Financial performance

Close to our goal to break even over the medium-term

Excluding superannuation adjustments, we have achieved a cumulative $0.1 million deficit
over the last five years.

Close to our break-even target

The work of the Audit Office is largely self-funded, generated from audit fees paid by our clients. These fees are set to cover our expenses while maximising value for the NSW public sector. Unlike private sector auditors, we aim to break-even over the medium-term rather than make a profit.

In monitoring our financial performance, we exclude the impact of the annual superannuation adjustments that affect our operating result. Like all government agencies with staff in the State’s defined benefit superannuation schemes, the schemes’ assessment of our liability varies substantially from year to year. These annual variations are outside our control and reflect the investment performance of the schemes and changes in actuarial assumptions. These superannuation adjustments are fully reflected in our audited financial statements, but are excluded from the information presented here so we can focus on our own performance.

As reported earlier in this report, the Auditor-General was appointed the auditor of councils in New South Wales in 2016–17 and we spent our own funds to implement the mandate. This significantly impacted our financial performance for the year, leading to a net result of $5,000 excluding defined benefit superannuation adjustments. This break-even result for 2016–17 was much less than the original budget and lower than last year’s profit. Over the five years to 2016–17, we have achieved a cumulative $0.1 million deficit, close to our medium term break-even target.

Our 2016–17 revenue of $47 million was $2 million more than the previous year’s $45 million. Government agencies, universities and councils paid $38 million for the audit of their financial statements. Government contributed $8.6 million towards our performance audits and reports to parliament. Our 2016–17 total expenditure of $47 million, excluding the defined benefit schemes superannuation adjustments, was $3 million more than the previous year’s $44 million.

The increase in our total revenue was largely due to an increase in audit fees ($1.0 million) and additional government contributions towards our performance audits and reports to parliament ($1.0 million). The increase in expenditure was largely due to implementing the new local government mandate, as well as commencing our inaugural audits in the sector.

Budgeting

Our break-even result for 2016–17 is significantly less than the budgeted profit of $1.4 million because of the new local government mandate. Our 2016–17 budget was set before the Auditor-General was appointed the auditor of NSW councils. As part of implementing the new mandate, we incurred costs on training, recruitment, communications and change management, and software and equipment purchases.

Per the State’s Budget Papers, our initial 2017–18 budget shows us making a profit of $1.9 million. We are working with NSW Treasury to adjust this as it does not reflect our latest estimate of the local government mandate change. We will be submitting a budget adjustment request to NSW Treasury during the half-yearly budget review process later this year.

Operating result 2016–17/$m
Excluding superannuation