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 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 from the South Australian Housing Trust 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 surplus after asset disposals attributable to ordinary activities of the Authority was $4.7 million ($10.8 million).
Rental properties were revalued resulting in an increment of $8.4 million.
Receivables decreased by $3.7 million to $4.9 million.
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 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:
monitoring of service providers
budgetary control and management reporting
Community Housing Program
raising and recovery of rent and other tenant charges
capital expenditure
repairs and maintenance of properties
purchase and sale of properties.
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 the processes for managing risk and the procedures for ensuring service providers perform their obligations under service level agreements. A satisfactory response was received. Further details relating to these issues are contained in ‘Audit Findings and Comments’ hereunder.
The control environment was affected by the arrangements for the preparation of the financial statements, whereby the Authority prepared the financial statements while the Trust prepared most of the supporting reconciliations, asset revaluations and accounting estimates.
The potential risk associated with these arrangements is mitigated by the Trust having performed these activities for many years prior to the establishment of the Authority and the Trust having appropriate controls to ensure they are performed effectively. The audit of these controls is covered within the scope of the audit of the Trust.
Audit identified opportunities to improve the processes for managing risk through the establishment of a risk management plan, monthly certification to the General Manager that internal controls have been performed, prompt renewal of insurance arrangements, performance of regular reviews of the progress of internal audits and regular monitoring of the implementation of internal and external audit recommendations.
The Authority responded that: a risk management plan will be developed; monthly certification will be provided each month to the General Manager that internal controls have been performed; processes will be implemented to ensure insurance arrangements are finalised before the year of coverage; service level agreements will be monitored to ensure that all internal audits are conducted; and an Audit Findings and Implementation Register will be established and monitored.
Last year Audit identified that the Authority had not implemented procedures to ensure services are provided in accordance with service level agreements.
The Authority responded that a contractor would be appointed to review all aspects of the service providers and included in that function would be the development and implementation of procedures to ensure all services are provided in accordance with the agreements.
This year Audit noted that the procedures remained to be developed and implemented, and the requirement of most service level agreements that six monthly review meetings be held with service providers was not occurring.
The Authority responded that an officer has now been appointed responsibility for holding quarterly meetings with service providers and ensuring services are provided in accordance with the agreements.
Audit noted that a strategic asset management plan had not been established for the maintenance, upgrade, acquisition and disposal of houses controlled by the Authority.
The Authority responded that a plan will not be established until after the task of progressively determining the condition of each house is completed.
Audit identified that little information was provided each month to the Board with respect to the management of:
tenant and other debt
vacancy, responsive and planned maintenance on houses and the amount of such maintenance recharged to tenants
housing applicant waiting list
home visits program
capital program
lettable and unlettable vacant houses
each community housing project.
The Authority responded that better information on management of the aforementioned activities will be provided to the Board.
Last year Audit commented that the Trust had restricted its ex-tenant debt recovery services to the Authority due to a perceived limitation on authority.
The Authority responded that it had approached the Trust to jointly address this issue.
This year Audit noted that the issue had not been finalised.
The Authority responded that legislative amendments have been sought to remove the perceived limitation on authority.
Audit identified opportunities to improve the processes for ensuring compliance with the Board’s delegations of authority and policies, and the regular update of those delegations and policies.
The Authority responded that the delegations have been updated and distributed to all officers, and that the policies will be updated in September 2002.
Audit identified that in those years prior to 2001-02 the targeted number and value of houses required to be transferred from the Trust to the Authority, pursuant to the Bilateral Agreement between the State and Commonwealth Governments, had not been achieved.
The Authority responded that it will ensure compliance with the Agreement.
Similar to the Trust, the amount of rent rebate provided by the Authority to its 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 the Report dealing with the South Australian 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 law.
The short period of operation of the Authority limits the opportunity to undertake comparison of financial information.
The surplus after asset disposals attributable to ordinary activities of the Authority was $4.7 million. Contributions from the Government of $21.8 million forms 70 percent of the Authority’s funding, while rent received from tenants of $7.2 million forms 23 percent.
Expenses from ordinary activities were $26.5 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 2002 there were 1 798 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 $17.5 million while expenses were $11.8 million resulting in a surplus of $5.7 million before asset disposals. Refer to Note 3(e) to the Financial Statements. Proceeds from the sale of 27 rental properties provided a further $2.3 million. Both the surplus and sales proceeds were used to acquire 33 properties and perform capital upgrades at a combined cost of $10.3 million.
Tenants meeting specified criteria, for instance those with low household income, are provided with a rebate and charged a reduced rent. Rent charged to tenants was $7.2 million ($7.0 million) and the rental rebates were $4.6 million ($4.2 million).
The number of tenancies at 30 June 2002 was 1 710 (1 704). The percentage of tenancies receiving rebates at 30 June 2002 was 85 percent.
The following graph reflects the increase in gross tenant debt due mainly to tenants not paying rent and other charges when due. The provision for doubtful debt was reduced in 2001-02 reflecting a change to the method for calculating the provision.
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. Refer to Note 3(e) to the Financial Statements.
The following graph depicts the increase up to 30 June 2002 in accumulated funds held for the community owned housing program since the program was transferred to the Authority. At 30 June 2002 the accumulated surplus was $4.6 million and the program had commitments of $5.9 million.
Cash assets increased by $2.8 million to $7.4 million due mainly to the $7.2 million increase in cash received from Government grants being greater than the $4.0 million increase in grants paid under the Community Housing Program.
Receivables decreased by $3.7 million to $4.9 million due mainly to grant funding due last year but not paid to the Authority by the Department until 2001-02, offset by increases in tenant debtors.
Rental properties were revalued resulting in an increment of $8.4 million.