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Report on Ministerial Portfolios May 1998

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Report on Ministerial Portfolios May 1998 V I C T O R I A Auditor-General of Victoria REPORT ON MINISTERIAL PORTFOLIOS MAY 1998 Ordered to be printed by Authority. Government Printer for the State of Victoria No. 13 - Session 1998 ISSN 1033 2960 ISBN 0 7306 9300 7 May 1998 The President The Speaker Parliament House Melbourne, Vic. 3002 Sir Under the authority of section 15 of the Audit Act 1994, I transmit my Report on Ministerial Portfolios. The Report also contains a section on the Parliament of Victoria. This Report completes the cycle of my auditing activities in relation to the 1996-97 financial year. Yours faithfully C.A. BARAGWANATH Auditor-General Contents Foreword vii PART 1 EXECUTIVE SUMMARY 1 1.1 Major findings ............................................................................. 3 PART 2 PARLIAMENT OF VICTORIA 11 2.1 Parliament of Victoria ............................................................... 13 PART 3 AUDIT OF MINISTERIAL PORTFOLIOS 17 3.1 Education ..................................................................................19 Maintenance backlog at schools 21 Capital expenditure and asset management at Swinburne University of Technology 31 Development of university IT systems - The CASMAC project 38 3.2 Human Services ........................................................................ 51 Department of Human Services tendering procedures 53 Management of Residents’ Amenities Funds 60 3.3 Infrastructure ............................................................................75 Privatisation of bus services 78 Public transport revenue and patronage levels 85 Docklands redevelopment arrangements 87 Quality of external financial reporting in the local government sector 104 Operation of audit committee and internal audit within the local government sector 110 Management of municipal business undertakings 114 Impact of poor tender specifications 121 Competitive tendering arrangements at the City of Greater Dandenong 128 Report on Ministerial Portfolios, May 1998 xxxxxxxxxxxxxxxxxxxxxxxxxxxxv CONTENTS xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 3.4 Justice ......................................................................................141 Community-based orders by courts 143 Management of infant investment trust accounts by courts 150 Collection of fines and fees 152 Charging for police services 160 3.5 Natural Resources and Environment ................................... 169 Restructuring of water authorities 172 Victorian Dairy Industry Authority Chinese joint venture 183 Milk marketing 189 3.6 Premier and Cabinet ...............................................................203 Administration of the Community Support Fund 205 3.7 State Development .................................................................213 The year 2000 Issue - The Millennium Bug 215 3.8 Treasury and Finance ............................................................. 235 Clearance of Yallourn Power Station site 239 Trends in performance of public sector superannuation funds 249 Local Authorities Superannuation Board unfunded superannuation liability 266 Financial standing of WorkCover 271 Utilisation of government property 277 Victorian electricity industry privatisation 285 Cost of Tricontinental failure 303 INDEX 319 vi xxxxxxxxxxxxxxxxxxxxxxxxxxxReport on Ministerial Portfolios, May 1998 Foreword A diverse range of public interest issues identified from the annual financial audit process of the numerous public sector agencies which come under my responsibility are subjected to additional audit work culminating in this annual Report to the Parliament on Ministerial Portfolios. As a result of the enactment of the Audit (Amendment) Act 1997, I am required to appoint “authorised persons”, following a process of contestability, to assist me in my financial audit responsibilities. As I remain the principal auditor of all Victorian public sector agencies, which total around 520, my Office will be required to undertake quality assurance reviews of the work undertaken by appointed “authorised persons”, in order to comply with Australian Auditing Standards, before I issue the audit opinions on agencies’ financial statements and issue the related audit reports. Under the new legislation, my Office will continue to be responsible for undertaking the additional audit work required to enable the preparation of my 2 annual audit reports to the Parliament, namely, the Report on Ministerial Portfolios and the Report on the Government’s Annual Financial Statement. I am currently finalising the determination of the appropriate resources to enable me to fulfil these responsibilities which emanate from the financial audit process, together with the resources to fulfil my performance audit responsibilities. The effectiveness of the new audit regime will be largely dependent on the quality of the input received from the various audit service providers, including Audit Victoria. The challenge for my Office will be to ensure that the public interest continues to be protected through the ongoing issue of high quality Auditor-General’s Reports to the Parliament and the community. C.A. BARAGWANATH Auditor-General Report on Ministerial Portfolios, May 1998 xxxxxxxxxxxxxxxxxxxxxxxxxxxxix May 1998 The President Legislative Council Parliament House Melbourne Vic. 3002 Sir Under the provisions of section 15 of the Audit Act 1994, I transmit my Report on Ministerial Portfolios. The Report also contains a section on the Parliament of Victoria. This Report completes the cycle of my auditing activities in relation to the 1996-97 financial year. Yours faithfully C.A. BARAGWANATH Auditor-General May 1998 The Speaker Legislative Assembly Parliament House Melbourne Vic. 3002 Sir Under the provisions of section 15 of the Audit Act 1994, I transmit my Report on Ministerial Portfolios. The Report also contains a section on the Parliament of Victoria. This Report completes the cycle of my auditing activities in relation to the 1996-97 financial year. Yours faithfully C.A. BARAGWANATH Auditor-General Part 1 yyyyyyyyyyy Executive Summary xxxxxxxx1 Part 1.1 Major findings 1.1.1 Key findings arising from the audit reviews of ministerial portfolios are highlighted at the beginning of each individual section of this Report. Major findings are summarised below. EDUCATION Page 19 Maintenance backlog at schools x The most recent assessment of the level of maintenance backlog in schools across the State indicates the need for expenditure of $275.4 million over a 5 year period. Audit examination identified certain instances where maintenance requirements were underestimated indicating a need to critically reassess the maintenance requirements of schools and the associated funding implications. Paras 3.1.4 to 3.1.5 and Paras 3.1.29 to 3.1.37 x In relation to the Williamstown North Primary School, maintenance requirements were significantly underestimated as the School was closed on account of health and safety factors, including unsafe classrooms and significant structural damage, within a year of its maintenance requirements being assessed at only $512 000. Paras 3.1.32 to 3.1.37 x The Department of Education has currently allocated, through school global budgets, funding which will only meet 55 per cent of the identified maintenance rated as urgent and required to be undertaken in the 1997-98 financial year. Paras 3.1.9 to 3.1.14 x Seventy-nine per cent of schools surveyed by audit supplemented the funding received from the Department with locally-raised funds or locally-provided labour to undertake urgent and ongoing maintenance. Paras 3.1.15 to 3.1.20 Report on Ministerial Portfolios, May 1998 xxxxxxxxxxxxxxxxxxxxxxxxxxxx3 EXECUTIVE SUMMARY xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx EDUCATION - continued Page 19 Capital expenditure and asset management at Swinburne University of Technology x The University’s Mooroolbark campus commenced operations in 1992 and continued until 1996 when its Lilydale campus was opened. The full financial impact of the University’s decision to invest in the Mooroolbark campus at a cost of around $5.2 million, which was only utilised for 5 years, will not be determined until the property is sold. Paras 3.1.57 to 3.1.70 Development of university IT systems - The CASMAC project x Universities across Australia in 1991 agreed to develop administrative computing systems (CASMAC). However, in February 1997, a computer application forming part of the project developed by a third party repeatedly failed acceptance testing resulting in the termination of the associated contract and as a consequence the commencement of legal action. Paras 3.1.71 to 3.1.78 HUMAN SERVICES Page 51 Department of Human Services tendering procedures x Departmental procedures do not require that a business case be developed when considering the outsourcing of functions or activities and therefore the Department is not in a position to determine whether the most cost-efficient and effective option has been selected for the provision of services. Paras 3.2.14 to 3.2.15 x Audit examination identified instances where there was no documentary evidence to substantiate whether goods and services had been provided in accordance with the contract specifications nor was there any analysis of the quality of service provision by contractors. Paras 3.2.18 to 3.2.22 Management of Residents’ Amenities Funds x Audit identified that Residents’ Amenities Funds were not only used to acquire goods and services for the use of residents but were also used to fund the normal operating activities of
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