New South Wales Auditor-General’s report: volume thirteen 2014 focusing on education and communities

12 Dec 2014

Executive summary

Financial and performance reporting

Financial and performance reporting is an important dimension of good governance. Confidence in public sector decision making, financial management and transparency is enhanced when financial and performance reporting is accurate, timely and clear.

The audit opinions on all the Education and Communities agencies’ 30 June 2014 financial statements were unqualified. No significant matters were identified. Over the last five years, reported misstatements identified during the audit have fallen significantly.

Agencies in the Education and Communities cluster were largely successful in performing early close procedures mandated by NSW Treasury. This facilitated early resolution of accounting issues and enabled the financial statements to be submitted earlier than the previous year.

The Department of Education and Communities currently records the Sydney Conservatorium of Music’s land and buildings in its financial statements, but the supporting basis for the control of assets at this site needs further clarification.

Service Level Agreements define the roles and responsibilities of all parties. A number of agencies in the cluster operate without formal service level agreements with their corporate service providers.

Agencies must generate sufficient revenues and cash flows to fund operations and remain financially stable. The liquidity ratio for Venues NSW is positive, but significant deficits over the past three years (after adjusting for capital grants) suggest it may not be able to meet its short term obligations in the future if this trend continues.

Most cluster agencies had very low or negative self-financing and capital replacement ratios, indicating they may not have sufficient cash from operations to fund new assets. For the major asset based agencies, Venues NSW and Sydney Olympic Park Authority, it is essential they work with NSW Treasury to establish capital structures and funding arrangements that allow them to maintain and renew their assets.

In 2011-12, 229 NSW public schools were invited to participate in the ‘Empowering Local Schools’ National Partnership. In 2013-14, these schools received all three components of funding under the Department’s new Resource Allocation Model (RAM). The model is designed to achieve a simpler, fairer and more transparent distribution of government school funding.

At 30 June 2014, schools held total cash of $648 million, an increase of $90.1 million (or 16.1 per cent) from the previous year. The Department advised contributing factors for the increase included the additional funding received under the RAM, allocation of 19.5 per cent salary oncosts to schools and the impact of schools operating on a calendar year rather than a financial year basis. The average cash balance was $804,381 for secondary schools and $223,506 for primary schools.

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