Induction Booklet for
Audit and Risk Committee Members
September 2015
History: First posted July 2015.
Disclaimer:
This publication is a working document of Treasury’s internal audit function
and was not developed by the policymakers.
Bearing this in mind, agencies are welcome to use this document as a
model to adapt to their own needs if they wish. Treasury makes every effort
to ensure this publication reflects good practice and is kept up to date;
however it is the responsibility of agencies to ensure their documents are
current and compliant with relevant policies and standards.
NSW Treasury Induction Booklet for Audit and Risk Committee Members
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Contents
1 The Audit & Risk Committee (ARC) ................................................................................... 4
1.1 The role of the Committee ........................................................................................... 4
1.2 Conflicts of Interest and Confidentiality Agreements .................................................... 5
1.3 ARC arrangements specific to entities which do not report to the Secretary ................ 5
1.4 The role of the Chief Audit Executive (CAE) ................................................................ 5
1.5 The role of the Internal Audit Program Manager (IAPM) .............................................. 6
1.6 The role of the Secretariat (Committee Manager) ........................................................ 6
1.6.1 Tracking Tools Maintained by the Committee Manager and IAPM ........................ 7
a.
Calendar of Meeting Dates .................................................................................. 7
b.
Schedule of Meeting Topics ................................................................................ 7
c.
Control Timetable for Financial Statements ......................................................... 7
d.
Registers of Recommendations from Completed Audits and Reviews ................. 8
2 Meetings ............................................................................................................................ 8
2.1.1 Meeting Agenda, Meeting Papers and Minutes ..................................................... 8
a.
Agenda ................................................................................................................ 8
b.
Meeting Papers ................................................................................................... 9
c.
Minutes ............................................................................................................... 9
3 Communication With Management And Staff ................................................................... 10
4 Annual review of Financial Statements............................................................................. 10
4.1 Legislative Requirements .......................................................................................... 10
4.2 Review of the Financial Statements by the Committee .............................................. 11
4.2.1 Steps relevant to the Committee’s review of the financial statements.................. 11
1.
Client Service Plan received from the Audit Office............................................. 11
2.
Committee reviews and comments on Early Close Financial Statements .......... 11
3.
Agency receives feedback from the Audit Office on Early Close Procedures ..... 11
4.
Committee reviews and comments on Financial Statements for Year End ........ 11
5.
Audit Office holds its clearance meeting and issues the Client Service Report .. 12
6.
Committee commends the accounts to the CEO ............................................... 12
7. Financial Statements are signed by the CEO and the Audit Office issues the
Independent Audit Report ......................................................................................... 12
8.
Management Letter is issued by the Audit Office ............................................... 12
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5 Appendix .......................................................................................................................... 13
5.1 Entities within the Treasury and Finance Cluster ....................................................... 13
5.2 Entities within the Treasury Audit & Risk Committee’s Oversight ............................... 13
5.2.1 Tier 1 Entities ...................................................................................................... 13
1.
The Total State Sector Accounts (TSSA)........................................................... 13
5.2.2 Tier 2 Entities ...................................................................................................... 14
1.
NSW Treasury (the Department) ....................................................................... 14
2.
The Crown......................................................................................................... 15
5.2.3 Tier 3 Entities ...................................................................................................... 15
1.
Electricity Assets Ministerial Holding Corporation (EAMHC) .............................. 16
2.
State Rail Authority Residual Holding Corporation (SRARHC) .......................... 16
3.
Liability Management Ministerial Corporation (LMMC) ....................................... 16
4.
Lotteries Assets Ministerial Holding Corporation (LAMHC) ................................ 17
5.
Ports Assets Ministerial Holding Corporation (PAMHC) ..................................... 17
a.
Port Botany Lessor Company (PBLC) ............................................................... 17
b.
Port Kembla Lessor Company (PKLC) .............................................................. 18
c.
Port of Newcastle Lessor Company (PNLC) ...................................................... 18
6.
Restart NSW ..................................................................................................... 18
5.3 The Long Service Corporation ................................................................................... 19
6 Appendix .......................................................................................................................... 20
6.1 Checklists and Documentation Templates ................................................................. 20
7 Further Information and Contacts ..................................................................................... 21
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1 THE AUDIT & RISK COMMITTEE (ARC)
1.1 Introduction
This guide is for members who have been recently appointed to the NSW Treasury Audit
and Risk Committee. It explains the role of the Committee and key functions that are not
already described in the ARC Charters or the Internal Audit Function Charter.
An affiliated paper provides some guidance on financial statements for the non-accountant.
1.2 The role of the Committee
The Treasury Audit and Risk Committee was established to oversee and monitor
governance, risk and control issues affecting the operations of relevant entities within the
Treasury cluster, and to provide independent advice to the Secretary on these matters and
on the financial statements of the same entities. It also monitors the Total State Sector
Accounts. Among its other tasks, the ARC monitors the implementation of management
responses to the recommendations of both internal and external audit. It has no executive
powers.
There is a shared arrangement agreement between NSW Treasury and the other cluster
entities overseen by the ARC.
The ARC’s responsibilities, which are spelled out in detail in its Charters1, generally cover
review and oversight of the following areas:




risk management
internal audit
development and progression through the external audit process of the financial
statements of Treasury, Crown and the shared arrangement entities
the Total State Sector financial statements
ARC members review the financial statements of all the entities in the shared arrangement
agreement at key dates during the financial year. These dates are usually determined by the
reporting schedule agreed in the Client Service Plan issued by the Audit Office.
Members of NSW public sector Audit and Risk Committees are expected to comply with a
number of other documents, which are shown in section 6 Appendix. Copies or links to
these are provided at each new member’s induction.
1
One covering Treasury as Principal Department, and the other the members of the shared arrangement agreement.
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1.3 Conflicts of Interest and Confidentiality Agreements
At appointment and then annually, members sign a Conflict of Interest Declaration in relation
to any interests that they consider might give rise to an actual or perceived conflict with their
role as a Committee member. They are also asked at each meeting to declare any conflicts
of interest that may have arisen since the formal declaration was last made.
Members sign a confidentiality agreement as assurance that the sensitive information to
which they have access in carrying out their responsibilities is only used for the purpose for
which it was provided and will not be released to third parties without prior authorisation.
Confidentiality agreements remain in force after members leave the Committee.
Copies of the Conflict of Interest Statement and Confidentiality Agreement are provided to
new members in their Letter of Offer, and can also be found on the Treasury website.
1.4 ARC arrangements specific to entities which do not report to the Secretary
At present this section applies to the Ports Lessor Companies.

Separate, sequential, meetings with separate Agendas are held to discuss matters for
entities which come under the ARC’s Shared Arrangements Agreement and have a
Chief Executive Officer (CEO) other than the Secretary.

These meetings are held on the same day as each regular Treasury ARC meeting.

The regular Treasury ARC meeting is formally closed and a new one opened to discuss
each entity’s business.

None of the entity’s business will be dealt with during the main meeting, except in the
case where information on that entity is relevant to the consolidated financial statements
(TSSA). In that case it will be treated like any NSW agency in the same circumstances.
Annexure 1 of the ARC Principal Department Charter lists entities which come under the
Treasury ARC but do not report to the Secretary. (see Audit and Risk Committee Principal
Department Charter).
1.5 The role of the Chief Audit Executive (CAE)
The Chief Audit Executive (CAE) heads the internal audit function in an agency and is
responsible for providing strategic leadership and managing the internal audit function within
the agency. The CAE is appointed by the Secretary, in consultation with the Audit & Risk
Committee, and supports all the entities overseen by the ARC.
The CAE is responsible for:

developing and regularly reviewing an Internal Audit Charter and the Charters for
the Committee

developing and implementing 3-year and more detailed 1-year Audit Plans,
prioritised according to the needs identified in Treasury’s Strategic Risk Register

selecting an audit provider to carry out duties as described in 3.3 below

implementing a risk based audit methodology for assessing and responding to
audit findings, with risk ratings aligning with the rating system used in the Risk
Framework and Risk Register.
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
ensuring a course of action is recommended for every significant audit finding,
and ensuring that these actions are referred to operational management for
formal response

monitoring Treasury’s progress in implementing endorsed management
responses to audit recommendations

providing input which assists the Audit & Risk Committee to be in a position to
second the Chief Financial Officer (CFO) in assuring the Secretary (and Directors
of Lessor Companies) that adequate controls are in place around all of the
annual financial statements which must be approved, including the Total State
Sector Accounts.
1.6 The role of the Internal Audit Program Manager (IAPM)
Treasury’s internal audit program is outsourced to a major consultancy firm. The Internal
Audit Program Manager (IAPM) manages that contract and any future procurement of
internal audit service providers. He is also the Treasury-side project manager for each audit
or review undertaken, and reports to the Audit & Risk Committee and the Executive on
progress against the recommendations of earlier audits.
The IAPM assists in the development of Treasury’s strategic and one-year audit plans,
working with management to finalise the detailed audit program based on the one-year plan
and to set the order in which the audits will be undertaken.
He reports on the progress of each project, and of the program as a whole, to the Chief Audit
Executive, Audit & Risk Committee and Secretary, and arranges for finalised reports to be
presented to the Committee in the presence of the senior manager of the audited area. This
role also follows up and reports on progress against the Registers of Recommendations
from earlier internal and external audits.
He also undertakes the same role in relation to NSW Long Service Corporation.
1.7 The role of the ARC Secretariat
The entire Branch forms the Audit & Risk Committee’s secretariat, which works with senior
management and the Committee to set and adjust its strategic direction, however the
Committee Manager is the primary liaison point with the Committee on operational issues.
The Committee Manager reports to the Chief Audit Executive and provides support for the
Audit & Risk Committee by:

managing meeting agendas, papers and Minutes to support the Committee and meet
members’ expectations for the quality, relevance, reliability, and timeliness of these
documents

compiling and managing the annual meeting calendar and schedule to ensure the
Committee undertakes all the work described in its Charter

liaising between the ARC, the Audit Office and Treasury management to ensure the
ARC process assists smooth certification of the cluster entities’ annual financial
statements and the Total State Sector Accounts (TSSA)

providing a tracking tool to allow the ARC to see at a glance the point each set of
statements has reached in the external audit process at any given time
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
continuously improving the quality and timeliness of information provided to the ARC
by the business areas by working with them to ensure they understand, and can
have input to, what is required.
The Secretariat regularly reviews existing audit and risk tools and researches best practice in
Committee support to ensure Treasury’s practice is current. It also assists the Committee to
finalise, by the deadlines, all of the regular reviews and assessments required for compliance
with TPP 15-03, Internal Audit and Risk Management Policy for the NSW Public Sector, and
with Treasury Internal Audit Branch’s own Quality Assurance and Improvement Program.
1.7.1 Tracking Tools Maintained by the Committee Manager and IAPM
A calendar of ARC meetings is prepared in October for the forthcoming year. It is
accompanied by a Meeting Schedule, which distributes particular Items at appropriate
intervals throughout the year to ensure that the Committee covers its reporting obligations
for the year under TPP 15-03, the Principal Department and Shared Arrangements Charters
and the Internal Audit Charter.
Running the Committee efficiently requires a number of “tracking tools”. These tools are
described below.
a. Calendar of Meeting Dates
The calendar of meeting dates includes public and school holidays and days that members
have indicated that they are not available. This calendar is presented to the Committee when
initially drafted and then when revisions are identified. Members are asked to advise the
Secretariat if they become aware of any new availability issues after the calendar is
established, as it is important to ensure a quorum for each meeting.
b. Schedule of Meeting Topics
The ARC Principal Department Charter and its obligations under TPP 15-03 are mapped
against the proposed meeting dates for the year to ensure that the Committee adequately
covers its responsibilities. The resultant Schedule is amended throughout the year when the
Committee requests an Item or update for a future meeting. This schedule is then used to
prepare meeting agendas.
c. Control Timetable for Financial Statements
This spreadsheet tracks the key reporting dates from the Client Service Plans issued by the
Audit Office which relate to the external audit of the early close and year-end financial
statements. In particular it charts deadlines for correspondence with the Audit Office and the
dates at which the ARC can expect to receive financial statements for its review and advice
(see Treasury Audit Manual Part 5 for detail of Audit Office correspondence).
The control timetable permits comparison of the agreed delivery date against the achieved
delivery date for each major action, as items move between the agency, the ARC and the
NSW Audit Office. This control timetable is included with the papers that are distributed prior
to each ARC meeting during the part of the year when statements are in full preparation. The
Secretary also retains an up-to-date copy of this timetable.
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d. Registers of Recommendations from Completed Audits and Reviews
A Register of Recommendations is a document that records:

the agreed recommendations from audit reports (or reviews or inquiries, in the case
of the External Bodies register)

the management responses to those recommendations, including managementnominated due dates, and

the status of action to implement each response.
Treasury has three Registers of Recommendations:
1. Register of Internal Audit Recommendations
2. Register of Recommendations from External Audit (ie from Audit Office Management
Letters)
3. Register of [other] Recommendations for Treasury from External Bodies (e.g. Audit
Office performance audits, Public Accounts Committee reviews). Also known as “the
Third Register”.
Each Register ranks recommendations by audit (or review/inquiry), and then in order of
importance based on the risk rating assigned by the auditor.
The Treasury ARC reviews the Registers of Internal and External Audit Recommendations
at alternate meetings. The third Register is reviewed at least every 6 months.
2 MEETINGS
The Treasury ARC typically meets at least 8 times per year. Typically half of those meetings
review financial statements, as well as covering other work.
At a Treasury Committee meeting you are likely to encounter the following people:
 Members
 Regular Observers, including the Treasury and Crown CFOs, internal audit staff and
service provider and representatives of the Audit Office
 Invitees (Treasury Cluster managers, external presenters)
2.1.1 Meeting Agenda, Meeting Papers and Minutes
a.
Agenda
The Agenda forms the basis for the meeting papers that are distributed to Committee
members. Agenda development is a strategic process on which the Chair and Chief Audit
Executive collaborate, and to which members are invited to contribute, as Agendas direct the
focus of the Committee.
The agenda skeleton for each meeting is originally set up at the beginning of the year and is
based on the Committee’s schedule of work, which has been previously mapped to the
Charter. The schedule helps ensure that the ARC remains compliant with TPP 15-03.
This draft agenda is progressively updated to add items on any other emerging issues, or in
response to requests from the Secretary, Committee or CAE.
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The Agenda is generally divided into sections: Standing Items, Items for Decision and Items
for Noting. All Items for Decision have recommendations. Occasionally there will be a
section called Presentations, which may be arranged so management can improve the
ARC’s understanding of a part of the business, or may be to report to the ARC on progress
in an area of significant change or risk.
b.
Meeting Papers
The meeting papers are forwarded to Committee members and regular observers one week
before each meeting. Papers may be distributed electronically or in printed format,
dependent on your personal preference. Even if you choose to receive your papers
electronically, it is recommended that you also request financial statements to be provided in
hard copy.
When you receive your meeting papers, most agenda items will begin with a coversheet with
the following information:

Meeting Date

Item number and description of item (from agenda)

Information such as who requested the item, briefly what it is about, and what the
Committee is asked to do with it. If the underlying paper has recommendations, the
coversheet will replicate or summarise them

List of attachments, in the order they are placed below the paper. Electronic users
will find that the attachments are listed in the same order (eg coversheet is Item 6,
then attachments Item 6a, 6b etc.
The purpose of the coversheet is (a) to make chairing easier, (b) to serve as a quick reminder
to members what each item is about, as most meetings involve around 15 papers, and (c) to
allow the CAE or Secretariat to make comments for the Committee’s benefit if required.
c.
Minutes
The Minutes are prepared immediately following each meeting and circulated in draft format
prior to being confirmed at the subsequent ARC meeting. Usual practice is also to provide
the Minutes of individual items to members of management who presented or answered
questions on them, for verification. The full Minutes are then sent to the Chair and finally to
members.
After circulation and before confirmation the Minutes go to the Secretary, Treasury, any
comments from whom will be discussed at the meeting prior to confirmation. The Secretary
is not authorised to change the Minutes.
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3 COMMUNICATION WITH MANAGEMENT AND STAFF
There are number of ways that the ARC interacts or communicates with management:
1. the Committee has requested a paper or presentation and the Treasury officer who
was responsible for its preparation attends the meeting to answer questions
2. A response has been given to an item on the Action List from the Minutes of an ARC
meeting
3. A management response has been provided to one or more recommendations in a
new internal audit and a Treasury officer is assisting EY to present its report to the
ARC
4. An item on the Register of Recommendations from a completed internal, or external,
audit has been updated (or is significantly overdue) and the Treasury officer attends
the meeting to answer questions
The Guide for staff interacting with a Treasury Cluster Audit & Risk Committee provides a
detailed explanation of how the management and staff communicate with the ARC
members. See Guide for staff interacting with the ARC.
4 ANNUAL REVIEW OF FINANCIAL STATEMENTS
4.1 Legislative Requirements
The following legislation and NSW Treasury guidelines should be complied with, where
applicable, in the preparation of the statutory financial reports for Treasury Cluster entities:






Australian Accounting Standards (AGAAP)
Public Finance and Audit Act, 1983
Public Finance and Audit (General) Regulation 1995
Annual Reports (Departments) Act, 1985
Annual Reports (Departments) Act, 1985 – Regulations
Treasurer’s Directions (TDs)
http://www.treasury.nsw.gov.au/__data/assets/pdf_file/0007/6559/treasurer_directions.pdf

Treasury Circulars (NSWTCs)
http://www.treasury.nsw.gov.au/Publications_Page/NSW_Treasury_Circulars

Treasury Policy and Guidelines Papers (TPPs)
http://www.treasury.nsw.gov.au/Treasury_Policy_Papers_Index_Page
The Public Finance and Audit Act 1983 (PFAA) is the main instrument that governs the
timing of the preparation of an entity’s financial statements and the date that they are
submitted to the Audit Office for review. The PFAA provides that accounts must go to the
Audit Office within 6 weeks of the end of the financial year (c.11 August), and that they must
be reviewed and an audit opinion issued 10 weeks later. These dates are often referred to in
correspondence as the “statutory deadlines”.
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4.2 Review of the Financial Statements by the Committee
The members of the Audit and Risk Committee (ARC) review the financial statements of
many different entities at key dates during the financial year. These dates are determined by
the reporting schedule agreed in the Client Service Plan issued by the Audit Office.
The aim of the ARC review is to provide independent advice to the Secretary on the content
and form of the financial statements. ARC members will provide feedback to management
on any issues that they feel should be resolved before the statements are forwarded to the
Audit Office.
The financial statements are accompanied by an explanatory coversheet each time they are
submitted to the Committee. Financial statements the Committee has seen before will show
changes since last time in mark-up (or highlight or different coloured font, if Excel).
4.2.1 Steps relevant to the Committee’s review of the financial statements
1.
Client Service Plan received from the Audit Office
The Client Service Plan issues in the first half of the calendar year. It is addressed to the Chief
Executive Officer (CEO) and distributed to Committee members by the Secretariat. It contains
important information about the planned review of the financial statements by the Audit Office.
It also includes the agreed timetable for the provision of information to the Audit Office (which
is the basis of the Financial Statements control timetable used by the Treasury ARC).
2.
Committee reviews and comments on Early Close Financial Statements
The Committee receives the Early Close Pro-forma Financial Statements from the
Secretariat at the same time that they are sent to the Audit Office.
The Committee reviews these pro-forma statements in accordance with the Audit and Risk
Committee Charter, and reports any observations to the Chief Audit Executive (CAE) and to
the management of the entity concerned. The comments can then be introduced into
management’s discussions with the Audit Office.
3.
Agency receives feedback from the Audit Office on Early Close Procedures
The Audit Office provides formal feedback (“Observations”) to the agency CEO on the areas
it reviewed in the Early Close Pro-forma Financial Statements. In doing so, it makes
recommendations to enhance the compilation of the final (year-end) accounts. Copies of the
AO’s reports are distributed to Committee members by the Committee Manager.
4.
Committee reviews and comments on Financial Statements for Year End
The draft Financial Statements are provided to the Committee at least 3-4 working days
before they are sent to the Audit Office, so that members may review these documents and
provide feedback prior to submission. The statements should show, in mark-up or
accompanying coversheet, any changes since Early Close, especially text changes. Any
later drafts should show any changes made following the ARC’s most recent review.
The Treasury officer who develops the financial statements for an agency usually attends
the ARC meeting where the statements are discussed, to hear new comments and clarify
any concerns members may have.
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Sometimes the Committee reviews smaller statements ‘out-of-session’. In this case, the
preparing officer provides the contact number (mobile if available) of his/her Executive
Director or the CFO to the CAE and Chair, in case of questions.
5.
Audit Office holds its clearance meeting and issues the Client Service Report
The Client Service Report gives the CEO and the ARC an opportunity to assess the audit
findings prior to the Auditor General issuing the management representation letter. The
observations in the Client Service Report are discussed with agency management during the
audit clearance meeting prior to its release. Copies of these reports are distributed to
Committee members by the Secretariat.
6.
Committee commends the accounts to the CEO
The Committee is responsible for commending the final audited financial statements
(statutory accounts) to the Chief Executive Officer prior to his sign-off under the Public
Finance and Audit Act 1983 (s41C).
To facilitate the commendation, the CFO provides the following information to the Committee
via the Secretariat:



Accounts, marked up with any changes since last viewed by the Committee
Client Service Report issued by the Audit Office
Management Representation Letter (MRL) signed by the CFO
Once the Committee ratifies these documents, the Chair signs a letter of commendation to
the Secretary, previously prepared by the CAE. The Committee Manager forwards the
signed letter to the CFO, who then arranges for the financial statements to be signed off by
the CEO and forwarded to the Audit Office.
7.
Financial Statements are signed by the CEO and the Audit Office issues the
Independent Audit Report
Having received the assurances described above, the CEO signs the audited statements
and returns them to the Audit Office. The Audit Office then returns the financial statements to
the entity. The statements are now embossed with the Audit Office seal on every page, and
they are accompanied by the Independent Audit Report. This Audit Report is the formal
opinion issued by the Audit Office that the financial statements are free from material
misstatements (errors).
8.
Management Letter is issued by the Audit Office
The Auditor-General’s Management Letter, which follows some time after final sign-off, is an
important part of the reporting process associated with the external audit of the financial and
operational activities of the organisation. This letter typically describes a range of matters
that the Auditor-General considers necessary to bring to the attention of management.
These are regarded by the ARC as equivalent to the Recommendations of an internal audit.
Final Management Letters from external audit are forwarded to the Chief Audit Executive
(CAE) for the Committee at the same time that they are provided to management for
response. The agreed management responses become part of the ARC’s Register of
Recommendations from External Audit (see s.1.6.1 above).
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5 APPENDIX 1
5.1 Entities within the Treasury Cluster
Please refer to Annexure 1 of the Principal Department ARC Charter for a complete list of
the entities within the Treasury Cluster.
5.2 Entities within the Treasury Audit & Risk Committee’s oversight
The following entities fall within the scope of the Treasury Audit and Risk Committee
 Treasury
 Crown Entity
 Electricity Assets Ministerial Holding Corporation
 Liability Management Ministerial Corporation
 Lotteries Assets Ministerial Holding Corporation
 Ports Assets Ministerial Holding Corporation
o Port Botany Lessor Pty Ltd
o Port Kembla Lessor Pty Ltd
o Port of Newcastle Lessor Pty Ltd
 State Rail Authority Residual Holding Corporation
The Committee also acts as the Audit & Risk Committee for the Total State Sector Accounts.
The Audit and Risk Committee has divided the cluster entities for which it is responsible into
three levels (or tiers) for ease of understanding. Allocation to a tier is based on the size and
complexity of the entity’s financial statements.
5.2.1 Tier 1 Entities
1.
The Total State Sector Accounts (TSSA)
The Total State Sector comprises all entities under the control of the New South Wales
Government. The entities are classified into three sectors, according to the nature of their
activities and funding arrangements, using the Government Finance Statistics (GFS)
framework2. The three sectors combined make up the TSSA.
The General Government Sector (GGS)
The General Government Sector comprises those entities that provide goods and services
not directly paid for by consumers (i.e. largely financed from tax revenues and
Commonwealth grants).
The general government sector represents the scope of the State Budget. Agencies in this
sector generally operate under the Financial Management Framework and carry out policy,
regulatory and service delivery functions. This sector includes agencies such as the Ministry
of Health, Department of Education and Communities, NSW Police Force, Rental Bond
Board and Independent Pricing and Regulatory Tribunal.
2
Australian Bureau of Statistics, Australian System of Government Finance Statistics: Concepts, Sources and Methods, Cat No
5514.0, ABS, Canberra, 2005.
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The Non General Government Sector comprises Public Enterprises that have a market
orientation and provide goods and services such as transport, water and electricity, or
participate in financial or other markets. These Public Enterprises are further split into two
sub-categories:
Public Non-Financial Corporations (PNFCs) – Public Trading Enterprises (PTEs)
‘Public non-financial corporation sector’ is the GFS term for this sector and it is this term that
is used in the TSSA. These entities are commonly referred to as Public Trading Enterprises
(PTEs) or, State Owned Corporations (SOCs) during discussions with Treasury
management.
Agencies in this sector are either commercial or non-commercial.
PNFCs are responsible for supplying public infrastructure services, including electricity,
ports, water and public transport. PNFCs, other than in the transport and housing sectors,
are self-funded from user charges and have been given a specific charter to run their
businesses on commercial lines including the achievement of a commercial rate of return on
the resources employed. Commercial enterprises generally operate under the Commercial
Policy Framework, which aims to replicate disciplines and incentives that drive the efficient
commercial practices of private sector businesses. They deliver services to a customer base
from which they receive their income. They generally pay dividends and tax-equivalent
payments to the general government sector. These agencies include State-owned
corporations (SOCs) such as energy distribution corporations and the Sydney Water and
Hunter Water Corporations.
Non-commercial operations in this sector address important social objectives and levy
charges for services to client groups on a subsidised basis. These include Rail Corporation
New South Wales and the New South Wales Land and Housing Corporation, which receive
substantial grants from the general government sector to provide these services.
Public Financial Corporations (PFCs) - Public Financial Enterprises (PFEs)
‘Public financial corporation sector’ is the GFS term for this sector and the term used in the
TSSA. These entities may also be referred to as Public Financial Enterprises (PFEs) in
discussions with Treasury management.
These agencies are involved in financial services and generally operate under the
Commercial Policy Framework. They include the New South Wales Treasury Corporation
and the Lifetime Care and Support Authority of New South Wales.
PFCs may accept demand, time or savings deposits and/or have the authority to incur
liabilities and acquire financial assets in the market on their own account.
5.2.2 Tier 2 Entities
1.
NSW Treasury (the Department)
NSW Treasury was established in April 1824 and is the oldest continuing Government
agency in Australia. It is a department within the meaning of Schedule 1 of the Public Sector
Employment and Management Act 2002.
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The NSW Treasury advises the Treasurer and the NSW Government on state financial
management policy and reporting, and on economic conditions and issues.
The Secretary is responsible for delivering on these objectives and for running Treasury in
an effective manner. To assist the Secretary in achieving these objectives he is supported by
the Treasury Group Executive team (TGE). The TGE is a key component of the NSW
Treasury corporate governance framework and operates as a Management Board.
2.
The Crown
The Crown has a unique legal status. Structurally, Crown and Liability Management is
regarded as a division of Treasury, and reports to the Secretary through the Executive
Director, Fiscal Estimates and Financial Reporting. It does not have legal capacity, and as
such, cannot be scheduled under legislation. This is due to its function as an interface
between the public and the government.
The Crown conducts both core government and commercial functions. It reports on those
service-wide assets and liabilities that are the overall responsibility of government, rather
than of individual government departments or statutory authorities.
Crown Undertakings:
Consolidated Fund activities are principally the collection of State taxes, distribution of
Commonwealth grants, financial distributions from non-budget dependent agencies, and
paying recurrent and capital appropriations to budget dependent agencies.
The Consolidated Fund (Confund) was established as a result of the Constitution Act (NSW)
1902 (Part 5). The Confund collects State taxation, Commonwealth contributions and
financial distributions from State Sector agencies and remits payments comprising of
recurrent and capital appropriation payments to budget dependent agencies.
Crown Finance functions include debt liability management, superannuation liability
management, and central financial services.
Crown Finance (CFE) was established as the entity responsible for the management and
reporting of residual assets, liabilities and transactions that cannot be directly attributed to
individual departments and statutory bodies. There is no enacting legislation for the CFE,
however it is a government department for financial reporting purposes under section 45A
(1A) of the Public Finance and Audit Act 1983. It is controlled by the Treasurer.
The main activities of the Crown Finance are:
 servicing the Crown’s debt portfolio
 providing asset/liability management
 providing structured finance activities
 administering superannuation and long service leave liabilities for budget dependent
agencies
 providing loans, grants and subsidies to public sector bodies.
5.2.3 Tier 3 Entities
The administration and accounting services of the entities listed below are provided by staff
of the NSW Treasury (through Crown). These entities have no staff of their own. Any
services required are provided by Crown staff or contractors.
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1.
Electricity Assets Ministerial Holding Corporation (EAMHC)
Electricity Assets Ministerial Holding Corporation (EAMHC) was established on 5 June 2012
by the Electricity Generator Assets (Authorised Transactions) Act 2012 (the Act). This Act
authorises and provides for the transfer of the State’s electricity generator assets to the
private sector and between public sector agencies.
The Act establishes that the EAMHC hold, on behalf of the Crown, electricity generator
assets acquired by it or transferred to it by or under this Act or any other Act, and to carry on
any activities or business that relate to any electricity generator assets held by it, including
demanding, collecting and receiving charges, levies, rates and fees, and such other
functions for the purposes of an authorised transaction as may be prescribed by the
regulations. The EAMHC may, for the purposes of an authorised transaction, acquire certain
land by agreement or by compulsory process in accordance with the Land Acquisition (Just
Terms Compensation) Act 1991.
On 31 July 2013, the Treasurer authorised the transfer of specific assets, rights and liabilities
relating to the pre-existing dust disease (DD) and workers’ compensation (WC) liabilities
from Eraring Energy, Delta Electricity and Macquarie Generation to EAMHC and appointed
NSW Self Insurance Corporation (SICorp) to undertake the claims management functions.
2.
State Rail Authority Residual Holding Corporation (SRARHC)
The State Rail Authority of New South Wales (StateRail) was a statutory body representing
the Crown in right of the State of New South Wales, as constituted by the Transport
Administration Act 1988 (TAA). Since 1 January 2004, pursuant to amendments to the TAA
that provided for the restructuring of the Rail Industry, StateRail’s principal activities have
been to manage the transfer of selected assets, rights and liabilities to Rail Corporation New
South Wales (RailCorp), and to manage the disposal of the remainder in consultation with
RailCorp. By 30 June 2008 all remaining functions, assets (including assets related to the
cross border rolling stock leases), rights and liabilities of StateRail were transferred to other
agencies, with the unique exception of its rights and liabilities relating to specified ongoing
cross border rolling stock leases. It is managing these which is the sole purpose of
SRARHC, since an amendment of the TAA in 2007.
The SRARHC has no assets or liabilities and remains a reporting entity until the last of the
lease contracts expire in December 2023. The SRARHC is a statutory body under the Public
Finance and Audit Act 1983. It is a not-for-profit entity.
3.
Liability Management Ministerial Corporation (LMMC)
The Liability Management Ministerial Corporation (LMMC) is a statutory body under the
Public Finance and Audit Act 1983. The LMMC was constituted under the General
Government Liability Management Fund Act 2002 (the Act) for the purpose of managing the
General Government Liability Management Fund (GGLMF). The GGLMF is a special deposit
account which receives funding from the Crown Entity to meet its obligations under the Act.
The LMMC commenced receiving contributions relating to judges’ superannuation from the
Crown Entity in the 2011-12 financial year. Prior to this, the LMMC was dormant from 2008
to 2011.
The LMMC is a not-for-profit entity. The reporting entity is consolidated as part of the NSW
Total State Sector Accounts.
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SRARHC and LMMC are both statutory authorities which appear in Schedule 2 of the PF&A
Act. This means they must comply with TPP 15-03 and must disclose audited financial
statements annually.
4.
Lotteries Assets Ministerial Holding Corporation (LAMHC)
Lotteries Assets Ministerial Holding Corporation (LAMHC) was established during 2009 by
the NSW Lotteries (Authorised Transaction) Act 2009 No 60. The Act authorises the transfer
of assets from NSW Lotteries Corporation to the private/public sector. The LAMHC holds (on
behalf of the Crown) and carries on any residual government business related to these
assets. No NSW Lotteries assets (as defined by the Act) have been transferred to LAMHC
since the commencement of the Act.
The LAMHC is a reporting entity and will remain so until the establishing legislation is
repealed.
5.
Ports Assets Ministerial Holding Corporation (PAMHC)
Ports Assets Ministerial Holding Corporation (PAMHC) was created on 26 November 2012
by the Ports Assets (Authorised Transactions) Act 2012. The object of this Act is to authorise
and facilitate the transfer to the private sector of the State’s ports assets at Port Botany, Port
Kembla and the Port of Newcastle on long-term leases.
The functions of the PAMHC are:

to hold, on behalf of the Crown, ports assets acquired by it or transferred to it;

to carry on any activities or business that relate to any ports assets held by it,
including demanding, collecting and receiving charges, levies, rates and fees; and

to carry out any other functions for the purposes of an authorised transaction as may
be prescribed by the regulations.
PAMHC recognises the accumulating residual interest in the leased land and infrastructure
through its subsidiaries:
a. Port Botany Lessor Company (PBLC)
Port Botany Lessor Pty Limited was incorporated on 12 December 2012 as a wholly owned
subsidiary of Sydney Ports Corporation, a New South Wales state-owned corporation.
The Company was established to facilitate the long term lease of land and affixed property,
plant and equipment by Sydney Ports Corporation to an external party. On 14 December
2012, a number of statutory vesting orders under the Ports Assets (Authorised Transaction)
Act 2012 (NSW) were received from the Treasurer of New South Wales, transferring specific
assets, rights and liabilities relating to the relevant assets at Port Botany, Enfield and Cooks
River from Sydney Ports Corporation to the Company. The vesting orders became effective
on 1 January 2013.
On 31 May 2013, a 99 year finance lease was executed with an external acquirer and the
relevant assets were derecognised by the Company. Upfront proceeds received from the
acquirer were paid directly to Restart NSW, the NSW Government’s priority infrastructure
fund. On the same date, Sydney Ports Corporation’s interest in the equity of the Company
was transferred to the Ports Assets Ministerial Holding Corporation (a NSW Government
agency within the administration of the Treasurer).
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The nature of the operations and principal activities of the Company are the administration of
a 99 year finance lease covering port related facilities at Port Botany, Enfield Intermodal
Logistics Centre and Cooks River Empty Container Park.
b. Port Kembla Lessor Company (PKLC)
Port Kembla Lessor Pty Limited was incorporated on 21 November 2012 as a wholly owned
subsidiary of Port Kembla Port Corporation, a New South Wales state-owned corporation.
The Company was established to facilitate the long term lease of land and affixed property,
plant and equipment by Port Kembla Port Corporation to an external party. On 14 December
2012 a number of statutory vesting orders under the Ports Assets (Authorised Transaction)
Act 2012 (NSW) were received from the Treasurer of New South Wales, transferring specific
assets, rights and liabilities relating to the relevant assets at Port Kembla from Port Kembla
Port Corporation to the Company. The vesting orders became effective on 1 January 2013.
On 31 May 2013 a 99 year finance lease was executed with an external acquirer and the
relevant assets were derecognised by the Company. The upfront lease premium was paid
directly to Restart NSW. On the same date, Port Kembla Port Corporation’s interest in the
equity of the Company was transferred to the Ports Assets Ministerial Holding Corporation (a
NSW Government agency within the administration of the Treasurer).
The nature of the operations and principal activities of the Company are the administration of
a 99 year finance lease covering port related facilities at Port Kembla.
c. Port of Newcastle Lessor Company (PNLC)
Port of Newcastle Lessor Pty Limited (PNL) is a not-for-profit entity incorporated on 21
October 2013. The Company was established to facilitate the long term lease of land and
affixed property, plant and equipment by Newcastle Ports Corporation (NPC) to an external
party.
On 30 May 2014, a 98-year finance lease was executed with an external acquirer and an
upfront lease premium was paid directly to Restart NSW Fund, the NSW Government’s
priority infrastructure fund. On the same date, NPC’s interest in the equity of the Company
was transferred to the Ports Assets Ministerial Holding Corporation (PAMHC).
6.
Restart NSW
Restart NSW was established under the Restart NSW Fund Act 2011 ("the Act"). Section 6
of the Act states that the purpose of the fund is to improve economic growth and productivity
in the state, and for that purpose:

to fund major infrastructure projects, and

to fund infrastructure projects that will improve:
o public transport,
o roads,
o infrastructure required for the economic competitiveness of the State
(including freight, inter-modal facilities and access to water),
o local infrastructure in regional areas affected by mining operations,
o hospitals and other health facilities and services,
o workplaces for law and justice officers, teachers, nurses and other staff
providing services to the public.
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Section 5 of the Act establishes that the Restart NSW Fund ("the Fund") is a Special Deposit
Account. Section 5 of the Public Finance and Audit Act 1983 defines a Special Deposit
Account as an account which the Treasurer is, by statutory or other authority, required to
hold apart from the Consolidated Fund.
The Fund is financed from windfall State tax revenue allocated through the Budget process,
and also from the proceeds of issuing Waratah Bonds, proceeds of investments in the Fund
and other contributions. In May/June 2013 the sale and lease proceeds from the port
operations at Port Botany and Port Kembla were transferred into the Restart NSW Fund.
5.3 The Long Service Corporation
The Secretary is CEO of the Long Service Corporation (LSC), the head office of which is in
Gosford. The Corporation’s expenditure and risk profile mean it requires its own Audit &
Risk Committee. Its Committee has no members in common with Treasury’s ARC.
LSC’s original legislation was administered by the Long Service Leave Division of the
Builders’ Licensing Board until 1982, when the Building & Construction Industry Long
Service Payments Corporation was established. With the introduction of the Long Service
Corporation Act 2010 and the Contract Cleaning Industry (Portable Long Service Scheme)
Act 2010, the Corporation’s name changed from the Building and Construction Industry Long
Service Payments Corporation to the Long Service Corporation.
The Long Service Corporation provides portable long service schemes to approximately
280,000 workers and 30,000 employers in the building and construction and contract
cleaning industries. Prior to the introduction of these schemes, many workers in the building
and construction and contract cleaning industries were unable to qualify for an entitlement
for leave under the Long Service Leave Act 1955, as they did not remain with a single
employer for a long enough period.
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6 APPENDIX 2
6.1 Checklists and Documentation Templates
The following documents used by presenters and members of the Internal Audit Branch are
available from the Secretariat. Those with links below are also accessible on the Branch’s
public webpage.
Paragraph
Reference
Document
Agency Accounts Coversheet Template (Financial
Statements coversheet)
ARC Advice for Treasury officers Responding to the
Committee
Calendar of Meeting Dates (Annual meeting Calendar)
Confidentiality Agreement
Conflict of Interest Declaration
Financial Statements Control Table
Schedule of Topics Assigned to Meetings (Schedule against
Charter)
Process for Financial Statement Review by ARC Members
NYA
ARC Presentation Template
NYA
ARC Review of Agency Statements - FAQs
NYA
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7 FURTHER INFORMATION AND CONTACTS
For further Information or clarification on issues raised in this paper, please contact:
Key Contacts
Chief Audit Executive :
Audit & Risk Committee Manager :
Internal Audit Program Manager:
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