NSW Audit Office - Financial Reports – 2000 - Volume 2 – Special  Reviews
7 Pages
English
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NSW Audit Office - Financial Reports – 2000 - Volume 2 – Special Reviews

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Learn all about the services we offer
7 Pages
English

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3Special Reviews New South Wales Government Agencies Preparedness for the GSTLeave in Universities Compliance Review of AcademicAuditor-General’s Report to Parliament 2000 Volume Two 5Compliance Review of Academic Leave in UniversitiesBACKGROUNDFollowing the introduction of enterprise agreements in universities, seven of the State’s tenuniversities have negotiated with their academics an entitlement, under certain conditions, to accruetheir annual leave. Prior to the introduction of this entitlement, academics were presumed to havetaken their annual leave in the approximate three month period between academic years. Under theformer arrangement, universities did not record details of academic leave earned and taken and noWHAT IS THE POTENTIAL RISK?The main risk to the individual universities is whether each will have in place the necessary internalcontrols to ensure that leave taken by academics is accurately and completely recorded and that theWHAT DID WE DO?A review of annual leave arrangements for academic staff and the associated controls was conductedWHAT DID WE FIND?All universities have negotiated enterprise agreements with their academic staff. Of the tenagreements, seven provide for the accrual of annual leave. The University of New England, Southernagreements which do notThe universities that have enterprise agreements allowing the accrual of leave have ...

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3
Special Reviews
Compliance Review of Academic
Leave in Universities
New South Wales Government Agencies Preparedness for the GST
Auditor-General’s Report to Parliament 2000 Volume Two
Special Reviews
5
Compliance Review of Academic Leave in Universities
BACKGROUND
Following the introduction of enterprise agreements in universities, seven of the State’s ten
universities have negotiated with their academics an entitlement, under certain conditions, to accrue
their annual leave. Prior to the introduction of this entitlement, academics were presumed to have
taken their annual leave in the approximate three month period between academic years. Under the
former arrangement, universities did not record details of academic leave earned and taken and no
liability accrued to the university in the form of untaken leave.
WHAT IS THE POTENTIAL RISK?
The main risk to the individual universities is whether each will have in place the necessary internal
controls to ensure that leave taken by academics is accurately and completely recorded and that the
liability for untaken leave is accurately recorded in their financial statements at year end.
WHAT DID WE DO?
A review of annual leave arrangements for academic staff and the associated controls was conducted
in each of the State’s ten universities.
WHAT DID WE FIND?
All universities have negotiated enterprise agreements with their academic staff. Of the ten
agreements, seven provide for the accrual of annual leave. The University of New England, Southern
Cross University and the University of Western Sydney each have enterprise agreements which do not
allow academic staff to accrue annual leave.
The universities that have enterprise agreements allowing the accrual of leave have developed
satisfactory internal controls over both the recording of leave and the accruing of the financial liability
for untaken leave at year end. Audit testing of these controls has revealed a generally satisfactory
outcome with only minor errors reported at one university. The same university experienced
difficulties in the calculation of the financial liability for untaken leave at year end, while one other
university did not accrue its liability at year end. At another university, a number of academic staff
had leave balances at year end in excess of the maximum allowed.
WHAT DOES THIS MEAN?
The conversion to the process of accruing the annual leave of academic staff has proceeded without
major difficulties. Minor deficiencies identified in some controls should be addressed by the three
affected universities so as to ensure that the problems do not become unmanageable.
WHAT WILL THE AUDIT OFFICE BE DOING?
The internal controls of this account area will be routinely followed up each year by the Audit Office
as part of the annual audit. Of particular interest will be a review as to what controls are in place at
each university to ensure academics do not take more than their entitlement of leave between
academic years.
WHAT ELSE SHOULD BE DONE?
As no major deficiencies were noted, no recommendations are required.
Auditor-General’s Report to Parliament 1999 Volume Two
Special Reviews
6
Compliance Review of NSW Government
Agencies Preparedness for the GST
BACKGROUND
The goods and services tax (GST) legislation,
A New Tax System (Goods and Services Tax) Act 1999,
received Royal Assent on 8 July 1999. From 1 July 2000, the GST will apply at the rate of 10 per cent
on the supply of most goods and services (whether locally produced or imported) consumed in
Australia. The NSW Government and its agencies will, in most respects, be liable for the GST in the
same way as the private sector.
Although the GST does not commence until 1 July 2000, there is a significant amount of planning and
follow-up action required by NSW government agencies (including government trading enterprises)
to ensure their systems and procedures comply with the GST legislation from commencement date. In
most cases, agencies will have to register with the Australian Taxation Office, apply GST to prices
charged for goods and services (unless specifically exempted), and claim input tax credits on any
purchased inputs. The GST will result in substantial new administrative requirements for the day to
day business of agencies, including the need to issue and archive GST invoices.
WHAT ARE NSW AGENCY AND TREASURY REQUIREMENTS?
Each NSW Government agency is responsible for carrying out the necessary planning and compliance
activities in preparing for the commencement of the GST.
In June 1999, NSW Treasury released Treasury Policy & Guidelines Paper (TPP 99-3) ‘GST
Compliance Plan for Public Sector Agencies’ to assist agencies with implementation of the GST. The
Plan sets out key GST implementation milestones (‘accountable actions’) against which Treasury will
Accountable Action
Reporting Deadline to Treasury
Phase 1 – Project scoping, planning and identifying GST
issues
18 August 1999
Phase 2 – Determining agency business changes required
and Budget impacts
3 November 1999
Phase 3 – Project implementation
Preliminary report due by 28 January 2000.
Final report due by 31 March 2000.
Phase 4 – Evaluation and testing
31 May 2000
Phase 5 – Post implementation compliance review
Late October 2000
Each action/phase has a series of tasks that need to be completed in order to adequately prepare for
the GST. Completing these tasks and meeting Treasury reporting requirements is the blueprint for
government agencies in adequately preparing for and complying with the GST.
Treasury will monitor each agency’s progress against the GST Compliance Plan as outlined in TPP
99-3. At the completion of each phase, Chief Executive Officers are required to provide Treasury with
a progress report by the stated deadlines.
Furthermore, at the completion of Phase 2 (3 November 1999), agencies were required to provide
Treasury with ‘independent certification’ of Phases 1 and 2 of the Plan. Treasury encouraged agencies
to utilise the services of the Audit Office to perform the independent certification work, although this
was not made mandatory.
Auditor-General’s Report to Parliament 2000 Volume Two
Special Reviews
7
The objective of this commentary is to assess the preparedness of agencies for the GST by reviewing
agencies’ progress in implementing the NSW Treasury GST Compliance Plan for Public Sector
Agencies, in particular, Phases 1 and 2 of the Plan.
WHAT ARE THE POTENTIAL RISKS?
Agencies will face a number of business and financial risks if the GST compliance activities (for GST
preparedness) are not completed successfully. Some of these risks are:
incorrect calculation and charging of the GST will result in losses to agencies, as liability to pay
GST remains even if the tax has not been charged to clients
incorrect classification of supplies that are taxable or non taxable could result in agencies
overpaying or underpaying tax
risks of over/under-claiming input tax credits. Over-claiming GST credits will be an offence
and will reflect poorly on NSW internal administration with potential for public censure or
criticism. Under-claiming GST credits would represent a financial risk and possibly result in
unnecessary calls on the Budget
GST returns may not be calculated correctly and lodged on a timely basis which could result in
substantial penalties (up to 200 per cent of the tax underpaid)
pricing under contracts that span the implementation of GST may not be sufficient to recover
the GST cost if the GST is not factored in
possible public censure by the Australian Competition and Consumer Commission (ACCC) if
agency’s price changes are found to be in breach of ACCC’s price exploitation guidelines
without adequate systems, procedures and staff training, attempting to comply with the GST
legislation could result in inefficient use of clerical resources and inadequate results.
WHAT DID WE DO?
The Audit Office performed various compliance procedures to determine the preparedness of agencies
for the GST by examining agencies’ progress in implementing the Treasury GST Compliance Plan for
Public Sector Agencies. In particular, this Report focuses on agencies’ progress in respect of Phases 1
and 2 of the Plan which were to have been completed by 18 August 1999 and 3 November 1999,
respectively.
These compliance procedures were performed using a sample of 141 agencies and their controlled
entities. These agencies were representative of the size, nature and complexity of those within the
NSW public sector. This work was undertaken throughout the period November 1999 to April 2000.
WHAT DID WE FIND?
A positive finding from the work performed by the Audit Office was that the greater majority of
agencies examined (94 per cent) had adopted the Treasury GST Compliance Plan. The balance were
GTEs that decided to follow an alternate plan which was not dissimilar to the Treasury Plan.
On the other hand, irrespective of when the Audit Office examined agencies’ preparedness for the
GST, all agencies were found to have fallen behind the timeframes set by the Plan. When the Audit
Office reviewed individual agency’s progress (which may have been some months after the due date),
the average percentage completion of the Plan in respect of Phases 1 and 2 was 81 per cent.
Auditor-General’s Report to Parliament 1999 Volume Two
Special Reviews
8
Only half of the agencies examined lodged the Phase 1 Report to Treasury by the due date, 18 August
1999. Treasury has advised that the balance lodged their Phase 1 Reports within three weeks of the
due date. In addition, the review found:
all agencies examined had established a GST project team, commenced to identify GST issues
and determined project resource requirements
of the agencies examined, 75 per cent had engaged a GST consultant in some manner or form.
The scope of the work to be performed by consultants included accounting, systems design, legal
and taxation advice
over 87 per cent of agencies were able to identify project risks, but only 42 per cent of these
agencies were able to quantify those risks
slightly less than 95 per cent of agencies had commenced an examination of the GST legislation
and its effects on the organisation.
approximately 90 per cent of agencies examined had established or had commenced to establish a
database of contracts. Of these, 90 per cent had commenced to determine the reviewable status of
those contracts and, yet again, 96 per cent of these agencies had commenced to review contract
pricing agreements
Slightly less than 60 per cent of agencies lodged their Phase 2 Reports to Treasury by the due date,
3 November 1999. Treasury advice is that the balance lodged their Phase 2 Reports within three
weeks of the due date. In addition, this phase of the review found:
of agencies examined, 85 per cent had undertaken some form of transaction flow analysis and 95
per cent had enquired about GST registration requirements
that review of existing accounting procedures had commenced in about 95 per cent of agencies
just under 80 per cent had also identified tax planning opportunities
modelling of the impact of the GST on prices had been commenced by 85 per cent of agencies.
But, only half of all agencies provided Treasury with a price impact statement. Just over 75 per
cent of all agencies had identified price impacts based on the modelling.
Approximately half of the agencies examined by the Audit Office had requested that the ‘independent
certification’ work be deferred until the agency had significantly completed Phase 2. Some of the
reasons put forward included:
the agency had only just commenced following the Treasury Plan
the agency had just decided to engage a GST consultant to complete and implement their GST
plans
the Y2K problem was the main focus for the agency in the lead up to 1 January 2000
in a majority of cases, the agency GST project manager was also the Y2K project manager
the agency was waiting for further advice/guidance on specific matters from Treasury and/or
the Australian Taxation Office.
Auditor-General’s Report to Parliament 2000 Volume Two
Special Reviews
9
WHAT DOES THIS MEAN?
Overall, based on the above observations, the level of planning and preparedness for the GST by
NSW Government agencies is of concern. The preparedness fell short of the milestones set out in
Phase 1 and Phase 2 of the Treasury implementation strategy. Unless agencies refocus and dedicate
additional resources to their GST projects, they increase the risk of not being prepared for the
commencement of the GST.
WHAT HAS BEEN DONE?
The Audit Office has been advised that the Treasurer provides regular reports to Cabinet about NSW
public sector agencies’ GST preparedness. Recently, the Secretary, Treasury, contacted all ‘at risk’
agencies seeking certain assurances about their preparedness for the GST.
WHAT ELSE SHOULD BE DONE?
Agencies should appreciate the enormity of the GST Project and dedicate appropriate resources to
ensure GST compliance as at commencement date.
Timely completion of Phases 3 and 4 of the Treasury Plan should be seen as a priority.
To ensure appropriate levels of corporate governance, agency heads/boards should monitor progress
more closely and become more involved.
WHAT WILL BE DONE?
At the deadline for completion of Phase 4 of the Plan (31 May 2000), agencies are again required to
provide Treasury with 'independent certification' of the reasonableness of their project
implementation, evaluation and testing, ie Phases 3 and 4. This will enable Treasury to continue its
monitoring role and provide appropriate advice to the Treasurer so that Cabinet may be kept informed
about the preparedness of the NSW public sector for the GST.
The Audit Office will also continue to monitor individual agency preparedness and will report again
to Parliament on individual agencies’ progress against Phases 3 and 4 of Treasury’s Plan in mid June
2000.