It’s no wonder the NSW solar grants scheme blew out and will cost far more than the former NSW government and opposition (and Greens) had estimated. A look at a previous report from the NSW Auditor-General released on October 31, helps to understand the problem. It shows that senior NSW public servants and the former Labor government are poor managers of the state’s assets.

In a damning comment in the report, the Auditor-General, Peter Achterstraat said he was “concerned that the NSW government, an entity as large as any organisation listed on the stock exchange, employing more than 380,000 people with assets over $290 billion, and annual revenue of over $65 billion, does not have appropriate financial systems and processes to deliver quality and timely financial reports”.

The solar scheme could cost $2 billion instead of just over $300 million, and could have cost $4 billion if it hadn’t been killed off earlier this year. That’s just another example of the incompetence highlighted by the Auditor-General in the report “Volume Three Report to Parliament on the 2010-11 NSW Total State Sector Accounts”.

It contained the amazing news that for the eighth year in a row, the Auditor-General had qualified the NSW government accounts, that some government departments couldn’t get their accounts done on time, and that he had again found billions of dollars in erroneously reported transactions or accounting.

Some 25 of these “errors” were for amounts of more than $20 million, one was for more than $1 billion (which is an improvement; there were two errors in the 2010 financial year of a billion or more. Image that?).

Land and other assets totalling more than $9 billion are “missing” or not properly accounted for in the NSW government accounts.

It’s a level of incompetence that the former Labor NSW government allowed for years, and will challenge the new Liberal-National Party administration (which is as culpable over the solar scheme as the ALP is) to redress, let alone redress quickly. The O’Farrell government has already been shown to be a slow-moving government when it comes to administration.

In fact, if the NSW government was a listed company, eight audit qualifications in a row would have earned a please explain from shareholders and regulators and the share price would be at weak levels.

If these errors and omissions were reported by a leading company, say a bank, BHP Billiton, Qantas or Coles Group (for example only), there would be an outcry from the media and political classes.

But this report has been in the public domain for nine days, and we have seen barely a ripple. The outcry has been about Qantas, and the badly thought-out solar scheme. We now have evidence of the managerial incompetence and laziness in the public service that allowed the solar disaster to occur. But no outcry about the Auditor General’s most basic report, the fitness of the NSW government accounts and the accounting and financial systems used by the public service to administer $65 billion of revenue in the latest financial year to June 30.

The Auditor-General said he had issued a qualified independent auditor’s opinion “as the state could not identify the full extent and value of its land and infrastructure holdings for the eighth year in a row”.

“Estimates of the value of land not recognised, but potentially controlled, range between $3 billion and $4 billion, and related infrastructure between $4 billion and $5.5 billion.”

And he also said the quality and timeliness of financial reporting continues to concern him.

The Auditor-General believes more can be done by the government to address recent recommendations made by the Public Accounts Committee to achieve reporting improvements, including the Treasury mandating “early close procedures” and developing better monthly reporting processes for government departments.

“I have made a number of recommendations to improve the quality and timeliness of financial reporting across the sector,’ said Achterstraat, “and I urge the government to consider these recommendations as a priority.”

While the state maintained its AAA credit rating, the Auditor-General warned against complacency. “It is important the government maintains fiscal discipline if it wishes to hold on to its existing credit rating,” he said.

NSW government departments are run by people earning hundreds of thousand of dollars in pay and bonuses a year. While many are hard-working and competent managers, there is obviously a large minority who are not earning their money.

Peter Fray

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