AUDITOR-GENERAL’S REPORT FINANCIAL AUDITS Volume Nine 2009_part4 ppt

28 ___________________________________________ Auditor-General’s Report to Parliament 2009 Volume Nine
New South Wales Technical and Further
Education Commission


AUDIT OPINION

The audits of the Commission and its controlled entities’ financial reports for the year ended
30 June 2009 resulted in unqualified Independent Auditor’s Reports.

Unless otherwise stated, the following commentary relates to the consolidated entity.


PERFORMANCE INFORMATION

Size and Scope of the Commission in New South Wales

The Commission is the largest vocational education and training (VET) provider in Australia.

Year ended 30 June 2006-2008
Change %
Increase/
(Decrease) 2008 2007 2006

Total enrolments 0.7 504,009 497,747 500,410
Annual student hours (ASH) (’000) 3.6 112,660 108,509 108,785
Net cost of services * ($’000) (1.9) 1,188,845 1,204,231 1,212,107
ASH per enrolment 3.2 224 218 217
Net cost of services/enrolment ($) (2.6) 2,359 2,419 2,422
Net cost of services per ASH ($) (5.5) 10.53 11.10 11.14

* Net cost of services is for the financial year ended 30 June, whereas enrolments and student hours are for the
calendar year.
Source: New South Wales Technical and Further Education Commission (unaudited).


Enrolments have remained steady and there has been a 3.6 per cent increase in hours of training
delivered since 2006. The Commission has advised that this trend reflects a 0.7 per cent increase in
enrolment numbers and also a change in the student profile, with an increasing number of students
undertaking studies in longer higher level qualifications. In 2008, 42.7 per cent of all enrolments
were in these higher level qualifications (Certificate III and above) compared to 40 per cent in
2006.

Higher level qualifications provide better employment outcomes. Increasing the number of people
with higher level qualifications has been an agreed goal of State and Commonwealth governments
for several years.

Enrolments by Aboriginal and Torres Strait Islanders have increased by 25.3 per cent since 2006,
while enrolments by students from language backgrounds other than English increased by
11.6 per cent in the same period.

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_________________________________________ New South Wales Technical and Further Education Commission

Auditor-General’s Report to Parliament 2009 Volume Nine __________________________________________ 29
New South Wales VET Cost per Student Hour

The table below provides details of the volume of vocational education and training hours delivered
in New South Wales from training providers in receipt of Government funding. Government

expenditure per student hour has decreased by 18.1 per cent since 2004. The Commission has
advised that over this period Government funded student enrolments in New South Wales increased
by 10.2 per cent and totalled 429,181 in 2008.

Year ended 30 June
2004-2008

Change
Increase/

(Decrease) 2008 2007 2006 2005 2004

Government recurrent
expenditure* ($m)
(90.0) 1,363 1,397 1,429 1,434 1,453
Student hours (million) 14.2 112.1 108.8 105.8 106.7 97.9
Expenditure per student

hour ($/hour)
(2.7) 12.2 12.8 13.5 13.4 14.9
Change in expenditure
per student hour
since 2004 (%)
(18.1) (18.1) (13.5) (9.1) (9.5)

Source: National Centre for Vocational Education Research, 2004-08 Australian vocational education and training
statistics – financial information. Unpublished data from NCVER. The costs noted in the table above have been
adjusted to 2008 dollars to exclude the effect of inflation. (unaudited).
* Government Recurrent Expenditure is made up of:
TAFE NSW (approx 82 per cent of total), VET programs within NSW DET, agricultural colleges and

NSW Adult Migrant English Service.


OTHER INFORMATION

We identified some minor opportunities for the Commission to improve internal controls and we
have reported these to management. We have reported the following matters to the Commission
for the last two years:

 the need to better manage the review and transfer of completed projects in capital works in
progress to completed assets. The balance of these projects totalled $91.1 million at
30 June 2009.
 the need to correctly identify land and buildings included in both the Department of
Education and TAFE NSW’s financial reports. The maximum value of properties potentially
duplicated is approximately $12.8 million. As the land and buildings date back in time, the
Commission has deferred confirming the accuracy of their records until the 2010 financial
year.

Maintenance Backlog

TAFE NSW Institutes are given an overall budget by the Commission. The Institutes determine a
maintenance budget based on service priorities. In accordance with the Government’s policy of
total asset management, the Commission is developing a new methodology for future condition
assessments. This uses new software to identify and prioritise maintenance works by matching data
collected with maintenance work programs. It was anticipated that the new condition assessments
would be completed by the end of 2008, but to date they have not been undertaken. At
30 June 2009, maintenance backlog was estimated by management to be $37.6 million
($27.7 million in 2007-08). The backlog is not considered significant in the context of the estimated
replacement value of TAFE NSW buildings of $3.0 billion.

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New South Wales Technical and Further Education Commission _________________________________________

30 ___________________________________________ Auditor-General’s Report to Parliament 2009 Volume Nine
Workers’ Compensation Claims

Year Ended 30 June 2009 2008* 2007*

Number of claims incurring cost 627 699 639
Number of stress claims incurring cost 66 101 82
Estimated cost for all workers compensation claims ($m) 6.8 9.1 8.5
Estimated cost for stress claims ($m) 1.9 3.6 2.2
Days lost - all injuries 5,669 6,993 14,269
Days lost - stress claims 1,515 2,707 4,263


* Figures for prior years include data accumulated to date. Therefore the total days lost and costs are higher for the
earlier years due to the passage of more time.
Source: New South Wales Technical and Further Education Commission (unaudited).


In 2008-09, the Commission had 15,962 (16,231) full time equivalent employees and there were
66 stress claims made, 34.7 per cent less than in 2007-08. The average cost per stress claim in
2008-09 was $28,971 ($35,947) compared to $10,766 ($13,015) for all types of injuries.

The number of workers’ compensation claims has decreased by 10.3 per cent since 2007-08 and
there has been a 25.3 per cent reduction in the estimated cost of the claims. The Commission has
advised the improvement was due in part to a reduction in the number of claims incurred along
with a reduction in the average duration of time lost. The Commission attributes these reductions

to the successful implementation of programs and initiatives under its safe working and learning
strategy, which targets improvements in injury prevention, return to work and claims management
outcomes.

Workers’ Compensation Premiums Benchmark

Year ended 30 June 2010+ 2009 2008 2007

Equivalent full time employees
(EFT)*** 15,962 15,962 16,231 16,037
Premium cost ($m) 15.2 16.2 16.8 18.2
Benchmark* ($m) 14.4 15.0 14.5 14.8
Excess** ($m) 0.8 1.2 2.3 3.4

* Benchmark paid by The Treasury.
** Excess paid by TAFE NSW.
*** EFT numbers as specified in the Commission’s Workers’ Compensation Declarations.
+ Estimates for 2010.

The Treasury sets a benchmark for agencies that determines the level of funding provided for
workers’ compensation premiums. If an agency’s premiums exceed the benchmark, the agency
needs to fund the excess. This offers a financial incentive for agencies to actively manage their
workers’ compensation costs and minimise workplace injuries.

The Commission has advised that there has been a $2.6 million reduction (76 per cent) in the short
fall payable by the Commission over the last four premium renewal periods as a result of improved
claims management. This has also led to a $1.0 million reduction (6.2 per cent) in the deposit
premium for the 2009-10 period.
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_________________________________________ New South Wales Technical and Further Education Commission

Auditor-General’s Report to Parliament 2009 Volume Nine __________________________________________ 31
Overtime

Overtime costs decreased two per cent in 2008-09.

Year ended 30 June 2009 2008 2007 2006

Overtime ($m) 28.8 29.4 29.3 27.3
Salaries ($m) 1009.7 1,002.1 987.1 951.3
Overtime as % of salary
2.9 3.0 3.0 2.9


As shown in the table below, 157 (156) non-teaching TAFE NSW employees earn 20 per cent or more
of their gross salary in overtime.

Overtime to Base Salary % Number of Non-Teaching Employees
2009 2008

71 – 100 1
61 – 70
51 – 60 4 5
41 – 50 22 18
31 – 40 54 45
21 – 30 77 87
10 – 20 169 169
0> - 10 1,798 1,854
Nil 3,763 3,461

Total 5,887 5,640


For four employees overtime was more than 50 per cent of their base salary compared to six in the
prior year. Overtime worked by non-teaching staff is paid at penalty rates, which is a relatively
expensive way of obtaining more resources.

Employee Annual
Overtime
$
Base
Salary
$
Annual
Gross
$
Overtime to
Base Salary
%

Employee 1 23,225 39,666 64,317 58.6
Employee 2 21,507 40,465 69,997 53.2
Employee 3 20,827 39,666 61,760 52.5
Employee 4 21,225 42,317 69,756 50.2


The Commission has previously advised that high levels of overtime may be paid because:

 overtime paid was for services that needed to be performed and that overtime was the

cheapest alternative for providing the required services
 the cost of some overtime has been built into the budget for commercial activities
 of industrial action and other circumstances beyond the control of the Commission
 TAFE NSW operating hours are from 6.00am to 10.00pm, Monday to Saturday, therefore some
overtime is unavoidable.

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New South Wales Technical and Further Education Commission _________________________________________

32 ___________________________________________ Auditor-General’s Report to Parliament 2009 Volume Nine
FINANCIAL INFORMATION

Abridged Consolidated Operating Statement

Year ended 30 June Consolidated Parent
2009 2008 2009 2008
$’000

$’000

$’000

$’000

Employee related 944,255 901,141
Personnel services 343,344 330,845 1,232,114 1,188,636
Other operating expenses 307,779 303,384 307,779 303,384
Depreciation and amortisation 78,072 75,675 78,072 75,675

TOTAL EXPENSES 1,673,450 1,611,045 1,617,965 1,567,695

TOTAL REVENUE 396,026 380,560 396,313 380,556

Other gains/(losses) 16 (1,706) 16 (1,706)

NET COST OF SERVICES 1,277,408 1,232,191 1,221,636 1,188,845

Government contributions 1,272,110 1,244,084 1,216,626 1,200,734

(DEFICIT)/SURPLUS (5,298) 11,893 (5,010) 11,889


The increase in revenue is attributable to the increase in student enrolment numbers, referred to
previously.

Abridged Consolidated Balance Sheet

At 30 June Consolidated Parent
2009 2008 2009 2008
$’000

$’000

$’000

$’000

Current assets 181,321 166,353 181,321 166,111
Non-current assets 2,991,280 2,978,932 2,991,280 2,978,932

TOTAL ASSETS 3,172,601 3,145,285 3,172,601 3,145,043

Current liabilities 212,669 180,210 213,511 180,943
Non-current liabilities 842 687

TOTAL LIABILITIES 213,511 180,897 213,511 180,943

NET ASSETS 2,959,090 2,964,388 2,959,090 2,964,100


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_________________________________________ New South Wales Technical and Further Education Commission

Auditor-General’s Report to Parliament 2009 Volume Nine __________________________________________ 33
The increase in current liabilities of $32.5 million was predominately due to:

 a rise in personnel services payable the to the Department of Education and Training of
$5.5 million.
 an increase in unearned revenue of $12.1 million due to new programs and increased
commercial activity domestically and overseas.

 a $9.9 million increase in accrued salaries and wages.


COMMISSION ACTIVITIES

The Commission, more commonly known as TAFE NSW, was constituted by the Technical and
Further Education Commission Act 1990 as a statutory body corporate.

Its principal objective is to provide relevant technical and further education services to industry,
students and other client groups.

The Commission provides vocational and pre-vocational education and training services through its
ten Institutes and the Open Training and Education Network (OTEN). While the Institutes and OTEN
observe Commission policies and priorities, they develop their own education and training profiles
and manage their own operations.

Since December 1997, the Commission has been a controlled entity of the Department of Education
and Training.

The Commission is subject to the control and direction of the Minister for Education and Training.

For further information on the Commission, refer to www.tafensw.edu.au
.

The four Metropolitan Institutes are Northern Sydney, South Western, Sydney and Western Sydney.
The six Country Institutes are Hunter, Illawarra, New England, North Coast, Riverina and Western.




CONTROLLED ENTITIES

The following controlled entities have not been reported separately on as they are not considered
material by their size or the nature of their operations to the consolidated entity.

A.C.N. 093 230 374 Pty Limited

The company ceased trading and was wound up on 15 November 2008.

New South Wales Technical and Further Education Commission Division

The Division provides personnel services to the Commission.
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34 ___________________________________________ Auditor-General’s Report to Parliament 2009 Volume Nine
Office of the Board of Studies


AUDIT OPINION

The audit of the Office’s financial report for the year ended 30 June 2009 resulted in an unqualified
Independent Auditor’s Report.


FINANCIAL INFORMATION

Abridged Operating Statement

Year ended 30 June 2009
$’000
2008
$’000

Sales of goods and services 6,209 6,829
Grant and contributions 955 980
Other 445 544

TOTAL REVENUE 7,609 8,353

Employee Related expenses 80,208 80,243
Other operating expenses 23,781 23,522
Depreciation and amortisation 1,954 1,483

TOTAL EXPENSES 105,943 105,248

NET COST OF SERVICES 98,334 96,895

Government contributions 98,351 97,694

SURPLUS 17 799


The fall in other revenue is due primarily to a decrease in interest earned on cash balances.

Depreciation and amortisation rose due to increased asset purchases during the year.

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_____________________________________________________________________ Office of the Board of Studies

Auditor-General’s Report to Parliament 2009 Volume Nine __________________________________________ 35
Abridged Balance Sheet

At 30 June 2009
$’000
2008

$’000

Current assets 6,873 7,331
Non-current assets

8,141 7,186

TOTAL ASSETS 15,014 14,517

Current liabilities 5,710 4,978
Non-current liabilities 247 499

TOTAL LIABILITIES 5,957 5,477

NET ASSETS 9,057 9,040


The increase in non-current assets was due predominantly to the acquisition of leasehold
improvements of approximately $959,000, plant and equipment of $1.6 million and intangible
assets of $421,000.

The decrease in non-current liabilities was due to a reduction in the provision for restoration costs.

Abridged Service Group Information

Office of the Board of Studies net cost of services on a service group basis is detailed below:

Year ended 30 June Net Cost of Services Net Assets
2009 2009 2008 2009 2008
Budget *

Actual

Actual

Actual Actual


$’000

$’000

$’000

$’000 $’000






Curriculum Development and Support

9,071 8,322 8,462 1,251 660
Examinations Assessments and
Credentialing 86,569 86,755 85,385 4,376 4,089
Registration and Accreditation 3,420 3,513
3,349 (127) (126)
Not Attributable ** (256)
(301) 3,557 4,417

Total all service groups 99,060 98,334 96,895 9,057 9,040

* Per the New South Wales 2008-09 Budget Papers
** Represents items that could not be reliably allocated to a ‘service group’



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Office of the Board of Studies _____________________________________________________________________

36 ___________________________________________ Auditor-General’s Report to Parliament 2009 Volume Nine
OFFICE ACTIVITIES

The Office is responsible for developing and delivering professional and administrative services to
the Minister for Education and Training, the Board of Studies and its committees. This includes
developing and supporting New South Wales curriculum, registering and accrediting
non-government schools, registering home schooling, and assessing and examining students for the
New South Wales School Certificate and Higher School Certificate (HSC). The Office carries out
functions delegated to it by the Board of Studies, including employing staff to run the HSC. The
Office bears the cost of carrying out those functions and does not charge the Board for those
services.

The Office also includes the Australian Music Examinations Board (NSW) and the Aboriginal
Education Consultative Group. The Office is a department under the Public Sector Employment and
Management Act 2002.

For further information on the Office of the Board of Studies, refer to

www.boardofstudies.nsw.edu.au
.
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37
Minister for Gaming and Racing




*Greyhound and Harness Racing Regulatory Authority


Refer to Appendix 1 for:

Casino, Liquor and Gaming Control Authority

*Responsible Gambling Fund





* The audit was incomplete at the time of compiling this Volume.
The comment will be included in a later 2009 Volume.

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