NSW Audit Office - Financial Reports – 2000 - Volume 2 – Special Reviews

The Audit Office Of New South Wales

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3Special Reviews New South Wales Government Agencies Preparedness for the GSTLeave in Universities Compliance Review of AcademicAuditor-General’s Report to Parliament 2000 Volume Two 5Compliance Review of Academic Leave in UniversitiesBACKGROUNDFollowing the introduction of enterprise agreements in universities, seven of the State’s tenuniversities have negotiated with their academics an entitlement, under certain conditions, to accruetheir annual leave. Prior to the introduction of this entitlement, academics were presumed to havetaken their annual leave in the approximate three month period between academic years. Under theformer arrangement, universities did not record details of academic leave earned and taken and noWHAT IS THE POTENTIAL RISK?The main risk to the individual universities is whether each will have in place the necessary internalcontrols to ensure that leave taken by academics is accurately and completely recorded and that theWHAT DID WE DO?A review of annual leave arrangements for academic staff and the associated controls was conductedWHAT DID WE FIND?All universities have negotiated enterprise agreements with their academic staff. Of the tenagreements, seven provide for the accrual of annual leave. The University of New England, Southernagreements which do notThe universities that have enterprise agreements allowing the accrual of leave have ...

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• Publié par: Nesing
• Nombre de lectures: 17
• Langue: English

Extrait

3

Special Reviews

Compliance Review of Academic

Leave in Universities

New South Wales Government Agencies Preparedness for the GST

Auditor-General’s Report to Parliament 2000 Volume Two

Special Reviews

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Compliance Review of Academic Leave in Universities

BACKGROUND

Following the introduction of enterprise agreements in universities, seven of the State’s ten

universities have negotiated with their academics an entitlement, under certain conditions, to accrue

their annual leave. Prior to the introduction of this entitlement, academics were presumed to have

taken their annual leave in the approximate three month period between academic years. Under the

former arrangement, universities did not record details of academic leave earned and taken and no

liability accrued to the university in the form of untaken leave.

WHAT IS THE POTENTIAL RISK?

The main risk to the individual universities is whether each will have in place the necessary internal

controls to ensure that leave taken by academics is accurately and completely recorded and that the

liability for untaken leave is accurately recorded in their financial statements at year end.

WHAT DID WE DO?

A review of annual leave arrangements for academic staff and the associated controls was conducted

in each of the State’s ten universities.

WHAT DID WE FIND?

All universities have negotiated enterprise agreements with their academic staff. Of the ten

agreements, seven provide for the accrual of annual leave. The University of New England, Southern

Cross University and the University of Western Sydney each have enterprise agreements which do not

allow academic staff to accrue annual leave.

The universities that have enterprise agreements allowing the accrual of leave have developed

satisfactory internal controls over both the recording of leave and the accruing of the financial liability

for untaken leave at year end. Audit testing of these controls has revealed a generally satisfactory

outcome with only minor errors reported at one university. The same university experienced

difficulties in the calculation of the financial liability for untaken leave at year end, while one other

university did not accrue its liability at year end. At another university, a number of academic staff

had leave balances at year end in excess of the maximum allowed.

WHAT DOES THIS MEAN?

The conversion to the process of accruing the annual leave of academic staff has proceeded without

major difficulties. Minor deficiencies identified in some controls should be addressed by the three

affected universities so as to ensure that the problems do not become unmanageable.

WHAT WILL THE AUDIT OFFICE BE DOING?

The internal controls of this account area will be routinely followed up each year by the Audit Office

as part of the annual audit. Of particular interest will be a review as to what controls are in place at

each university to ensure academics do not take more than their entitlement of leave between

academic years.

WHAT ELSE SHOULD BE DONE?

As no major deficiencies were noted, no recommendations are required.

Auditor-General’s Report to Parliament 1999 Volume Two

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Compliance Review of NSW Government

Agencies Preparedness for the GST

BACKGROUND

The goods and services tax (GST) legislation,

A New Tax System (Goods and Services Tax) Act 1999,

received Royal Assent on 8 July 1999. From 1 July 2000, the GST will apply at the rate of 10 per cent

on the supply of most goods and services (whether locally produced or imported) consumed in

Australia. The NSW Government and its agencies will, in most respects, be liable for the GST in the

same way as the private sector.

Although the GST does not commence until 1 July 2000, there is a significant amount of planning and

follow-up action required by NSW government agencies (including government trading enterprises)

to ensure their systems and procedures comply with the GST legislation from commencement date. In

most cases, agencies will have to register with the Australian Taxation Office, apply GST to prices

charged for goods and services (unless specifically exempted), and claim input tax credits on any

purchased inputs. The GST will result in substantial new administrative requirements for the day to

day business of agencies, including the need to issue and archive GST invoices.

WHAT ARE NSW AGENCY AND TREASURY REQUIREMENTS?

Each NSW Government agency is responsible for carrying out the necessary planning and compliance

activities in preparing for the commencement of the GST.

In June 1999, NSW Treasury released Treasury Policy & Guidelines Paper (TPP 99-3) ‘GST

Compliance Plan for Public Sector Agencies’ to assist agencies with implementation of the GST. The

Plan sets out key GST implementation milestones (‘accountable actions’) against which Treasury will

Accountable Action

Reporting Deadline to Treasury

Phase 1 – Project scoping, planning and identifying GST

issues

18 August 1999

Phase 2 – Determining agency business changes required

and Budget impacts

3 November 1999

Phase 3 – Project implementation

Preliminary report due by 28 January 2000.

Final report due by 31 March 2000.

Phase 4 – Evaluation and testing

31 May 2000

Phase 5 – Post implementation compliance review

Late October 2000

Each action/phase has a series of tasks that need to be completed in order to adequately prepare for

the GST. Completing these tasks and meeting Treasury reporting requirements is the blueprint for

government agencies in adequately preparing for and complying with the GST.

Treasury will monitor each agency’s progress against the GST Compliance Plan as outlined in TPP

99-3. At the completion of each phase, Chief Executive Officers are required to provide Treasury with

a progress report by the stated deadlines.

Furthermore, at the completion of Phase 2 (3 November 1999), agencies were required to provide

Treasury with ‘independent certification’ of Phases 1 and 2 of the Plan. Treasury encouraged agencies

to utilise the services of the Audit Office to perform the independent certification work, although this

was not made mandatory.

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The objective of this commentary is to assess the preparedness of agencies for the GST by reviewing

agencies’ progress in implementing the NSW Treasury GST Compliance Plan for Public Sector

Agencies, in particular, Phases 1 and 2 of the Plan.

WHAT ARE THE POTENTIAL RISKS?

Agencies will face a number of business and financial risks if the GST compliance activities (for GST

preparedness) are not completed successfully. Some of these risks are:

♦

incorrect calculation and charging of the GST will result in losses to agencies, as liability to pay

GST remains even if the tax has not been charged to clients

♦

incorrect classification of supplies that are taxable or non taxable could result in agencies

overpaying or underpaying tax

♦

risks of over/under-claiming input tax credits. Over-claiming GST credits will be an offence

and will reflect poorly on NSW internal administration with potential for public censure or

criticism. Under-claiming GST credits would represent a financial risk and possibly result in

unnecessary calls on the Budget

♦

GST returns may not be calculated correctly and lodged on a timely basis which could result in

substantial penalties (up to 200 per cent of the tax underpaid)

♦

pricing under contracts that span the implementation of GST may not be sufficient to recover

the GST cost if the GST is not factored in

♦

possible public censure by the Australian Competition and Consumer Commission (ACCC) if

agency’s price changes are found to be in breach of ACCC’s price exploitation guidelines

♦

without adequate systems, procedures and staff training, attempting to comply with the GST

legislation could result in inefficient use of clerical resources and inadequate results.

WHAT DID WE DO?

The Audit Office performed various compliance procedures to determine the preparedness of agencies

for the GST by examining agencies’ progress in implementing the Treasury GST Compliance Plan for

Public Sector Agencies. In particular, this Report focuses on agencies’ progress in respect of Phases 1

and 2 of the Plan which were to have been completed by 18 August 1999 and 3 November 1999,

respectively.

These compliance procedures were performed using a sample of 141 agencies and their controlled

entities. These agencies were representative of the size, nature and complexity of those within the

NSW public sector. This work was undertaken throughout the period November 1999 to April 2000.

WHAT DID WE FIND?

A positive finding from the work performed by the Audit Office was that the greater majority of

agencies examined (94 per cent) had adopted the Treasury GST Compliance Plan. The balance were

GTEs that decided to follow an alternate plan which was not dissimilar to the Treasury Plan.

On the other hand, irrespective of when the Audit Office examined agencies’ preparedness for the

GST, all agencies were found to have fallen behind the timeframes set by the Plan. When the Audit

Office reviewed individual agency’s progress (which may have been some months after the due date),

the average percentage completion of the Plan in respect of Phases 1 and 2 was 81 per cent.

Auditor-General’s Report to Parliament 1999 Volume Two

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Only half of the agencies examined lodged the Phase 1 Report to Treasury by the due date, 18 August

1999. Treasury has advised that the balance lodged their Phase 1 Reports within three weeks of the

due date. In addition, the review found:

♦

all agencies examined had established a GST project team, commenced to identify GST issues

and determined project resource requirements

♦

of the agencies examined, 75 per cent had engaged a GST consultant in some manner or form.

The scope of the work to be performed by consultants included accounting, systems design, legal

and taxation advice

♦

over 87 per cent of agencies were able to identify project risks, but only 42 per cent of these

agencies were able to quantify those risks

♦

slightly less than 95 per cent of agencies had commenced an examination of the GST legislation

and its effects on the organisation.

♦

approximately 90 per cent of agencies examined had established or had commenced to establish a

database of contracts. Of these, 90 per cent had commenced to determine the reviewable status of

those contracts and, yet again, 96 per cent of these agencies had commenced to review contract

pricing agreements

Slightly less than 60 per cent of agencies lodged their Phase 2 Reports to Treasury by the due date,

3 November 1999. Treasury advice is that the balance lodged their Phase 2 Reports within three

weeks of the due date. In addition, this phase of the review found:

♦

of agencies examined, 85 per cent had undertaken some form of transaction flow analysis and 95

per cent had enquired about GST registration requirements

♦

that review of existing accounting procedures had commenced in about 95 per cent of agencies

♦

just under 80 per cent had also identified tax planning opportunities

♦

modelling of the impact of the GST on prices had been commenced by 85 per cent of agencies.

But, only half of all agencies provided Treasury with a price impact statement. Just over 75 per

cent of all agencies had identified price impacts based on the modelling.

Approximately half of the agencies examined by the Audit Office had requested that the ‘independent

certification’ work be deferred until the agency had significantly completed Phase 2. Some of the

reasons put forward included:

♦

the agency had only just commenced following the Treasury Plan

♦

the agency had just decided to engage a GST consultant to complete and implement their GST

plans

♦

the Y2K problem was the main focus for the agency in the lead up to 1 January 2000

♦

in a majority of cases, the agency GST project manager was also the Y2K project manager

♦

the agency was waiting for further advice/guidance on specific matters from Treasury and/or

the Australian Taxation Office.

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WHAT DOES THIS MEAN?

Overall, based on the above observations, the level of planning and preparedness for the GST by

NSW Government agencies is of concern. The preparedness fell short of the milestones set out in

Phase 1 and Phase 2 of the Treasury implementation strategy. Unless agencies refocus and dedicate

additional resources to their GST projects, they increase the risk of not being prepared for the

commencement of the GST.

WHAT HAS BEEN DONE?

The Audit Office has been advised that the Treasurer provides regular reports to Cabinet about NSW

public sector agencies’ GST preparedness. Recently, the Secretary, Treasury, contacted all ‘at risk’

agencies seeking certain assurances about their preparedness for the GST.

WHAT ELSE SHOULD BE DONE?

Agencies should appreciate the enormity of the GST Project and dedicate appropriate resources to

ensure GST compliance as at commencement date.

Timely completion of Phases 3 and 4 of the Treasury Plan should be seen as a priority.

To ensure appropriate levels of corporate governance, agency heads/boards should monitor progress

more closely and become more involved.

WHAT WILL BE DONE?

At the deadline for completion of Phase 4 of the Plan (31 May 2000), agencies are again required to

provide Treasury with 'independent certification' of the reasonableness of their project

implementation, evaluation and testing, ie Phases 3 and 4. This will enable Treasury to continue its

monitoring role and provide appropriate advice to the Treasurer so that Cabinet may be kept informed

about the preparedness of the NSW public sector for the GST.

The Audit Office will also continue to monitor individual agency preparedness and will report again

to Parliament on individual agencies’ progress against Phases 3 and 4 of Treasury’s Plan in mid June

2000.