Audit finds NSW reporting systems lacking

Some government departments are falling behind in their financial reporting responsibilities in the wake of an extensive departmental restructure within the New South Wales Government, forcing the auditor-general to once again call for new whole-of-government reporting systems.

The restructure of the state government into 13 new super-departments in mid-2009 caused the financial reporting of said departments to fall behind, risking inaccuracy.

"Given the work required to update accounting records to reflect the impact of restructures and the necessary changes to financial reporting systems and processes, the quality and timing financial reporting is generally adversely impacted by restructures. This is especially so where structures occur part way through a financial year. In this event, agencies have to prepare financial reporting information for two reporting periods within the same financial year, both of which have to be audited, resulting in additional costs.

"Restructures, particularly those occurring during a financial year, increase the risk of errors in agency financial statements, which can have negative consequences for the quality, timing and audit of the financial statements," NSW auditor-general Peter Achterstraat wrote in his report.

Achterstraat subsequently recommended that Premier Barry O'Farrell's department spearhead the implementation of common financial reporting systems.

"I again recommend Treasury and Department of Premier and Cabinet take a lead role in monitoring, supporting and reporting on the implementation of common financial reporting and support systems within the new departments," Achterstraat wrote, adding that in the interim, agencies be notified of agency amalgamations months in advance to plan for the disruption to their reporting schedules.

The auditor-general also advised that the government ought to overhaul its recruitment strategy for agency chief financial officers, recommending the introduction of a required amount of minimum qualifications to hold a government CFO position, which included training in technology-based financial reporting.

"Preparing agency financial statements requires a broad range of skills, which are not limited to an understanding of accounting concepts and requirements. Year-end financial reporting requires project management and stakeholder consultation, as well as knowledge of agency operations. In addition to formal accounting qualifications, agency CFOs need experience in financial management and corporate governance, including compliance and risk management, technology and internal controls," Achterstraat wrote.

The NSW Government is currently working to develop an industry-centric ICT plan via a number of consultation panels.