I am pleased to present my first annual report as the Auditor-General for New South Wales.
Firstly, I would like to acknowledge the excellent work and commitment of Tony Whitfield who acted as Auditor-General in 2015–16 until I started in April this year. Tony ensured the Audit Office performed well and provided ongoing value to the NSW Parliament and our audit clients. He continues as Deputy Auditor-General where he is respected and well known throughout the accounting profession and NSW public sector.
A year of achievement
In the short time I have been Auditor-General, I have found the Audit Office to be highly professional and accomplished. It is pleasing to see this view reinforced by the annual surveys of key stakeholders; parliamentarians, agencies, and our own staff. The Audit Office also continues to compare well on client satisfaction measures benchmarked against other Australian audit offices.
Our audit programs
In Tony’s message in last year’s annual report, he referenced changes to the structure of the performance audit branch. I am pleased to report that his prediction of improved productivity has been realised with 16 performance audits tabled in 2015–16, up from 11 in 2014–15 and from a low of eight in 2012–13.
In 2016–17, we aim to further increase the number of performance audit reports to 17, but our focus will also be on raising the ‘value index’ of these reports, the area where our audit clients are least satisfied (see here).
Over the last few months, I was pleased to meet with all departmental secretaries, heads of other integrity bodies, and other stakeholders to obtain their input to the performance audit program for the next three years. External input and stakeholder engagement is critical to ensure our audits remain relevant and have the greatest impact to improve public sector administration and performance overall.
In terms of financial audits, the Audit Office produced 419 opinions, down from 436 last year. The number of financial audits undertaken is a factor of the total number of NSW public sector agencies required to be audited under the Public Finance and Audit Act 1983. Of greater significance is the independent assurance our financial audit opinions provide to parliament to assist them monitor the accountability and financial performance of the NSW public sector.
Our people and systems
In our last annual report, Tony also reported his concerns regarding staff turnover levels, running at 24 per cent at that time. It is pleasing that turnover has returned to a more sustainable level of around 18 per cent, and staff engagement has risen to 82 from 67 per cent. This is due in part to a very concerted effort to work collaboratively with our staff to finalise a new industrial Award. The Award appropriately balances flexible work practices, leave arrangements and remuneration.
I am particularly pleased that 100 per cent of our people have performance agreements in place. Each person’s plan aligns with the Audit Office strategic plan and branch business plans, and provides the basis for regular discussions with managers about performance, career aspirations and development.
I have been struck by the broad diversity of our workforce with staff coming from some 39 countries. Next year I would like to improve the representation of Aboriginal and Torres Strait Islander people, and continue to support and develop more women into leadership roles. This will capitalise on the talent we have in the office and encourage a diversity of ideas and approaches.
I am also pleased to see the level of investment that the Audit Office makes in both professional development and in systems and technology to support our staff. An innovative staff secondment program enhances the experience of our audit staff by allowing them to work for a period of time with external auditing firms. And we recently commenced a mentoring program for our staff in which I am a participant.
In 2016–17, the Audit Office will further investigate how new technologies and the promise of ‘big data’ will impact the audit profession. We will look outwards to assess trends and invest where appropriate to equip our staff for the future and increase the value of our audits.
A new mandate – local government
The strength of our audit programs and our investment in people and systems provide a solid platform to manage the challenges of the future. Foremost of these is the passage of legislation by the NSW Parliament appointing me as the auditor of all NSW local government councils from 1 July 2016.
This is the most significant change to the mandate of the Auditor-General since 1991 when parliament assented to the Auditor-General conducting performance audits of NSW agencies.
When proclaimed, the Local Government Amendment (Governance and Planning) Act 2016 will provide that I apply the same level of scrutiny to local councils as currently applies to the State government agencies and universities I audit. I will report publically, and to the Minister for Local Government and parliament, on the financial statements of councils and on local council performance. Up until now, councils have engaged their own auditors and there has not been consolidated reporting on the outcomes of audits. This change in mandate brings NSW into line with most other Australian audit offices and is intended to support improved financial and operational performance of our third tier of government.
Transitional arrangements to fulfil our new obligations are in train but my intention is to consult broadly with local government and with current audit providers to ensure the arrangements are efficient and effective and add value to our new clients and to the citizens of New South Wales.
Public Accounts Committee
Since commencing in this role I have had the opportunity to meet with parliament’s Public Accounts Committee on some three occasions to present our audit findings. Our relationship with this committee is important as we collaborate to improve public administration and hold government to account for the effective use of public resources. I would like to thank the committee for its interest and support of the Audit Office.
Thank you to staff
Finally, I would like to sincerely thank the leadership team and all staff of the Audit Office for the welcome they have extended to me. I continue to be very impressed with the dedication of our staff and by the quality of the work we produce.