NSW Audit Office - Awareness - Issue 2003 05 - June 2003
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AWARENESSccounting and Auditing Developments Issue 5 JUE 2003AUDIT OFFICE 1AUDIT OFFICE UPDATEUPDATEAUDITOR-GENERAL’S REPORT TO PARLIAMENT 2003, VOLUME ONEACCOUNTING 5The report was released on the 1 May 2003. Significant issues in this UPDATEvolume include:AUDITING UPDATE 7Sydney Water Corporation-Review of Implementation of Customer URGENT ISSUES 7Information and Billing System (CIBS) GROUP UPDATEOur audit found many unsatisfactory aspects in the areas of project INTERNATIONAL 9governance, project specification and management, cost estimation and UPDATErisk management. Examples included:MISCELLANEOUS 11Sydney Water spending approximately $61.0 million up to project PUBLICATIONStermination and another $18.6 million on related hardware and software. We believe most of the $61.0 million will be written offLEGISLATIVE 11CHANGES UPDATEmanagement not always reporting important issues to Sydney Water’s Board of Directors in a clear, complete and timely mannerTREASURY 12the Board not overseeing the project as effectively as it might have. UPDATEIts understanding of the project, in light of its complexity, was limitedPREMIER’S 18project planning and specifications were inadequate, contributing to DEPARTMENT many change requests and significant additional costs and delays UPDATErisk management not being effective at the corporate and project levels.AUDIT OFFICE 19Our recommendations included: BETTER PRACTICEGUIDESGovernment to consider ...
Informations
| Publié par | Seah |
| Nombre de lectures | 24 |
| Langue | English |
Extrait
AWARENESS Accounting and Auditing Developments Issue 5 JUNE 2003
AUDIT OFFICE UPDATE AUDITOR-GENERAL’S REPORT TO PARLIAMENT 2003, VOLUME ONE The report was released on the 1 May 2003. Significant issues in this m in
Sydney Water Corporation-Review of Implementation of Customer Information and Billing System (CIBS) Our audit found many unsatisfactory aspects in the areas of project governance, project specification and management, cost estimation and risk management. Examples included: Sydney Water spending approximately $61.0 million up to project ermination and another 18.6 million on related hardware and oftware. We believe most of the 61.0 million will be written off anagement not always reporting important issues to Sydney Water’s Board of Directors in a clear, complete and timely manner he Board not overseeing the project as effectively as it might have. Its understanding of the project, in light of its complexity, was limited roject planning and specifications were inadequate, contributing to any change requests and significant additional costs and delays risk management not being effective at the corporate and project levels. r r mm n i n in nment to consider amending the Annual Reporting legislation to require a to expand their reporting on large projects, xplaining significan s and whether project benefits will be hi a curr place. Each IT project hould be ass patibility with the ra egy ommunicating in an org imely, all he way to Board level a change r omplex projects will be delivered late and at increased cost he business case to support a project must be updat or significant hanges as they occur. r n is published by The Audit Off South Wales, 234 Sussex Street, Sydney NS Sydney NSW 2001 Te ep on 1 x 1 Em i Terry.Hogan@audit.nsw.gov.au i www.audit.nsw.gov.au
AUDIT OFFICE 1 UPDATE ACCOUNTING 5 UPDATE AUDITING UPDATE 7 URGENT ISSUES 7 GROUP UPDATE INTERNATIONAL 9 UPDATE MISCELLANEOUS 11 PUBLICATIONS LEGISLATIVE 11 CHANGES UPDATE SU 12 TREA RY UPDATE PREMIER’S 18 DEPARTMENT UPDATE AUDIT OFFICE 19 BETTER PRACTICE GUIDES
In October 2002, the Treasurer requested the Auditor-General to audit CIBS and report to Parliament. Sydney Water’s Board terminated the full implementation of CIBS in October 002 due to concerns that the project was not reaching acceptable standards and there were xcessive delays and costs. CIBS with a final budget of $60 million was Sydney largest IT roject Sydney Water contracted PricewaterhouseCoopers (PWC) in June 2000 to build and implement CIBS. Because of problems with the project, Sydney Water is considering litigation.
New South Wales Aboriginal Land Council The capital value of the Aboriginal Land Council Account fell below the statutory limit. Local Aboriginal Land Councils owe the New South Wales Aboriginal Land Council (NSWALC) $6.6 illion. Of this, $2.8 million is treated as a doubtful debt. More robust controls are required to manage Councillors’ expenditure. There continues to be issues surrounding the accountability for Councillors’ travel. Th n i h f i m in in n ff i in rn i f n i n
Cobar Water Board, Gosford Water Supply Authority and Wyong Water Supply Authority From 1996 to 2002, Wyong Water and Gosford Water did not fully comply with statutory requirements and therefore all their water and sewerage charges require validation. This also applies to Cobar Water Board’s water charges. Under their legislative provisions, Wyong and Gosford Water Supply Authorities are not permitted to make their water and sewerage charges until a determination is made by the Independent Pricing and Regulatory Tribunal (IPART). The proposed charges must then be included in the Councils’ management plans and publicly isplayed for a specified period. yong and Gosford Water have applied to the Minister for Land and Water Conservation seeking action to amend the legislation. They have also sought the Governor’s consent to validate the harges. At the date of this report, no decision had been received from the Minister. Water believes a review is required of the IPART decision-making process and the legislative ns requiring Wyong Water to make determinations within prescribed im fr m
Newcastle International Sports Centre Trust and Wollongong Sportsground Trust These Trusts continu . Modified Independent Audit Reports ere issued due to the inh ility to continue as going concerns.
Further information ood@audit.nsw.gov.au.
2 The Audit Office of New South Wales
ns on 92850020 or barry.under
PERFORMANCE AUDIT REPORT: DEPARTMENT OF EDUCATION AND TRAINING MANAGING TEACHER PERFORMANCE The education a child receives is still largely based on face-to-fac petence f in i i h r i h r f r n f h m f r in h n r f i n i r This audit examined ost recent performance management scheme for primary and econdary class teachers, which was introduced by the NSW Department of Education and Training in 1.
Audit opinion and key findings NSW publ mance assessment in place for the ast 40 yea hanced by making annual performance review and fe s are required to improve its ff i n Firstly, the system may ts across all schools. Secondly, the annual perfor ance to be rated as anything other than efficient. There are also no professional standards or e rincipals can assess classroom teaching. The basis u making judgements regarding eacher performance can differ from school to school. Other findings were: he scheme is not used to identify poor performers and no other rating such as ‘needs improvement’, is available to the principal eachers rated as efficient are automatically entitled to a salary increment; 70 per cent of urrent teachers have progressed to the top of the salary scale he scheme does not recognise or reward outstanding performance or professional hi m n unlike most other states, NSW does not have an independent body responsible for etermining teacher qualifications, registrations and standards of professional practice. n Interim Committee was established by the NSW Government to advise on a NSW Institute f Teachers and the development of professional standards by June 2003. teacher’s performance can be reviewed at any time during the year and if a teacher is identified as experiencing difficulties with their performance, a separate scheme exists to anage them. During 2001, however, with more than 40,000 classroom teachers, only 174 (0.4 per cent) were eing managed according to these procedures. Of these, 51 teachers (0.1 per cent) left either uring, or because of this process.
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Recommendations The report contains a number of recommendations to improve the annual teacher performance m n h m f r r m h r Further Information contact Jane Tebbatt, on (02) 9285 0074 or jane.tebbatt@audit.nsw.gov.au. The report was issued on 14 May 2003 and can be accessed at www.audit.nsw.gov.au.
PERFORMANCE AUDIT REPORT – PROTECTING OUR RIVERS This audit focussed on whether the quality of river water in New South Wales is efficiently and ffectively protected. Pr i n implies no further decline in the condition of the rivers ay include regulation, promotion of best practice guidelines, economic incentives or i n ay also involve works to restore the condition of rivers.
Key Findings The current arrangements lack the structure to ensure success. There is no lead entity to co-rdinate efforts to protect river water. New South Wales has no overarching water quality or river health strategy and no water quality anagement plans to ensure: lear outcomes and responsibilities for protecting river water quality integrated decision-making to protect areas of greatest risk to water quality. There are significant gaps in the monitoring and evaluation of water quality. Based on the information currently available it is not possible for anyone to gauge in a comprehensive way: h h h f ri r in ri k h ri r n h r f ri k trategies to ma ose risks. minantly focused on controlling point source pollution. There i tory, which addresses the risks from diffuse ollution such a icultural run-off.
Recommendations The report recommends th anagement structure for implementing th c approach. Further information from Denis Streater on 92850075 or denis. eater@audit.nsw.gov.au.
4 The Audit Office of New South Wales
The report was released on 7 May and is available in full on our website at ww.audit.nsw.gov.au. The report follows on from the August 2002 report on the audit of egulating the Clearing of Native Vegetation
ACCOUNTING UPDATE GAAP/GFS CONVERGENCE IMPLEMENTATION STRATEGY The Financ Reporting Council (FRC) has set Government Finance Statistics (GFS) and Generall he AASB ill on the general purpose financial report vernments, including consideration of issues re s on general purpose financial reporting y governm her public sector entities oes not direct t porting oes not replace existin P with GFS. The AASB has identified technical and he roject Some of the differences arising from the two frameworks as the differences in the reatment of borrowing costs, may be eliminated when Australia ad ernational ccounting Standards. For more details, refer to the paper available on the AASB website from <http:// ww.aasb.com.au/public_docs/misc_docs/implementing_FRC-GFS_strategic_direction.pdf>. ource: Accounting and Auditing News Today Issue No 1 , May ).
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ACCOUNTING FOR GRAVEL ROADS The approach explored in the following draws on the principles in paragraph 5.7.5 of AAS 4 Depreciation and involves treating gravel on a road as analogous to paint on a building. Some local governments are concerned that by treating gravel on roads as a separate asset, an xpense is effectively being double counted, once for depreciation of the asset (gravel) and nce for repair work that is undertaken. There are typically two components to a gravel road: the formation of the road and the gravel op. Consistent with the definitions of asset and expense in accounting standards, arguably it ay be appropriate to treat the construction of a gravel road (including the initial spreading of gravel) in a manner similar to the construction of a building (including the initial painting). That is, all costs incurred in constructing the building (including the initial painting) are capitalised and recognised as a non-current asset, which is subsequently depreciated. Subsequent repainting/patching is not then treated as replacing an asset, but rather is treated as repairs and expensed as incurred. By analogy, gravel work would be initially capitalised into the cost of he road but any subsequent regravelling/grading/patching costs would be expensed. lthough expensed, subsequent gravel works would maintain the useful life of the road and herefore the initial useful life assessment of the road would take that into account, potentially resulting in a relatively long useful life of the road. This would be consistent with paragraph .5.8(a) of AAS 4, which states that an assumption of “adequate maintenance” is taken into account in determining the useful life of an asset. Given gravel road maintenance programs in any local governments, it would be expected that the life of gravel roads would be relatively long The AAS 4 requirement to consider “technical obsolescence” in determining the useful life f an asset (see paragraph 5.5.8(b)) is one factor that would mean that the life of a gravel road would be finite. However, paragraph 6.1 requires the useful life of depreciable assets to e reassessed at least annually. This would include a review of previous expectations about echnical obsolescence. Accordingly, it is conceivable that original expectations about technical bsolescence could be found, with the benefit of hindsight, to have unduly constrained stimates of useful lives, resulting in reassessments of useful lives to be significantly longer han first thought. relative useful life would result in a relatively lower depreciation charge, effectively ounteracted by the ing of subsequent gravel works, thus overcoming concerns about s relating to gravel roads. nothe reciation charged in a period is the estimate of residual value. eds to be assessed in light of the facts using professional jud ent. ource ransparenc Issue May ).
6 The Audit Office of New South Wales
AUDITING UPDATE ED 82 ASSURANCE ENGAGEMENTS PROPOSED AUS 108 “INTERNATIONAL FRAMEWORK FOR ASSURANCE ENGAGEMENTS,” AND PROPOSED AUS 110 “ASSURANCE ENGAGEMENTS ON SUBJECT MATTERS OTHER THAN HISTORICAL FINANCIAL INFORMATION This ED is the A lian “wrap around” version of International ED on Assurance Engagements. For further i rmation refer to the International Update in issue 4 May 2003 Awareness.
URGENT ISSUES GROUP UPDATE (UIG Action Alert 03-3) Meeting May
TAX CONSOLIDATION ACCOUNTING: SUBSIDIARY JOINS OR LEAVES THE GROUP-CONSENSUS AGREED The UIG reached a C e Tax Accounting under the Tax Consolidation System” revision has been ade to clarify general account out below. (The ASB will consider the Consensus on 2 2003).
Formation of Group, or Subsidiary Joins Group hen a tax-consolidated group is formed, the head entity in the group es deferred ax balances relating to the wholly-owned subsidiaries in the tax-consolidated group hen a subsidiary joins an existing tax-consolidated group, similar treatment of their eferred tax balances by the head entity applies Timing or temporary differences are determined by the carrying amounts of a subsidiary’s assets and liabilities at the level of the tax-consolidated group.
On-going Tax Consolidation Accounting hen the subsidiary remains in the tax-consolidated group, the head entity is required to account for movements in permanent and timing/temporary differences based on the group-level carrying amounts for the subsidiary’s assets and liabilities.
Subsidiary Leaves the Group hen a subsidiary leaves the tax-consolidated group and becomes a taxable entity, they are required to recognise deferred tax balances based on their own carrying amounts for its assets and liabilities and the tax values that applied to them under the tax-consolidated group he head entity is required to write down the deferred tax balances of the leaving ubsidiary where they are not recoverable when the subsidiary is expected to leave the roup.
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Superannuation Disclosures by Employers UIG members noted that there were a number of different disclosure practices arising from iffering interpretations of the requirements in AASB 1028 “Employee Benefits”. The UIG agreed hat the matter should be discussed with the AASB before further investigations.
Emission Rights and Renewable Energy Certificates UIG members considered a draft Interpretation of the International Financial Reporting Interpretations Committee (IFRIC) of the International Accounting Standards Board. The UIG oted that the draft Interpretation does not encompass all the issues concerning renewable nergy certificates (RECs) in Australia and has decided to pursue those issues for input to IFRIC.
Leases-Determining whether an Agreement contains a lease Current draft IFRIC Interpretation proposes that three elements need to be present for an agreement to contain a lease being that: ulfilment of the agreement depends on the explicit or implicit use of a specific item he purchaser controls the right to use the item for a specific period of time; and he purchaser’s obligation to make payments to the supplier under the agreement is for the im h h i m i m i r h r h n h f h i m Members agreed that it could be very difficult to distinguish leases and service contracts. The raft IFRIC interpretation may assist in extreme cases. The next meeting will be held on 17 June in Melbourne.
8 The Audit Office of New South Wales
INTERNATIONAL UPDATE IMPROVEMENTS TO INTERNATIONAL ACCOUNTING STANDARDS (IAS S ) In May 2002, the International Accounting Sta d (IASB) published an exposure draft of roposed improvements to 12 IA 150 comments were received. The IASB in light of t comments has confirmed its general support for the changes proposed in the ED, but i so agreed to make detailed changes. Of particul interest are the proposed changes to IAS 27 Consolidation and Separate Financial m n
EXEMPTION FROM PREPARING CONSOLIDATED STATEMENTS The IASB co olidated financial statements to comply ith Internatio it is a wholly-o interests have not objected to he fact that consoli its securities are not publicly urities and he immediate or ultimate parent p es consolidated financial statements in ompliance with IFRSs. The IASB decided that the exemption should be available wh intermediate parent above he exempted parent prepares consolidated financial statements in co with IFRSs. This exemption applies only to the consolidation of subsidiaries and exempted parents required to account for their investments in associates using the equity method as proposed for IA
Exemption from Consolidation based on Temporary Control The clarification in the ED, that a subsidiary is excluded from consolidation when control is intended to be temporary because the subsidiary is acquired and held exclusively with a view to its subsequent disposal within 12 from acquisition, was confirmed.
Effective Date The IASB agreed that there should be a single implementation date for all standards revised in he Improvements project. The revised standards will be mandatory for financial statements for eriods beginning on or after 1 January 2005 (not 2003 as proposed in the ED).
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INTERNATIONAL ACCOUNTING STANDARDS BOARD MEETING (IASB) ON 29 APRIL-2 MAY 2003 Key matters from the meeting included:
Business Combinations (phase II) ttributing a partially owned subsidiary’s excess losses to the controlling and minority in r Business combination disclosures - the Board agreed to add a disclosure requirement or contingent assets acquired, contingent liabilities assumed, and contingent consideration recognised initially at fair value that are not subsequently accounted for under current IASB guidance h r m r i in First-time adoption of IFRSs Ex r i in ri IA 1 In m T x IAS 16 Property Plant and Equipment IFRI i n r n n r in n r Share based payment.
CONTROLLING COMPUTERS IN BUSINESS: BACKUP, ARCHIVE AND RESTORE AND CONTROLLING COMPUTERS IN BUSINESS: PHYSICAL SECURITY These new guidance documents issued by the International Federation of Accountants (IFAC) assist small and medium accounting practices (SMPs) and enterprises (SMEs) in managing and rating their computer systems. Each of the b features a series of notes that provide information on specific computer ontrol issues, including tion of key terms, costs and benefits, and risks and practicalities. d with each note. Both docu e from the SMP section of IFAC’s online ookstore www.if dered through the online bookstore for US 25 each plus shipping.
10 The Audit Office of New South Wales
MISCELLANEOUS PUBLICATIONS AUSTRALIAN NATIONAL AUDIT OFFICE REPORTS: Navy Operational Readiness D T x n i n nnual Report n Ecologically Sustainable Development Managin esidential Aged Care Accreditation The S le of Sydney (Kingsford Smith) Airport evi w of the Parenting Payment Single Program These re rts are available at www.anao.gov.au.
VICTORIAN AUDITOR-GENERAL’S OFFICE REPORT Parliamentary C ol and Management of Appropriations Performance Manageme udy These reports are available at www. .vic.gov.au.
LEGISLATIVE CHANGES UPDATE PROCLAMATION UNDER THE PUBLIC FINANCE AND AUDIT ACT 1983 The object of this Proclamation is to amend the list of departments in Schedule 3 to the P i Fin n n A i A 1 o as to reflect the administrative changes made by the P i Sector Employment and Management (General) Order 2003 and the change of name of Police r i P i Commencement of this Proclamation is 23 May 2003, GG No 89 23 May 2003 p4838).
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