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Schott Report: NSW needs a new Budget Management System

by Paris Cowan •
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In what could be the clearest insight into ICT opportunities likely to arise in the 2012-13 NSW Budget to date, a review of the State’s public sector management has found that poor financial systems are preventing the NSW Government from tracking exactly how much money it has and where it is being spent.

The interim report of a NSW Commission of Audit lead by former head of Sydney Water, Kerry Schott, was tabled in Cabinet in January and has recently been made public.

It has recommended that improvements need be made to financial, human resources and management information systems across the State’s public sector if the NSW Government is to have any hope of achieving the key outcomes of its 2021 State Plan.

“The problems this report has uncovered are systemic,” it says. “The Commission has been surprised at how consistently basic management practices have not been implemented.”

The authoring Commission has urged the Treasury and agency CFOs to commence the business case design for a new and improved government financial management system “as a matter of urgency”.

It has found that poor interfaces between agency-level financial systems and the Treasury Online Entry System (TOES) and Capital Treasury Online Entry System (CAPTOES) has meant that funded entities and the Treasury have at times been left with divergent understandings of their budgets.

A 2009 audit of the NSW Police Force (NSWPF) found that it treated the annual allocation letter sent by the Treasury as notional budget guidance only. From the Treasury’s perspective, it represented the final word on the NSWPF’s annual funding. A lack of synchronisation between NSWPF SAP systems and TOES meant that the error was not picked up.

In his 2011 financial audit, the NSW Auditor-General found 25 errors across the financial statements submitted by agencies, six of which were off the mark by between $100 million and $1 billion, and one which was mistaken by more $1 billion.

The Schott Report also recommended that the Directors-General of each of the nine agency clusters should:

  1. “invest in improved systems for providing them with the basic and strategic workforce metrics required to manage their organisations”; and
  2. “review the management support systems for finance, human resources and asset management in their cluster to better integrate the cluster and improve services, as well as preparing business cases to support any required additional expenditure.”

The Commission of Audit Report says a lack of visibility across the nine agency clusters is hampering the leadership efforts of their Directors-General – some of whom are expected to oversee as many as 384 entities within their cluster without reliable data on staffing or budgets.

“Many clusters are not able to gain a single view of their organisation, cannot produce a set of monthly accounts or performance reports, or even email all staff on a common system,” it says.

Repeated Machinery of Government (MoG) changes have also been targeted as a source of unwanted complexity.

Although it has undergone two major ‘integrations’ since 2010, the Report found 130 separate business and reporting systems in operation across the Transport cluster and its 58 comprising entities.

These could be consolidated down to as few as 12, the Report said, saving the Government more than $100 million a year and making business processes more transparent.

A 12 to 18 month moratorium on MoG changes was also recommended to provide much-needed relief to clusters such as the Department of Trade and Investment, Regional Infrastructure and Services (DTIRIS), which has undergone three major restructures since being formed as the Department of Primary Industries in 2004.

It has been left with six different payroll and finance systems as a result, and has been unable to produce a consolidated monthly report since May 2011. It is currently planning its third corporate services amalgamation in seven years. “There is little wonder that staff are reported to be experienced at amalgamation but ‘battle weary’,” said the report.

The review also complained of a proliferation of government entities over time. Some of these, it said, should have their futures placed under review.

Unsurprisingly, the NSW Government has leapt at the opportunity to bring the systemic issues that evolved under the preceding 16 years of Labor government into the spotlight, and this should mean that the recommendations are viewed favourably in the lead up to a mid-year Budget.

“NSW has been punching below its weight for too long,” said Treasurer Mike Baird, in a statement.

“This Government has already acted to improve the efficiency and effectiveness of the public sector and we will be pursuing the recommendations to move the NSW public administration forward from its current position to a level that the people of NSW both expect and deserve,” he said.

The final report is due to be released in April and will focus on Government service delivery.

The ICT implications of the Schott Report – to the upcoming Budget as well as the future of procurement in the State – will be discussed at Intermedium’s NSW Breakfast Briefing to be held in North Sydney this Thursday, 1 March 2012.


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What the Draft ICT Strategy really means for NSW

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  • NSW
  • IT Services
  • Policy
  • 2021 State Plan
  • Financial Management
  • Kerry Schott
  • Mike Baird
  • NSW Budget 2012-13
  • NSW Treasury
  • Schott Report
  • TOES