The Auditor-General has issued unqualified opinions on the financial statements from the State’s 2020-21 General Government Sector (GGS) and Total State Sector (TSS), warning however that accounting issues surrounding the Transport Asset Holding Entity (TAHE) almost resulted in a qualified audit opinion.
TAHE was established in July 2020 to manage the State’s rail assets and infrastructure.
In her Report, State Finances 2021, Auditor-General, Margaret Crawford said this year’s audit was significantly delayed by protracted disagreement over the treatment of the Government’s $2.4 billion cash contribution to TAHE.
“This matter was further frustrated by the fact that information was withheld and not shared with my Office on a timely basis,” Ms Crawford said.
“This has warranted an extreme risk finding for NSW Treasury to significantly improve governance processes to ensure complete and timely sharing of information,” she said.
“The challenges encountered in completing this year’s audit were extraordinary and tested the constructive partnership between the Audit Office and NSW Treasury.”
Ms Crawford acknowledged the “enormous efforts” the staff of both Agencies went to to correct material errors and ultimately achieve the unmodified audit opinion.
She said the levels of TAHE’s projected returns did not support the State’s cash contribution to be treated as an equity injection, but instead the evidence suggested the transfer was a capital grant expense which would impact the GGS budget result.
She said that up until December, NSW Treasury submitted three versions of estimated returns with respect to the GGS’s contribution to TAHE.
“All of these models were unsophisticated, containing errors, omissions and/or poor logic,” Ms Crawford said.
“Most importantly, none were able to demonstrate that a realistic rate of return would be derived from the GGS’s investment in TAHE.”
Ms Crawford made seven recommendations, including that Treasury implement effective quality review processes over key accounting information before submitting that information to her Office.
The end-of-financial-year result for the State was a deficit of $7.1 billion, lower than the forecast deficit of $16 billion.
The Auditor-General’s 91-page Report can be accessed at this PS News link.
