26 September 2023

Audit at Treasury leads to independent probe

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An independent assessment of NSW Treasury’s management of an Asset Holding Entity found by the Auditor-General to have been mismanaged, has recommended that Treasury, and all Government entities operate on a basis that the Audit Office is entitled to access the full range of documents necessary to undertake an audit.

The independent probe, conducted by former federal Public Service Commissioner, Stephen Sedgwick, followed the Auditor-General’s Report on State Finances 2021 which uncovered accounting issues surrounding the Transport Asset Holding Entity (TAHE) that almost resulted in a qualified audit opinion.

In his report Independent assessment of NSW Treasury’s processes in relation to the preparation of the 2021 State Financial Statements, Mr Sedgwick finds the circumstances of the TAHE “somewhat unique”.

He said this was because of a long lag between the decision to establish TAHE and its full execution during which there was a range of issues which became the almost ‘perfect storm’ of other events that occupied senior Treasury officials who had enjoyed ‘high stakes consequences’ of departures from by-then, long-established budget practices.

“In many respects, the genesis of the issues that came to a head in 2020 and 2021 lies years before,” Mr Sedgwick said.

He said that at that time, Treasury believed it was required to provide documents to the Audit Office that it judged to be ‘relevant’ and ‘material’.

“Treasury, like all other NSW Government Entities, should operate on the basis that the Audit Office is entitled to access the full range of documents necessary to undertake the audit,” Mr Sedgwick said.

He said the Department’s accounting expertise was strong with a small team of dedicated professionals and a clear key person regarding risks in highly specialist and all those involved believed they were discharging their responsibilities professionally and acting in the best interests of NSW.

“I was somewhat saddened to learn that trust has been eroded between Treasury and the Audit Office, with key personnel reporting they have been deeply hurt in the process,” Mr Sedgwick said.

He made 11 recommendations to Treasury, including that it review the governance and the conduct of the TAHE transition arrangements, and infuse the Department’s culture with “a professional curiosity and a willingness to both reassess the appropriateness of policy positions over time.”

The 45-page independent Report can be accessed at this PS News link and further information on the Auditor-General’s Report on State Finances 2021 in this PS News article.

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