Our financial audits

Providing value to the entities we audit

16 new modifications issued and 4 modifications cleared

What are financial audits?

Our financial audits provide independent opinions on the financial statements of NSW Government entities, universities and councils. Our opinions provide assurance about whether these financial statements comply with accounting standards, relevant laws, regulations and government directions. Additional financial audits are undertaken each year on the General Government and Total State Sector Accounts. Financial statement audits also highlight opportunities where entities can improve their accounting and financial systems.

 

Our audit base

We completed 426 financial audits of NSW Government agencies in 2016−17 see Appendix Two for the full list of entities we audited over this period. These entities provide a diverse range of services and vary in size from large government departments, universities, State superannuation entities and utilities, to small boards and trusts. We also audited one local council in 2016−17. NSW State Government entities as a whole collected income of approximately $99 billion, spent approximately $93 billion and managed more than $456 billion in assets.

In October 2016, we were given the mandate to audit all NSW local and county councils. Each council is unique in its administration and provision of diverse services and facilities for their communities. The financial audits of these councils will be completed under our new mandate for the first time in the 2017−18 financial year. We will therefore report on these audits in next year’s annual report.

 

NSW General Government and Total State Sector opinion

For the fourth consecutive year, the General Government and Total State Sector Accounts received an unqualified auditor’s opinion following more than a decade of qualifications. This outcome shows the government’s commitment to improve the quality of financial reporting across the NSW public sector. Compared to previous years, there were fewer significant errors in entities’ 2015–16 financial statements submitted for audit and used for whole-of-government financial reporting.

 

Budget review

We were first engaged to review the reasonableness of estimates and forecasts used by NSW Treasury in preparing the Budget Papers for 2013–14, and have continued to conduct this review each year up to and including the 2016–17 Budget Papers.

In 2016–17, we were not engaged to review the 2017–18 Budget. This was due to the implementation of the PRIME system in 2016–17 which is part of Treasury’s broader Financial Management Transformation (FMT). Treasury advised our review was a major undertaking, and would be challenging when run alongside the PRIME implementation.

 

Financial audits per sector 

 

Number of new modifications

 

Number of modifications cleared

 

Number of repeat modifications

 

Modified auditor’s opinions and conclusions

We issued 20 modified auditor’s opinions and conclusions on assurance engagements in 2016−17 (18 modified audit opinions in 2015–16). Of the 18 modifications from the previous year only four remain unresolved. Ten modifications have not been repeated as they were one-off modifications related to a compliance audit conducted in 2015−16. The Auditor-General selects a new compliance audit subject each year.

 

Agency New/repeat modification Type of modification Reason for modification
Modified opinions on financial statements
Former Gosford Water Supply Authority New Disclaimer of opinion Control weaknesses in the finance system prevented management from attesting that all transactions had been properly recorded and reflected in the financial statements.
State Emergency Service Repeat Qualified opinion We were unable to form an opinion on the completeness of received donations and fundraising revenues as the internal controls at the point of collection were not operating for the full financial year.
Modified opinions and conclusions on other assurance engagements
The Sydney’s Children’s Hospital Network (Randwick and Westmead) (incorporating the Royal Alexandra Hospital for Children)

Audit of the Acquittal Statements for the National Centre for Immunisation Research and Surveillance activities

 New Qualified opinion We could not verify the unexpended funds brought forward at 1 July 2014 because the acquittal statements were not audited from the commencement of the funding agreement on 14 September 2010 until 30 June 2014.
Department of Industry, Skills and Regional Development

Review of the Summary of Australian Vocational Education and Training Management Information Statistical Standard (AVETMISS) Financial Data for New South Wales

New Qualified conclusion Systems limitations prevented us from obtaining sufficient and appropriate evidence to support the amounts recorded for student revenue and related transactions.
Modified conclusions on compliance engagements
Review of compliance with Part 3 Division 5 of the Government Information (Public Access) Act 2009 (GIPA Act).

Thirteen agencies were selected for this compliance review:

  • Board of Studies, Teaching and Educational Standards
  • Department of Family and Community Services
  • Department of Industry, Skills and Regional Development
  • Department of Justice
  • Department of Planning and Environment
  • Department of Premier and Cabinet
  • Hunter New England Local Health District
  • Insurance and Care New South Wales
  • Justice Health and Forensic Mental Health Network
  • Land and Property Information – Division of Department of Finance, Services and Innovation
  • NSW Trains
  • NSW Treasury
  • Sydney Water Corporation

 

New Qualified conclusion The 13 agencies materially complied with the requirements of Part 3 Division 5 of the GIPA Act. However, we identified instances of non-compliance, which resulted in a qualified review conclusion for each agency.

Instances of non-compliance included the completeness, accuracy and timeliness of contract registers. For further information refer to the 2016 Special Report Agency Compliance with the GIPA Act, which contains our findings and makes several recommendations to help agencies better comply with the requirements of the GIPA Act.

The Legislature

Review of compliance with the annual Determination of the Parliamentary Remuneration Tribunal

Our review program is designed to cover all Members over the four-year Parliamentary term. This year’s review covered a sample of 34 Members.

Repeat Qualified conclusion The Members reviewed complied with the requirements of the Tribunal’s determination. However, we identified some instances of non-compliance including:

  • claiming an expense from the Member’s Logistic Support Allocation allowance which did not aid in their Parliamentary duties
  • late submission of reconciliations and declarations to the Department of Parliamentary Services.

For further information on our findings refer to the 2017 Auditor-General’s Report Members’ Additional Entitlements 2016.

NSW Ministry of Health

Review of compliance with the prudential requirements of Division 57 of the Aged Care Act 1997 and Division 3 of Part 4 of the User Rights Principles 1997

 Repeat Qualified conclusion The Ministry materially complied with the requirements of the Act and the Principles. However, we identified instances of non-compliance, which resulted in a qualified review conclusion.
The Sydney Children’s Hospitals Network (Randwick and Westmead) (incorporating the Royal Alexandra Hospital for Children)

Review of compliance with specified requirements of the Health Insurance Act 1973, and the Health Insurance (Approval of Billing Agents) Guidelines (No.1) 2004

Repeat Qualified conclusion The Network materially complied with the requirements of the Act and Guidelines, except for prepaid trust fund monies which were not paid directly into the Network’s compartmentalised bank account. This resulted in a qualified review conclusion.

 

Modified opinions cleared

We work closely with agencies to resolve qualification issues. This year we resolved four previous qualifications.

 

Agency Type of opinion removed Reason for modification
Financial statements
Technical and Further Education Commission Qualified opinion The previous qualification arose because system limitations prevented the Commission from providing sufficient and appropriate support for the amounts recorded for student revenue and related transactions. The modification was removed because the Commission was subsequently able to support these amounts for 2014−15 and 2015−16.
Charles Sturt University Foundation Trust Qualified opinion The previous qualification arose because the Trust was not able to evidence an effective system of internal control over fundraising revenue and voluntary donations until their initial entry and receipt into their financial records system. The modification was removed as the control deficiency was rectified.
Other assurance engagements
HealthShare NSW Parramatta and Newcastle Service Centres

HealthShare NSW Westmead Service Centre

Assurance engagement on the service organisation’s description of controls, their design and operating effectiveness

Qualified opinion These two previous qualifications arose from a control deficiency that meant the control objective ‘disbursements are made to the appropriate suppliers’ was not achieved during the period. The modification was removed as the control deficiency was resolved during 2014−15 and the control operated effectively for the 2015−16 year.