risks of unethical conduct.
| Issues | Recommendations or conclusions |
5.1 Ethical framework |
|
|
Code of conduct All agencies we reviewed have a code of conduct, but they can still improve the way they update and manage their codes to reduce the risk of fraud and unethical behaviour. |
Recommendation Agencies should regularly review their code-of-conduct policies and ensure they keep their codes of conduct up-to-date. |
|
Statement of business ethics Most agencies maintain an ethical framework, but some can enhance their related processes, particularly when dealing with external clients, customers, suppliers and contractors. |
Conclusion Agencies can enhance their ethical frameworks by publishing a Statement of Business Ethics, which communicates their values and culture. |
5.2 Potential conflicts of interest |
|
|
Conflicts of interest All agencies have a conflicts-of-interest policy, but most can improve how they identify, manage and avoid conflicts of interest. |
Recommendation Agencies should improve the way they manage conflicts of interest, particularly by:
|
|
Gifts and benefits While all agencies already have a formal gifts-and-benefits policy, we found gaps in the management of gifts and benefits by some that increase the risk of unethical conduct. |
Recommendation Agencies should improve the way they manage gifts and benefits by promptly updating registers and providing annual training to staff. |
Risk management is an integral part of effective corporate governance. It helps agencies to identify, assess and prioritise the risks they face and in turn minimise, monitor and control the impact of unforeseen events. It also means agencies can respond to opportunities that may emerge and improve their services and activities.
This year we looked at the overall maturity of the risk management frameworks that agencies use, along with two important risk management elements: risk culture and risk registers.
| Issues | Recommendations or conclusions |
6.1 Risk management maturity |
|
|
All agencies have implemented risk management frameworks, but with varying levels of maturity in their application. Agencies’ averaged a score of 3.1 out of five across five critical assessment criteria for risk management. While strategy and governance fared best, the areas that most need to improve are risk culture, and systems and intelligence. |
Conclusion Agencies have introduced risk management frameworks and practices as required by the Treasury’s:
However, more can be done to progress risk management maturity and embed risk management in agency culture. |
6.2 Risk management elements |
|
|
Risk culture Most agencies have started to embed risk management into the culture of their organisation. But only some have successfully done so, and most agencies can improve their risk culture.
|
Conclusion Agencies can improve their risk culture by:
|
|
Risk registers and reporting Some agencies do not report their significant risks to their lead agency, which may impair the way resources are allocated in their cluster. Some agencies do not integrate risk registers at a divisional and whole-of-enterprise level. |
Conclusion Agencies not reporting significant risks at the cluster level increases the likelihood that significant risks are not being mitigated appropriately. |
Effective risk management can improve agency decision-making, protect reputations and lead to significant efficiencies and cost savings. By embedding risk management directly into their operations, agencies can also derive extra value for their activities and services.
Managing demand for ambulance services 2017
NSW Ambulance has introduced several initiatives over the past decade to better manage the number of unnecessary ambulance responses and transports to hospital emergency departments. However, there is no overall strategy to guide the development of these initiatives nor do NSW Ambulance's data systems properly monitor their impact. As a result, the Audit Office was unable to assess whether NSW Ambulance's approach to managing demand is improving the efficiency of ambulance services.
NSW Ambulance uses a telephone referral system to manage triple zero calls from people with medical issues that do not require an ambulance. This has the potential to achieve efficiency improvements but there are weaknesses in NSW Ambulance's use and monitoring of this system. Paramedics are now able to make decisions about whether patients need transport to a hospital emergency department. NSW Ambulance does not routinely measure or monitor the decisions paramedics make, so it does not know whether these decisions are improving efficiency. Extended Care Paramedics who have additional skills in diagnosing and treating patients with less urgent medical issues were introduced in 2007. NSW Ambulance analysis indicates that these paramedics have the potential to improve efficiency, but have not been used as effectively as possible.
Our 2013 audit of NSW Ambulance found that accurate monitoring of activity and performance was not being conducted. More than four years later, this remains the case.
NSW Ambulance has recognised the need to change the way it manages demand and has developed initiatives that have the potential to improve efficiency. However, there are significant weaknesses in the strategy for and implementation of its demand management initiatives.
NSW Ambulance has identified the goal of moving from an emergency transport provider to a mobile health service and developed several initiatives to support this. Its demand management initiatives have the potential to contribute to the broader policy directions for the health system in New South Wales. However, there is no clear overall strategy guiding these initiatives and their implementation has been poor.
NSW Ambulance's reasons for changing its approach to demand management have not been communicated proactively to the community. Demand management initiatives that have been operating for over a decade still do not have clear performance measures or targets. Project management of new initiatives has been inadequate, with insufficient organisational resources to oversee them and inadequate engagement with other healthcare providers.
NSW Ambulance uses an in-house Vocational Education and Training course to recruit some paramedics, as well as recruiting paramedics who have completed a university degree. No other Australian ambulance services continue to provide their own Vocational Education and Training qualifications. Paramedics will need more support in several key areas to be able to fulfil their expanded roles in providing a mobile health service. Performance and development systems for paramedics are not used effectively. Up to date technology would help paramedics make better decisions and improve NSW Ambulance's ability to monitor demand management activity.
There are gaps in NSW Ambulance's oversight of the risks of some of the initiatives it has introduced, particularly its lack of information on the outcomes for patients who are not transported to hospital. Weaknesses in the way NSW Ambulance uses its data limit its ability to properly assess the risks of the demand management initiatives it has introduced.
Parliamentary reference - Report number #295 - released 13 December 2017
Industry 2017
The following report highlights the results of the financial audits of NSW Government entities in the Industry cluster. The report focuses on key observations and findings from the most recent audits of these entities.
The report notes that TAFE NSW will continue to incur extra costs each year to produce reliable financial information due to deficiencies in its student administration system. TAFE NSW plans to replace its Student Administration and Learning Management system in 2018-19 at an estimated cost of $89 million.
1. Financial reporting and controls
|
Financial reporting |
Unqualified audit opinions were issued for 44 out of 48 financial statement audits with four audits incomplete. Early close procedures continue to promote earlier and better quality financial reporting. |
| Financial performance | The cluster recorded a net deficit of $107 million in 2016–17 ($78.0 million in 2015–16). Contributing to the overall cluster net deficit was the Department's $226 million net deficit offset by net surpluses at Water NSW and the Forestry Corporation of New South Wales. |
| TAFE NSW continues to experience system issues | TAFE NSW incurs extra costs each year to produce reliable financial information due to deficiencies in its student administration system. TAFE NSW plans to replace its Student Administration and Learning Management system in 2018–19 at an estimated cost of $89 million. |
| Internal controls |
We identified 180 internal control issues, including 61 repeat issues across the cluster. We rated four of these issues as 'high' risk, 98 as ‘moderate’ risk and 78 as ‘low’ risk. Of the 180 issues raised, 37 related to financial reporting and 52 related to controls over processes such as procurement and fixed assets. Some internal control issues and recommendations identified in previous years, have been repeated and should be addressed promptly to reduce risks and improve processes. |
| Deficient user administration access | Agencies need to strengthen user access administration to critical financial systems. |
2. Service delivery
| Premier and State Priorities |
Australian Bureau of Statistics data shows the Premier's priority for job creation has been achieved. While performance has declined for the State priority to increase the proportion of people completing apprenticeships and traineeships, the Department advises it has initiatives in place to achieve this State priority, and the State priority for New South Wales to lead Australia in business confidence. |
| Crown land | The Department is working to respond to the recommendations from a Parliamentary Inquiry into Crown Land and to implement the revised framework contained in the Crown Land Management Act 2016. |
| Aboriginal land claims |
Despite a continued focus, the Department has been unsuccessful in reducing the number of unprocessed Aboriginal land claims. The Department should continue to implement measures to reduce the backlog of unprocessed Aboriginal land claims. |
This report focuses on agencies in the Industry cluster. The report focuses on audit results, observations, conclusions and recommendations for financial reporting and controls, and service delivery.
This cluster leads the State's promotion of New South Wales as the place to invest and produce goods and services. Significant cluster agencies deliver services in the following areas:
Confidence in public sector decision-making and transparency is enhanced when financial reporting is accurate and timely. Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies.
This chapter outlines audit observations, conclusions and recommendations for the financial reporting and controls of agencies in the cluster for 2016–17.
| Observation | Conclusion or recommendation |
| 2.1 Quality of financial reporting | |
| Unqualified audit opinions were issued for 44 out of 48 financial statement audits. Four audits are continuing. | Ongoing improvements in the preparation of financial statements helped identify and resolve material issues. |
| The number of misstatements within the cluster fell from 104 in 2015–16 to 70 in 2016–17. | The ‘early close procedures’ initiative introduced by the Treasury in 2011–12 has reduced the number of misstatements each year. |
| 2.2 Timeliness of financial reporting | |
| Most agencies complied with the Treasury’s early close procedures and the timetable for the preparation and audit of financial statements. | Greater focus on financial reporting and effective early close procedures has improved the timeliness of financial reporting, but further improvements are required. |
| 2.3 Key financial issues from cluster agencies | |
| The Department of Industry completed a revaluation of Crown land and continues work on improving the accounting for Crown land. | The value of Crown land recognised in the Department's financial statements at 30 June 2017 was $5.3 billion. The revaluation was carried out using a revised mass valuation approach which reduced complexity and subjectivity and improved transparency. |
| There is no process in place to ensure agencies recognise all the Crown land they manage and control. | Recommendation: The Department should confirm the completeness and accuracy of the Crown land database with other organisations that manage and control Crown land to improve the reliability of its records. |
| TAFE NSW incurred approximately $6 million of direct costs to deal with issues in its student administration system and establish the integrity of its financial data for 2016–17. | TAFE NSW will continue to incur extra costs each year to produce reliable financial information. TAFE NSW advises it intends to replace the Student Administration and Learning Management system it jointly implemented with the Department of Education three years ago at a cost $40.2 million. TAFE plans to implement the new system in 2018–19 at an estimated cost of $89 million. |
| 2.4 Key financial information | |
| The cluster recorded a net deficit of $107 million in 2016–17 ($78.0 million in 2015–16). | The overall cluster net deficit included the Department's $226 million net deficit which was partly offset by net surpluses in a number of other agencies, including Water NSW and the Forestry Corporation of New South Wales. Most agencies in the cluster, including the Department, but excluding the State owned corporations, are dependent on the NSW Government for the majority of their revenue. |
| 2.5 Financial performance and sustainability | |
| We assessed the performance of certain agencies against key financial sustainability indicators. This identified four agencies with adjusted net deficits and two agencies with liquidity ratios below one. | Overall, based on our analysis these agencies are not at high risk of sustainability concerns. |
| 2.6 Internal controls | |
| A significant number of repeat internal control issues were again raised with management for certain agencies in the cluster. |
Recommendation (repeat issue): Internal control issues and recommendations from previous years should be addressed promptly to reduce risks and improve processes. |
| User access administration over financial systems needs to be improved. 17 moderate risk issues related to user access administration across nine agencies were identified. |
Recommendation: Agencies should ensure administration of user access to critical systems
|
Government outcomes can be achieved by delivering services through a mix of the public, private or not-for-profit sectors. Service delivery reform is most successful if there is clear accountability for service delivery outcomes, decisions are aligned to the government's strategic direction, and performance and value for money are monitored and evaluated.
This chapter outlines our audit observations, conclusions and recommendations for the service delivery of agencies in the cluster for 2016–17.
| Issues | Conclusion or recommendation |
|
3.1 Measuring and reporting on performance |
|
| The Department is responsible for two State priorities (increasing apprenticeships and business confidence) and the Premier's priority of creating jobs. The Department also supports four state priorities. | Australian Bureau of Statistics data shows the Premier's priority for job creation continues to be achieved. The Department reported that the number of people completing apprenticeships and traineeships had declined to 59 per cent against a 2019 target of 65 per cent, while the State was ranked first or second on a range of business confidence indicators. |
|
3.2 Improvements required in the administration of Crown land |
|
| The Department faces many challenges in the administration of Crown land. These challenges range from inadequate systems and processes through to satisfying competing commercial, environmental, and community interests. |
The Department has implemented, or is implementing the recommendations from a performance audit on the Sale and Lease of Crown land and the Parliamentary Inquiry into Crown land. It is also implementing the revised framework for Crown land contained in the Crown Land Management Act 2016. |
|
3.3 Aboriginal land claims over Crown land |
|
| The number of unprocessed Aboriginal land claims continues to increase. Work on finalising Aboriginal Land Agreements, which may help address the claims backlog, is continuing. | Recommendation (repeat Issue): The Department should continue to implement measures to reduce the number of unprocessed Aboriginal land claims. |
|
3.4 Skills development |
|
| Eleven contracted Smart and Skilled service providers had their contracts cancelled for quality issues. There were 391 providers of Smart and Skilled qualifications as at October 2017. | The Department of Industry spent $1.4 billion on the provision of vocational education and training. The Department has controls in place to monitor the performance of contracted service providers to ensure quality delivery of training. |
Sharing school and community facilities
Schools and the community would benefit if school facilities were shared more often.
The Department of Education’s ‘Community Use of School Facilities Policy’ encourages but does not require schools to share facilities. Sharing depends heavily on the willingness of school principals and there are few incentives. There are many challenges in developing agreements with community users and there is only limited support available from the Department.
There are strategies and plans to support the sharing of facilities between schools and the wider community, but none are backed up with budgets, specific plans or timeframes.
Governments should strive for the best use of assets. This is particularly important in the context of a growing New South Wales population, fiscal constraints and increasing demand for services.
Lack of available land, rising land costs and population growth highlighted in our April 2017 'Planning for school infrastructure' performance audit report mean that new and existing schools will need to share their facilities with communities more than is currently the case.
This audit assessed how effectively schools share facilities with each other, local councils and community groups. In making this assessment, the audit examined whether the Department of Education (Department):
- has a clear policy to encourage and support facilities sharing
- is implementing evidence-based strategies and procedures for facilities sharing
- can show it is realising an increasing proportion of sharing opportunities.
Facilities sharing is the use of a physical asset, such as a building, rooms, or open spaces, by more than one group for a range of activities at the same time or at different times. For the purposes of this audit, we have divided sharing arrangements into two types: shared use and joint use.
Shared use refers to arrangements where existing school assets are hired out for non-school purposes, usually for a limited time. The assets remain under the control of the school. Generally, there is little alteration or enhancement to the asset required to enable shared use. Shared use can also refer to schools using external facilities, such as council pools, but these arrangements are not included within the scope of this audit.
Joint use refers to arrangements where new or upgraded school and non-school facilities or community hubs are planned, funded, built and jointly shared between a school and other parties, usually involving significant investment.
Both shared use and joint use agreements are governed by contractual obligations.
The sharing of school facilities with the community is not fully effective. The Department of Education is implementing strategies to increase shared and joint use but several barriers, some outside the Department’s direct control, must be addressed to fully realise benefits to students and the community of sharing school facilities. In addition, the Department needs to do more to encourage individual schools to share facilities with the community.
A collaborative, multi-agency approach is needed to overcome barriers to the joint use of facilities, otherwise, the Department may need significantly more funds than planned to deliver sufficient fit-for-purpose school facilities where and when needed.
Since the early 2000’s, several reviews in NSW and other jurisdictions have commented on the benefits of and need to increase the sharing of school facilities.
Several NSW Government strategies and plans support shared and joint use of facilities between schools and the wider community, but none are backed up with financial incentives, or specific plans with implementation timeframes. In Victoria and Queensland whole-of-government processes are in place to support a more coordinated approach to planning, building and sharing community facilities. For example, Victoria has a comprehensive policy framework encompassing both existing and future use of community facilities and a $50 million program to seed the development of community facilities on school sites over the next four years.
There are examples of successful shared use, but more can be done. Information about the available facilities is not readily available to potential community users. Schools should work more closely with councils and other stakeholders to leverage shared use.
Currently, the administrative burden, costs and risks associated with shared use can exceed the perceived benefits to schools, leading to reluctance amongst some Principals to share. In addition, a substantial backlog of school-initiated infrastructure proposals awaiting Departmental approval means that schools that raise money from sharing their facilities find it difficult to use the funds they raise on improved infrastructure. Some of these proposals have been waiting for approval for more than 12 months.
The Department could do more to support Principals by ensuring the fees charged for facilities cover the costs incurred by schools, that Principals can access help with negotiating and managing contracts, and that infrastructure proposals initiated and funded by schools are approved in a timely manner.
The Department is not monitoring shared use across the State, and does not evaluate different approaches as evidence to influence policies and procedures.
Recommendations
By December, 2018, the Department should:
- increase incentives and reduce impediments for school Principals to share school facilities, including:
- review the methodology for calculating fees charged for facilities to ensure that shared use of school facilities does not result in a financial burden to schools or the Department
- improve support provided to Principals by School Infrastructure NSW, including reducing the backlog of school-initiated infrastructure proposals awaiting approval
- develop service standards, including timeframes, for assessing and approving school-initiated infrastructure proposals.
- provide readily-accessible information about available school facilities to community groups and local councils
- implement processes to monitor and regularly evaluate the implementation of the shared use policy and promote better practice to drive improvements.
As discussed in our 2017 audit report on ‘Planning for school infrastructure’, joint use agreements are a key direction of the School Assets Strategic Plan. Joint use of school facilities will be necessary to ensure that there will be enough fit-for-purpose learning spaces for students when and where needed. Under the ‘Community Use of School Facilities Policy’ Principals play the leading role in identifying opportunities, and developing and managing agreements for sharing school facilities. This is impractical for joint use projects which involve substantial investment in new or refurbished assets, in particular for joint use projects in schools that are yet to be built. In addition, the policy does not address joint-use facilities built on land not owned by the Department. For these reasons, the Department is developing a new policy.
The Department is planning to develop joint use agreements in a more systematic way as part of school community planning, previously known as cluster planning, with a special focus on local councils. Several agreements are currently being piloted, and will be evaluated to provide an evidence-based foundation for this new approach.
To develop or refurbish school facilities for joint use, the Department, councils and other key stakeholders must work together and prioritise joint use from the earliest stages of any project. A collaborative, multi-agency approach is needed to ensure sufficient fit-for-purpose facilities are available for school students within the funding framework proposed in the School Assets Strategic Plan.
To increase shared and joint use, the Department is recruiting specialist staff in its Asset Division to assist with the brokerage, community engagement and development of agreements, but these staff are not dedicated to joint use projects and their available time may not be sufficient to provide the necessary support in the timeframes required.
Recommendations
By December, 2018, the Department of Education should:
- ensure that the implementation of the new ‘Joint Use of School Facilities and Land Policy’ is adequately resourced, and has the support of Principals
- implement processes to monitor and regularly evaluate the implementation of joint use policy and promote better practice to drive improvements.
Appendix one - Response from agency
Appendix two - About the audit
Appendix three - Victoria's 30-Year Infrastructure Strategy
Appendix four - Not-for-profit hire changes
Appendix five - Performance Auditing
Parliamentary reference - Report number #293 - released 1 November 2017
2016 - An overview
This report focuses on key observations and findings from 2016 audits and highlights key areas of focus for financial and performance audits in 2017.
| Financial reporting | |
| Observation | Conclusion |
| Only one qualified audit opinion was issued on the 2015–16 financial statements of NSW public sector agencies, compared to two in 2014–15. | The quality of financial reporting continued to improve across the NSW public sector. |
| More 2015–16 financial statements and audit opinions were signed within three months of the year end. | Timely financial reporting was facilitated by more agencies resolving significant accounting issues early, completing asset valuations on time and compiling sufficient evidence to support financial statement balances. |
|
NSW Treasury’s early close procedures in 2015–16 were again successful in improving the quality and timeliness of financial reporting, largely facilitated by the early resolution of accounting issues. For 2016–17, NSW Treasury has narrowed the scope of mandatory early close procedures. |
The narrowed scope of mandatory early close procedures may diminish the good performance in ensuring the quality and timeliness of financial reporting achieved in recent years. To mitigate this risk, NSW Treasury has mandated that agencies perform non-financial asset valuations and prepare proforma financial statements in their early close procedures. It also encourages them to continue with the good practices embedded in recent years. |
| Although most agencies complied with NSW Treasury’s early close asset revaluation procedures we identified areas where they can improve. | Asset revaluations need to commence early enough to ensure all assets are identified and the results are analysed, recorded and reflected accurately in the early close financial statements. |
| Number of misstatements | |||||
| Year ended 30 June | 2015-16 | 2014-15 | 2013-14 | 2012-13 | 2011-12 |
| Total reported misstatements | 298 | 396 | 459 | 661 | 1,077 |
All material misstatements identified by agencies and audit teams were corrected before the financial statements and audit opinions were signed. A material misstatement relates to an incorrect amount, classification, presentation or disclosure in the financial statements that could reasonably be expected to influence the economic decisions of users.
Significant matters reported to the portfolio Minister, Treasurer and Agency Head
In 2015–16, we reported the following significant matters to the portfolio Minister, Treasurer and agency head in our Statutory Audit Reports:
Appropriate financial controls help ensure the efficient and effective use of resources and the implementation and administration of agency policies. They are essential for quality and timely decision making.
In 2015–16, our audit teams made the following key observations on the financial controls of NSW public sector agencies.
| Financial controls | |
| Observation | Conclusion |
| More needs to be done to implement audit recommendations on a timely basis. We found 212 internal control issues identified in previous audits had not been adequately addressed by 30 June 2016. |
Delays in implementing audit recommendations can impact the quality of financial information and the effectiveness of decision making. Agencies need to ensure they have action plans, timeframes and assigned responsibilities to address recommendations in a timely manner. |
| Agencies continue to face challenges managing information security. Most information technology issues we identified related to poor IT user administration in areas like password controls and inappropriate access. | Agencies should review the design and effectiveness of information security controls to ensure data is adequately protected. |
|
We found shared service provider agreements did not always adequately address information security requirements. |
Where agencies use shared service providers they should consider whether the service level arrangements adequately address information security. |
| Thirteen of 108 agencies required to attest to having a minimum set of information security controls did not do so in their 2015 annual reports. | The 'NSW Government Digital Information Security Policy' recognises the growing need for effective information security. With cyber security threats continuing to increase as digital services expand we plan to look at cyber security as part of our 2017–18 performance audit program. |
| We identified instances where service level agreements with shared service providers were outdated, signed too late or did not exist. | Corporate and shared service arrangements are more effective when service level arrangements are negotiated and signed in time, clearly detail rights and responsibilities and include meaningful KPIs, fee arrangements and dispute resolution processes. |
| Internal controls at GovConnect, the private sector provider of transactional and information technology services to many NSW public sector agencies were ineffective in 2015–16. We found mitigating actions taken to manage transition risks from ServiceFirst to GovConnect were ineffective in ensuring effective control over client transactions and data. | The Department of Finance, Services and Innovation should ensure GovConnect addresses the control deficiencies. It should also examine the breakdowns in the transition of the shared service arrangements and apply the learnings to other services being transitioned to the private sector. |
| Maintenance backlogs exist in several NSW public sector agencies, including Roads and Maritime Services, Sydney Trains, NSW Health, the Department of Education and the Department of Justice. | To address backlog maintenance it is important for agencies to have asset lifecycle planning strategies that ensure newly built and existing assets are funded and maintained to a desired service level. |
