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Table of contents

List of appendices iii

INTRODUCTION

EXECUTIVE SUMMARY

Part 1 - Executive and Legislature
Part 1.1 Office of the Governor
Part 1.2 Legislative Council
Part 1.3 House of Assembly
Part 1.4 Legislature-General

Part 2 - Ministerial Departments
Part 2.1 Department of Community and Health Services, Tasmanian Ambulance Services, Home Ownership Assistance Program, Housing Services
Part 2.2 Department of Education, Community and Cultural Development
Part 2.3 Department of Environment and Land Management
Part 2.4 Department of Justice
Part 2.5 Department of Police and Public Safety
Part 2.6 Department of Premier and Cabinet, Communications and Computing Division
Part 2.7 Department of Primary Industry and Fisheries
Part 2.8 Department of Tourism
Part 2.9 Department of Transport
Part 2.10 Department of Treasury and Finance, Treasury Corporate, Finance-General, State Purchasing and Sales ,TASFleet
Tasmanian State Service Workers Compensation Scheme
Part 2.11 Department of Vocational Education and Training
Part 2.12 Tasmania Development and Resources
Part 2.13 Workplace Standards Authority

Part 3 - Statutory Authorities
Part 3.1 - Government Business Enterprises
Part 3.2 - Local Government
Part 3.3 - Port Authorities AND Marine Boards
Part 3.4 - Regional Health Boards
Part 3.5 - OTHER STATUTORY AUTHORITIES

Part 4 - Miscellaneous Public Bodies
Part 4.1 TT-Line
Part 4.2 University of Tasmania
Part 4.3 Other
Aboriginal Land Council of Tasmania
Construction Industry Long Service Leave Fund
Inland Fisheries Commission
Local Government Association of Tasmania
Royal Tasmanian Botanical Gardens
Tasmanian Building and Construction Industry Training Board
Tasmanian Museum and Art Gallery
Tasmanian Office of Financial Supervision
Tasmanian Secondary Assessment Board
Wellington Park Management Trust
Workplace Safety Board

Part 5 - OTHER ISSUES
Part 5.1 Human Resource Management
Part 5.2 Timeliness and Quality of Financial Statement
Part 5.3 Television Commercial
Part 5.4 Performance Audits - Current Comments
Part 5.5 Collection of Firearms

List of appendices

APPENDIX A: Qualified Audit Reports 196

APPENDIX B: Ministerial Portfolios 197

INTRODUCTION

Report No 1 was submitted to Parliament in September 1996 and dealt with the audit of the Public Account for the year ended 30 June 1996.

Report No 2 (this Report) deals with Ministerial Departments, State Authorities, Government Business Enterprises, Local Government Authorities, Port Authorities and Marine Boards, Regional Health Boards, and other public bodies together with special comments on various other issues. Unless specifically indicated, the comment in this Report is current as at 25 November 1996.

FORMAT OF THIS REPORT

In previous years this Report has been structured to encompass under Ministerial Departments all those bodies attached to the relevant Minister in accordance with the Administrative Arrangements Act and the associated Order then in force.

In March 1996 the structure of both Departments and Ministerial portfolios was altered through the Tasmanian State Service (Restructuring) Order 1996, the Tasmanian State Service (Departments and Heads of Departments) Order 1996 and the Administrative Arrangements Order (No 2) 1996.

Because of these changes the structure of this Report has been altered.

Part 1 Executive and Legislature

Part 2 Ministerial Departments

Part 3 Statutory Authorities

Part 3.1 Government Business Enterprises

Part 3.2 Local Government

Part 3.3 Port Authorities and Marine Boards

Part 3.4 Regional Health Boards

Part 3.5 Other

Part 4 Miscellaneous Public Bodies

This classification does not attempt to recognise any lines of responsibility that some Statutory Authorities have through Ministerial Departments to the appropriate Minister, however the Portfolio or Responsible Minister is shown in each case.

STATUS OF AUDITS

The majority of audits for the year ended 30 June 1996 have been completed with some exceptions as detailed in the preamble under each Part of the Report.

AUDITS DISPENSED WITH

In accordance with Section 41 of the Financial Management and Audit Act 1990 (FMAA), the following audits have been dispensed with after consideration of alternative accountability arrangements for the public bodies concerned. Two of the aspects considered were the materiality of the financial transactions involved and the most cost-effective means of conducting the audits.

Grants to Public Bodies

An organisation in receipt of a grant from the Consolidated Fund automatically becomes a public body as defined under the FMAA, and is required to meet certain accountability requirements in accordance with the Treasurer's Instructions. A recipient of a grant of $5 000 or more is required to provide the appropriate Head of Agency with:-

• a signed copy of the public body's financial statements, showing the receipt and manner of disbursement of each grant, together with an audit report signed by a suitably qualified person; or

• a Statutory Declaration made in accordance with the Evidence Act 1910, and signed by two office holders or members considered to be bona fide representatives of the public body, to the effect that the grant was received and disbursed for the purpose for which it was given; or

• a certificate signed by a suitably qualified person to the effect that the grant was received and disbursed for the purpose for which it was given.

In the course of the various Agency audits, Audit Office staff ensure that Heads of Agencies comply with the requirements of the Treasurer's Instructions.

Health Registration Boards

The audits of the following Boards have been dispensed with on the basis that an audit is undertaken by a suitably qualified person and certain reporting requirements.

Physiotherapists Registration Board

Podiatrists Registration Board

Psychologists Registration Board

Radiographers Registration Board

Other Public Bodies

The audits of the following public bodies have also been dispensed with on the basis that an audit is undertaken by a suitably qualified person:-

National Trust of Australia (Tasmania)

National Trust Preservation Fund (Hobart)

Drainage Trusts

Local Government Committees

Committees appointed under the Local Government Act 1993 are required to provide copies of their annual financial statements to the respective Council to enable the General Manager, or some other appropriate person, to perform an audit of those accounts.

Statements of Committees are normally consolidated in the financial statements of the respective Councils.

EXECUTIVE SUMMARY

The format of this Report differs from the corresponding report in 1995. This Report contains a brief summary of the operating statements and financial positions of the more significant government business enterprises and statutory authorities. Comparative amounts for the previous year are tabulated. The Report continues to present summarised financial information for all councils. I hope that method of presentation provides a better overview of how these entities have fared without undertaking the futile task of reproducing all of the information that is available in the annual reports of these entities. The accompanying text sets out significant points, if any, arising from an analysis of the financial statements and in relation to the environment in which each operates.

There is no financial analysis of the results of government departments. This would be premature while the cash reporting basis remains.

The consequences are that this Report is almost 100 pages longer than in 1995 which was exclusively oriented towards "exception reporting" principles. I would appreciate feedback on which approach is preferred by readers.

The Report does not include many items arising from the audits that have been formally raised with the auditees. The rationale for inclusion or otherwise rests on my perception of the public interest in each point and the need to confine comments to those matters that have more than a managerial dimension.

SIGNIFICANT ISSUES

Timeliness and quality of financial statements (Part 5.2)

A basic problem seems to exist in many government departments and authorities. There is a reluctance to accord sufficient priority to the production of financial statements and the quality of the drafts is often poor.

The Report lists those agencies that were late in producing financial statements for audit. The list is exceedingly generous since it has allowed the production of "draft" financial statements to substitute for the statutory requirement to produce signed financial statements. On the stricter criterion, many more agencies would have appeared on the list of defaulters. Comments under some agencies in this Report refer to specific aspects of lack of quality and timeliness.

I appreciate that there are always reasons for lateness and some of these may be justified. However in an agency of reasonable size, a combination of events would have to occur to derail a process that was otherwise properly planned and resourced.

Since financial statements are supposedly produced for management purposes as well as for discharging accountability requirements, the question must be asked as to how agencies can be properly managed in the absence of timely information.

In 1996-97, nearly every agency will have to produce full accrual financial statements including all government departments. Most of the other States and Territories have already implemented this reform. Unless there is a much greater commitment to improving performance, I anticipate worse problems. Each Finance Manager, or equivalent, needs to examine whether he or she is performing up to proper professional standards.

I have argued elsewhere that the current deadlines for the production of financial statements and tabling of annual reports are too slack. Tasmania would now be lagging at the end of the Australian field in terms of timeliness. I trust that the review of annual reporting being conducted under the auspices of the Department of Treasury and Finance will reach the same view and recommend accordingly.

Outstanding fines and fees (Part 2.4)

Court fines and fees outstanding have increased by $1.9m or 29% to $8.5m over June 1995. However only approximately $6.4m is immediately due for payment. On the brighter side, collections increased by 7.5% to $3.0m during the year. I note that the Department has already amended its procedures and during 1996-97, plans to further "re-engineer" the process to make further improvements.

Unregistered vehicles (Part 2.9)

The Department of Transport has made a useful start on purging its records of vehicles with lapsed registrations. As a result of a massive circularisation it identified many vehicles that had been sold or wrecked but proper notice and procedures had not been followed with the result that departmental records were inaccurate. As a result of the campaign, 340 vehicles were re-registered. However there are still many thousands of records relating to commercially owned vehicles that need similar attention.

Adequate follow-up by the Department in the future and the enforcement of penalties for failure to comply with the procedures when a vehicle is scrapped or sold coupled with more rigorous detection efforts to locate unregistered vehicles would have benefits for the whole community.

Road valuation and depreciation (Part 2.9)

The Department of Transport has been using a replacement cost approach to the valuation of the State roads. Depreciation is calculated by estimating the cost of restoring the road network to near new condition. Approximately $3.0bn is attributed to the value of the road network. The method used to value roads is presently being reviewed by a working group. Early indications are that the valuation of roads may be overstated from a material perspective.

TASFleet (Part 2.10)

The centralisation of the light vehicle fleet into TASFleet means that the financing for the purchase of replacement vehicles no longer appears as an element of the appropriation for government departments. The financing will occur by way of an overdraft from the Special Deposits and Trust Fund (Account T905). This will increase the overdraft in this Account from $6m at 30 June 1995 to an estimated maximum of $24m during 1996-97. This is an entirely proper approach to cash management.

The government departments will now lease their vehicles from TASFleet on a "dry lease" basis and the lease charge will include a "capital charge"; ie a cost of finance, as well as the estimated cost of administration, depreciation etc. As such, the arrangement incorporates proper signals to departments to encourage economical and efficient use of this resource.

However an associated effect will be that use of the overdraft facility will lessen the borrowings previously reflected in the Net Financing Requirement. This should be kept in mind when analysing any improvements in the NFR relative to 1995-96.

Tasmanian State Service Workers Compensation Scheme
(Part 2.10)

There has been a welcome improvement in the unfunded claims liability from $52.8m in 1995 to $47.2m in 1996. This has been achieved by increasing the contributions required from agencies. However the cost of claims actually paid out from T837 has remained fairly constant at around $24m.

Local government (Part 3.2)

A number of councils have yet to fully recognise the value of their infrastructure assets, primarily roads. When this is done, many of these councils will show a negative operating result because the full cost of the depreciation of those assets will be included in their financial statements. This signifies that those councils either need to live with a deteriorating asset stock, cut expenditure or raise rates and charges. They could also increase borrowings but this would not improve their operating deficiency.

I urge these councils to plan for this contingency and obtain public support for any necessary measures.

Some councils have run down their working capital position as shown in the table under this section of the Report. No particular conclusion can be drawn for these figures alone; however in such cases these councils should prepare accurate forward estimates of operating and capital requirements together with proposed sources of funds. Present practice in this respect is not entirely satisfactory due to an undue emphasis on planning only for the immediately following year.

Many councils failed to submit financial statements within the required 90 days from the end of the financial year.

Marine Boards (Part 3.3)

Burnie Port Authority continues to receive qualified audit opinions due to their noncompliance with a number of accounting standards.

Human Resource Management Systems (Part 5.1)

The previous attempt to provide human resource information was a centralised system referred to as HRMIS. It was never completed being abandoned in October 1992 after costing approximately $7m.

The current initiative to give the State a comprehensive overview of its employees is called the Strategic Employment Information System (SEIS). It is a more decentralised system and was authorised in August 1992. By June 1996 it was supposed to be getting on a regular basis, detailed information electronically from 26 agencies. That target date has been extended and two largest agencies are still not operating in the manner envisaged. Only nine of the 26 agencies are providing the information required in an electronic form. Central SEIS project costs excluding agency costs, exceed $1.3m.

I recommend the SEIS scope been broadened to include all employees regardless of the Act they are employed under or the manner in which they are employed to ensure the SEIS collates data on all employees employed in the State Service.