Our financial audits

Providing value to the entities we audit

5 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 550 financial audits of NSW government entities and local government councils in 2017-18 (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, and local and county councils, to small boards and trusts.

NSW state government entities as a whole collected income of approximately $110 billion, spent approximately $93 billion and managed more than $430 billion in assets.

NSW General Government and Total State Sector opinion

For the fifth 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. Over the past five years, the number of significant errors in financial statements of agencies has generally fallen largely due to identifying and resolving complex accounting issues early.

 

Financial audits per sector 

 

Number of new modifications

 

Number of modifications cleared

 

Number of repeat modifications

 

Modified auditor’s opinions and conclusions

We issued eight modified auditor’s opinions and conclusions on assurance engagements in 2017-18 (20 modified audit opinions in 2016–17).

Of the 20 modifications from the previous year, three remain unresolved. Two of these assurance engagements have not yet been finalised. Thirteen modifications have not been repeated as they were one-off modifications related to a compliance audit conducted in 2016-17.

 

Agency New/repeat modification Type of modification Reason for modification
Modified opinions on financial statements
Former City of Botany Bay Council

General purpose financial statements

New Disclaimer of opinion Significant breakdowns in administrative, financial and governance internal controls affected the reliability of financial reporting of the former Council. A significant fraud involving former management was also identified in the reporting period.

Consequently, councillors and management were unable to provide written representation that the financial statements present fairly the financial performance and position of the Council. As a result, Australian Auditing Standards require a disclaimer of opinion to be issued.

The Hills Shire Council New Qualified opinion The method used by the Council to value land under roads did not appropriately reflect external restrictions on the use of this land as required by Australian Accounting Standards.
Junee Council New Qualified opinion Council could not demonstrate that roads, bridges, footpaths and bulk earthworks were reported at fair value, as it did not value these asset classes during the year. The last valuation was conducted in 2012.
Yass Valley Council New Qualified opinion Council did not record the receipt of financial assistance grants from the Australian Government as revenue in the year received, as required by Australian Accounting Standards.
The University of Sydney

Basic Financial Statements prepared in accordance with United States of America’s Generally Accepted Accounting Standards (US GAAP)

Repeat

This engagement is performed once every three years.

Qualified opinion The University accounted for certain property, plant and equipment at fair value, which complies with Australian Accounting Standards. However, US GAAP requires measurement of these assets at historical cost.
Modified opinions and conclusions on other assurance engagements
Former City of Botany Bay Council

Special purpose financial statements of the Council’s Declared Business Activities

New Disclaimer of opinion Significant breakdowns in administrative, financial and governance internal controls affected the reliability of financial reporting of the former Council. A significant fraud involving former management was also identified in the reporting period.

Consequently, councillors and management were unable to provide written representation that the financial statements present fairly the financial performance and position of the Council. As a result, Australian Auditing Standards require a disclaimer of opinion to be issued.

Department of Industry

Review of the Summary of Australian Vocational Education and Training Management Information Statistical Standard (AVETMISS) Financial Data for New South Wales for the year ended 2016

Repeat Qualified conclusion Ongoing systems limitations of the student revenue system prevented us from obtaining sufficient and appropriate evidence to support the amounts recorded for student revenue and related transactions.
Department of Industry

Review of the Summary of Australian Vocational Education and Training Management Information Statistical Standard (AVETMISS) Financial Data for New South Wales for the year ended 2017

Repeat Qualified conclusion Ongoing systems limitations of the student revenue system prevented us from obtaining sufficient and appropriate evidence to support the amounts recorded for student revenue and related transactions.

 

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
Former Gosford Water Supply Authority Disclaimer of opinion The previous disclaimer of opinion arose for the Authority because control weaknesses in the finance system prevented management from attesting that all transactions had been properly recorded and reflected in the financial statements.
Office of the NSW State Emergency Service Qualified opinion The previous qualification arose because we were unable to form an opinion on the completeness of received donations and fundraising revenues due to the internal controls at the point of collection not operating for the full financial year. The modification was removed as controls over donations and fundraising operated effectively for the full financial year.
Other assurance engagements
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

Qualified conclusion The previous qualification arose as upfront deposits by self-funded and overseas patients to the Network, as a Billing Agent, were not paid directly into the Network’s compartmentalised bank account.

The modification was removed as confirmation was received from the Department of Human Services that upfront deposits by self-funded and overseas patients should not be treated as a transaction with the Department and therefore not required to comply with the Guidelines.

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

 

Qualified opinion The previous qualification arose as we could not verify the unexpected 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.

The modification was removed as opening balances for the current year were subject to audit with no exceptions noted.