NSW Audit Office - Awareness - Issue 2005 10 - November 2005

The Audit Office Of New South Wales

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• Publié par: Urne
• Nombre de lectures: 24
• Langue: English

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AWARENESS
Accounting and Auditing Developments ISSUE 10 - NOVEMBER 2005
AUDIT OFFICE 1 AUDIT OFFICE UPDATE
UPDATE
ACCOUNTING 5 Auditor-General’s Report to Parliament 2005 – Vol Three
UPDATE
This report includes:
AUDITING 8 our audit opinions on the 2004-05 Total State Sector Accounts and
UPDATE
the Statement of Budget Result
INTERNATIONAL 10 recommendations for more meaningful financial and non-financial
UPDATEreporting
comments on the Statement of Budget Result. OTHER ISSUES 12
MISCELLANEOUS 13Audit Opinions
PUBLICATIONS
We issued a qualified audit opinion on the Total State Sector Accounts
because the WorkCover Scheme Statutory Funds and Crown reserves LEGISLATIVE 15
should have been included. A similar qualification was made last year. CHANGES
Our Independent Audit Report on the Statement of Budget Result was
PREMIER’S 16unqualified.
DEPARTMENT
UPDATE
The State’s Financial Position
AUDIT OFFICE 19The State is in a strong financial position but it is currently facing some
BETTER PRACTICEcyclical and structural fiscal pressures.
GUIDES
In earlier years’ Reports to Parliament, we have included an analysis
ACRONYMS & 20of the State’s financial position, but have not done so this year. As we
ABBREVIATIONShave previously acknowledged, the Treasurer’s Report on State Finances
and the Budget Papers already provide a high level of disclosure of
the State’s finances. We see little value in simply duplicating that
information. Rather, we want to highlight the need for better non-
financial information about the State’s performance.
The State’s Performances fundamental role is to provide services rather than make
a profit. That does not mean the State and its agencies should not
operate in a business-like manner, nor adopt relevant private sector
financial management disciplines. It does mean that assessing the
State’s performance calls for information about the nature, quality and
quantity of services as well as its finances. Currently, only the latter
information is available in any comprehensive way.
Awareness is published by The Audit Office of New South Wales, Level 15, 1 Margaret Street
Sydney NSW 2000, GPO Box 12, Sydney NSW 2001 Telephone [phone] Fax [phone]
Email [e-mail] Website www.audit.nsw.gov.au
CONTENTSWhole-of-government performance reporting would fill this gap. It would help the
Government and central agencies in managing the State, in prioritising resources
between agencies, and in delivering better services. It would also be a sign of a
healthy democracy, helping citizens to understand and assess the performance of
their elected government.
Performance reporting at the State level would be a simple extension of the
concept that agencies must report on their performance. It would also strengthen
the discipline of resource decisions when government finances are strong, and help
the sector to weather times of financial pressure.
Recommendations
We recommend that the Government build on existing agency performance systems
by:
identifying the key outcomes (social, economic, environmental) that the
Government is seeking to achieve
developing a suite of performance indicators that best measure progress towards
those outcomes
reporting on these annually, either in conjunction with the Treasurer’s Report on
State Finances or shortly thereafter.
Further Information
The full report is available from our Internet site on: www.audit.nsw.gov.au.
Peformance Audit Report:
Implementing Asset Management Reforms
Background
Hospitals, schools, public housing, roads, bridges, buses and trains are just some of
the assets used by government in providing services to citizens.
The NSW Government’s asset base is impressive in size - with a value of around $167
billion and with government plans to spend around $8 billion acquiring or replacing
assets in the current year. Another $2 billion is spent each year on maintenance.
Improving the NSW public sector’s approach to asset management has been on the
reform agenda for at least a decade. In 1992 the Total Asset Management (TAM)
policy was first released. Changes in practice have been accelerated more recently
by integrating asset management policy with the budget process.
In this audit we examined NSW Treasury’s efforts to improve asset management
practices in the public sector and the progress made by three agencies - the
Department of Corrective Services, NSW Fire Brigades and the Powerhouse Museum
- towards better managing their asset portfolios.
2 The Audit Office of New South WalesAudit opinion
Effective asset management is a key measure of the quality of management
and stewardship of a government. In NSW, asset management for the general
government sector is heading in the right direction. The approach taken by NSW
Treasury to further improve asset management practices in agencies and better link
asset plans to the budget process is sensible and having a positive impact.
From the cases we examined, some very good practice can be seen. But overall, a lot
of room still exists for improvement. Agencies need to improve asset management
by:
identifying all assets essential to service delivery and including these in TAM
plans
specifying the contribution that assets make to services
developing performance standards or measures to help judge whether assets are
needed or could be disposed of
considering the risks assets pose to service delivery if they fail and how best to
manage those risks
implementing asset management systems that can provide information on asset
condition, maintenance, performance and useful life.
One problem may be the one size fits all approach to TAM, which may overwhelm
agencies with a small portfolio of assets. About one third of agencies required to
submit TAM plans to NSW Treasury control assets worth less than $10 million yet the
reporting requirements are the same for agencies controlling large portfolios.
Government budget deliberations need to be made with full knowledge of the costs
of proposals and the impact of tradeoffs. These deliberations would be enhanced if
agencies also reported on deferred maintenance and the implications and risks to
services if these tradeoffs are made.
Summary of Recommendations
We made a number of recommendations to NSW Treasury designed to improve asset
management by:
providing further guidance to agencies on TAM
including impact statements in TAM
improving plan quality through better feedback.
Further Information
Jane Tebbatt, Director, Performance Audit on 02 9275 7274 or [e-mail]
.gov.au. The full report is available from our Internet site on www.audit.nsw.gov.au.
3The Audit Office of New South WalesPeformance Audit Report:
NSW Treasury: Oversight of State Owned Electricity Corporations
Background
NSW Government owned corporations in the electricity sector represent an
investment of around $20 billion. They return dividends and tax equivalent
payments to the State of around $1 billion per year.
Our audit looked at how well the State oversights the performance of State owned
corporations (SOCs) in the electricity sector to ensure that they meet its needs from
an owner’s short and long-term perspective.
Audit Opinion
The State’s oversight of its SOCs is well organised and monitored by NSW Treasury,
on behalf of the shareholder ministers.
The SOCs have delivered substantial dividend returns to the Government. We
examined the issue, sometimes alleged as a weakness in the NSW approach, that
dividend requirements may limit the ability of SOCs to fund new investment in
infrastructure. The SOCs we examined clearly indicated that this was not occurring.
The SOCs indicated that new investment is planned on a needs basis and that, whilst
much infrastructure in this sector is now ageing, it has a considerable remaining
useful life. We found that the SOCs have sound credit ratings, and we could not find
evidence or available data that investment was being unduly constrained.
Whilst there is the potential for conflict between Treasury’s primary role of
managing the State’s finances and its over-sighting role on behalf of shareholder
ministers, we found no evidence that this conflict was in fact occurring. While some
other jurisdictions include the portfolio minister as the other shareholder, in our
view the current New South Wales arrangement - where the portfolio minister can
exercise the regulatory role free from concerns about conflict – is the more robust
model and better satisfies the ‘public interest’ test.
Our principal concern from this audit is that Treasury’s oversight of State owned
corporations needs to be strengthened and refined. We would have expected
Treasury to oversight performance against the State’s ownership objectives. But
these ownership objectives are not clearly stated. There is no regular reporting
on how well these businesses are performing against comparative private sector
organisations or against their social and environmental objectives. Treasury
has relatively little focus on analysing non-financial areas that may affect a
shareholder.
Treasury’s task on behalf of the shareholder ministers is particula