The South Australian Aboriginal Housing Authority (The Authority) was established in October 1998 as a statutory corporation under the Housing and Urban Development (Administrative Arrangements) Act 1995.
The functions of the Authority, as provided by the establishing regulations include:
developing strategies, policies and guidelines for the provision, management and maintenance of appropriate housing for Aboriginal people;
liaising with other agencies providing assistance to Aboriginal people to achieve a coordinated response;
to receive and allocate resources for Aboriginal housing programs.
The Authority provides these functions through two main activities being the rental of State Government owned housing to Aboriginal people and the provision of grants to fund housing owned by Aboriginal communities.
The Authority is established with a Board of Management comprising members and deputy members. All members and their deputies must be Aboriginal people and are appointed by the Governor with five members, including the presiding member, nominated by the Minister and four nominated by the Aboriginal and Torres Strait Islander Commission.
The staff of the Authority are employees of the Department of Human Services assigned to work for the Authority. The Department and the South Australian Housing Trust (the Trust) provide management, accounting and systems services to the Authority. The Authority uses the Trust’s systems to record and account for assets, raise and follow up rents and other charges, to manage the maintenance of properties and to control costs associated with properties.
In February 2000 control of Aboriginal rental housing and other housing programs for Aboriginal people was transferred to the Authority. The transfer involved reassignment of staff from the Trust to the Authority and the transfer of rental housing and other properties, along with associated assets, rights, liabilities and obligations from the Trust to the Authority.
The decrease in Surplus from Ordinary Activities after Restructuring and Asset Disposals of $125.5million was due mainly to net revenue on restructure last year of $131million resulting from the transfer of Aboriginal housing programs from the Trust to the Authority.
Section 28 of the Housing and Urban Development (Administrative Arrangements) Act 1995 requires statutory corporations established pursuant to the Act to keep proper accounting records and to prepare annual statements of accounts for each financial year. The Act also empowers the Auditor-General to audit the accounts of the Authority and its annual statement of accounts.
The scope of the audit took into account the relationship between the Authority and its two main service providers, being the SA Housing Trust (the Trust) and the Department of Human Services. The audit program covered all major financial systems and was directed primarily towards obtaining sufficient evidence to enable an audit opinion to be formed with respect to the financial report and the adequacy of internal controls.
The specific areas of audit attention included:
The systems operated by the Trust to process transactions and account balances of the Authority were audited as part of the audit of the Trust.
During the year a management letter communicating issues arising from the audit was forwarded to the General Manager. The main issues related to opportunities to improve the control environment by improving processes for monitoring the adequacy of services provided to the Authority under service level agreements and by progressing the development and implementation of risk management policies and plans. A satisfactory response was received. Further details relating to these issues are contained in ‘Audit Findings and Comments’ hereunder.
In 2000-01 the control environment was affected when a number of key managers, with knowledge and experience in Aboriginal housing programs, left the employ of the Authority. An external contractor was appointed to temporarily perform the role of the Senior Finance Officer, whose responsibilities included many accounting and financial reporting functions.
The control environment was further affected by the arrangements for the preparation of the financial statements. The Department prepared the statements; the Trust prepared most of the supporting key reconciliations and accounting estimates; and the Authority’s contractor had responsibility for the oversight of the completeness and accuracy of the financial statements.
The potential risk associated with these arrangements was partly mitigated by the Trust continuing to prepare, on behalf of the Authority, most of the key reconciliations, accounting estimates and asset revaluations. The Trust has been performing these activities for many years prior to the establishment of the Authority and has appropriate controls to ensure they are performed effectively. As mentioned, the audit of these controls is covered within the scope of the audit of the Trust.
Notwithstanding the change of managers and the arrangements for preparing the financial statements, the overall assessment of the Authority’s control structure was that it was satisfactory, although there was room for improving processes for monitoring the adequacy of services provided to the Authority under service level agreements and room for improving compliance with the prescribed elements of the Financial Management Framework relating to the development and implementation of risk management policies and plans.
Audit identified that a draft risk management policy, prepared in February 2001, had not been submitted to the Board or Audit Committee for consideration.
The Authority responded that the draft policy would be submitted to the Board by November 2001.
The Authority is required by the Housing and Urban Development (Administrative Arrangements) Act 1995 to establish and maintain effective internal auditing of its operations.
Audit identified that, although an internal auditor had been appointed, only a draft internal audit plan was prepared during the year.
The Authority responded that an Internal Audit Plan for July 2001 to June 2004 would be implemented upon establishment of an Internal Audit Committee.
The audit identified that a number of the Authority’s service level agreements for 2000-01 with the Trust and the Department had not been finalised.
The Authority responded that all service level agreements for 2000-01 and 2001-02 would be finalised by 30September 2001.
The audit revealed that the Authority had not implemented processes for monitoring the adequacy of services provided to the Authority under service level agreements. For instance, the Authority did not monitor whether all reconciliations performed by service providers were up-to-date and whether appropriate and timely action had been taken on significant reconciling items.
The Authority responded that it would develop, document and implement procedures to ensure all services are provided in accordance with the service level agreements.
The Trust provides ex-tenant debt recovery services to the Authority. The audit revealed, however, that due to a perceived limitation by the Trust on its authority, the services provided by the Trust have been restricted since October 2000.
The Authority responded that it has approached the Trust to jointly address this issue.
The Authority had not implemented procedures to ensure its officers were completing the bank reconciliation in a timely manner as required by the Treasurer’s Instructions. As a consequence, the bank reconciliation had not been performed for several months.
The Authority responded that procedures would be implemented to ensure the timely performance of a monthly bank reconciliation.
Similar to the Trust, the amount of rent rebate provided by the Authority to tenants is mainly based upon the household composition and household income. The Authority, like the Trust, faces challenges in verifying information provided by tenants in respect of household composition and household income. The Trust has been developing and implementing initiatives to improve the verification process which are detailed within that part of this Report dealing with the SA Housing Trust. In summary, the initiatives include regularly obtaining proof of income from tenants and the home visits program. The Authority has included these initiatives within its operations.
As required by subsection 36(1)(a)(iii) of the Public Finance and Audit Act 1987,the audit of the South Australian Aboriginal Housing Authority included an assessment of the controls exercised in relation to the receipt, expenditure and investment of money, the acquisition and disposal of property and the incurring of liabilities. The assessment also considered whether those controls were consistent with the prescribed elements of the Financial Management Framework as required by Treasurer’s Instruction 2 ‘Financial Management Policies’.
Audit formed the opinion that the controls exercised by the South Australian Aboriginal Housing Authority in relation to the receipt, expenditure and investment of money; the acquisition and disposal of property; and the incurring of liabilities, except for the matters outlined under ‘Audit Findings and Comments’, were sufficient to provide reasonable assurance that the financial transactions of the organisation were conducted properly and in accordance with the law.
The short period of operation of the Authority and the control last year of many of its operations by the Trust limits the opportunity to undertake comparison of financial information.
The decrease in the result for the year of $121.7 million was due mainly to net revenue on restructure last year of $131million resulting from the transfer of Aboriginal housing programs from the Trust to the Authority.
The surplus attributable to ordinary activities of the Authority was $10.9 million. Contributions from the Government of $22.7 million forms 72 percent of the Authority’s funding, while rent received from tenants of $7million forms 22 percent.
Expenses from ordinary activities were $20.7 million. The main expenses, as depicted in the following chart, were community housing grants and expenses incurred on Government owned rental properties including maintenance, depreciation and council and water rates. A more detailed analysis of activities related to Government owned housing and community owned housing follows the chart.
At 30 June 2001 there were 1814 (1797) properties owned by the State Government and controlled by the Authority for rental to Aboriginal people. The Authority is responsible for the acquisition and maintenance of these properties and obtains funding for this purpose through Government grants, sale of properties and collection of rents from tenants.
In respect of rental housing activities, revenues from ordinary activities were $20.5 million while expenses were $10.6 million resulting in a surplus of $9.9 million. Proceeds from the sale of 26 rental properties provided a further $1.5 million. Both the surplus and sales proceeds were used to acquire 43 properties and perform capital upgrades at a combined cost of $6.8 million.
Tenants meeting specified criteria, for instance those with low household income, are provided with a rebate and charged a reduced rent. The number of tenancies at 30 June 2001 was 1704 (1784). The percentage of tenancies receiving rebates at 30 June 2001 was 63 percent (69 percent).
The following graph reflects rent charges and rent rebates for the past two years.
The figures for 2000 include rents and rebates charged by the Trust for Aboriginal houses prior to transfer to the Authority.
The following graph reflects the increase in gross tenant debt and provision for doubtful debts, due mainly to tenants not paying rent and other charges when due.
Community housing grants are mainly used by the Authority to acquire housing for Aboriginal communities. Ownership of the housing is transferred to the Aboriginal communities, who are responsible for the repair and maintenance of the properties. Community housing grants are also provided to assist in funding repairs and maintenance.
The following graph depicts the increase in accumulated funds held for the community owned housing program since the program was transferred to the Authority.
Cash assets increased by $2 million to $4.6 million due mainly to an increase in accumulated funds for community housing.
Receivables increased by $4.6 million to $8.5 million due mainly to Grant funding due but not paid to the Authority by the Department until after 30 June 2001 and increases in tenant debtors.
Rental properties were revalued resulting in an increment of $3.9 million.