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SOUTH AUSTRALIAN ABORIGINAL HOUSING AUTHORITY

 

 

FUNCTIONAL RESPONSIBILITY AND STRUCTURE

 

Establishment

 

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.

 

Functions

 

The functions of the Authority are:

·                     the development of strategies, policies and guidelines for the provision, management and maintenance of appropriate housing for Aboriginal people;

·                     to liaise with other agencies providing assistance to Aboriginal people to achieve a coordinated response to problems and issues facing Aboriginal people;

·                     to receive and allocate resources for Aboriginal housing programs;

·                     to provide and manage or facilitate the provision and management of appropriate housing for Aboriginal people in the State;

·                     to provide a single point of contact for Aboriginal people seeking housing assistance.

 

The Authority provides these functions through the rental of State Government owned housing to Aboriginal people and the provision of grants to fund housing owned by Aboriginal communities.

 

Structure

 

The Authority is established with a Board of Management comprising nine members appointed by the Governor on the nomination of the Minister.  All members and their deputies must be Aboriginal people.

 

The staff of the Authority are employees of the Department for Families and Communities (the Department) 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.

 

The structure of the Authority is illustrated in the following organisation chart.

 

 

AUDIT MANDATE AND COVERAGE

 

Audit Authority

 

Audit of the Financial Report

 

Subsection 27(4) of the Housing and Urban Development (Administrative Arrangements) Act 1995 and subsection 31(1)(b) of the Public Finance and Audit Act 1987 provide for the Auditor-General to audit the accounts of the Authority for each financial year.

Assessment of Controls

 

Subsection 36(1)(a)(iii) of the Public Finance and Audit Act 1987 provides for the Auditor-General to assess 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.

 

This assessment also considers whether controls are consistent with the prescribed elements of the Financial Management Framework as required by Treasurer’s Instruction 2 Financial Management Policies.

 

Scope of Audit

 

The audit program covered major financial systems and was directed primarily to obtaining sufficient evidence to enable an audit opinion to be formed with respect to the financial statements and internal controls.

 

During 2005-06, specific areas of audit attention included:

 

·                     budgetary control and management reporting

·                     raising and recovery of rent and other tenant charges

·                     grant expenditure for the Community Housing Program

·                     capital expenditure

·                     repairs and maintenance of rental housing properties.

 

The work done by the internal auditor was considered in planning the audit programs.  Reliance was placed on the work of internal audit in assessing the effectiveness of the Authority’s internal controls.  Specific areas in which reliance was placed on internal audit work included controls over grant expenditure through the Community Housing Program.

 

 

AUDIT FINDINGS AND COMMENTS

 

Audit Opinions

 

Audit of the Financial Report

 

In my opinion, the financial report presents fairly in accordance with the Treasurer’s Instructions promulgated under the provisions of the Public Finance and Audit Act 1987, applicable Accounting Standards and other mandatory professional reporting requirements in Australia, the financial position of the South Australian Aboriginal Housing Authority as at 30 June 2006, the results of its operations and its cash flows for the year then ended.

 

Assessment of Controls

 

In my opinion, 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 matter raised in relation to management reporting, as outlined under ‘Audit Communications to Management’; are sufficient to provide reasonable assurance that the financial transactions of the South Australian Aboriginal Housing Authority have been conducted properly and in accordance with law.

 

Audit Communications to Management

 

Matters arising during the course of the audit were detailed in a management letter to the Chairperson.  Major matters raised with the Authority and the related responses are considered herein.

 

Management Reporting

 

In previous reports Audit concluded that the Authority had not developed and implemented mechanisms which support effective financial reporting of project to date expenditure against budget for rental housing maintenance and capital upgrade activities.

 

During 2005-06 Audit noted action taken by the Authority progressively during 2005-06 to improve the reliability of management reporting.  Review of revised management reporting arrangements identified further opportunities to improve the effectiveness of this reporting together with opportunities to improve the effectiveness of prioritisation and scheduling for maintenance activities.

 

The Authority has undertaken to implement Audit recommendations.


Relationship with Key Service Providers

 

Last year Audit noted that the Authority did not have a documented contractual relationship with a key service provider for the provision of services associated with the maintenance program.  During 2005-06 Audit noted that a contractual relationship with the key service provider had been delayed pending the implementation of planned governance reforms within the Families and Communities portfolio.

 

Further, in August 2005 Audit observed that the Authority did not have a documented, structured approach to review the performance of key service providers to ensure that work is performed in accordance with expectations.

 

Key services include:

 

·                     issue of maintenance orders;

·                     monitoring of work performed to ensure that it has been performed in accordance with the order;

·                     approval and processing of disbursements to maintenance sub-contractors.

 

During 2005-06 Audit noted that the whilst the Authority has undertaken steps to improve the monitoring of work performed by service providers, significant opportunities exist to ensure that this work is consistently performed in a structured manner.

 

The Authority responded that a documented and structured approach to performance review will be established.

 

Strategic Asset Management Plan

 

Audit noted that the Authority has not established a strategic asset management plan for the maintenance, upgrade, acquisition and disposal of houses.

 

The Authority responded that the development of a strategic asset management plan has been delayed pending the finalisation of a portfolio wide asset plan currently being developed by the Department for Families and Communities.

 

Further, the Authority has noted that planned governance reforms within the Families and Communities portfolio will impact on the completion of its final strategic asset management plan.

 

Community Housing Program (CHP)

 

The Authority maintains a Service Level Agreement with the Department for Families and Communities (DFC) for the provision of internal audit services.  During 2005-06 the Department’s Risk Management and Internal Audit undertook a review of the Community Housing Program (CHP).

 

The objectives of the review were to assess the Authority’s compliance with Commonwealth requirements to ensure that funds are:

 

·                     allocated to Aboriginal communities with the highest need;

·                     spent in accordance with business and asset plans to improve the well being of Aboriginal communities.

 

Internal Audit concluded that whilst the Authority had made progress in improving its control over the CHP program, significant improvements were required to establish controls that provide reasonable assurance that there is compliance with Commonwealth requirements.  In particular Internal Audit noted:

 

·                     Indigenous Community Housing Organisations (ICHOs) business plans had either not been developed or had expired;

·                     the criteria established by the Authority to determine regional housing needs were subject to differing interpretations and did not enable independent objective assessment;

·                     a need to improve the clarity in decision making for funding allocations to ICHOs;

·                     the need to provide further assistance to ICHOs to improve housing and tenancy management capabilities;

·                     the need to develop a long term strategy for supporting ICHOs asset management planning.

 

The Authority has accepted the internal audit findings and identified a target date of June 2007 to address these matters.

INTERPRETATION AND ANALYSIS OF FINANCIAL REPORT

 

Highlights of Financial Report

 

 

2006

2005

Percentage

 

$’million

$’million

Change

EXPENSES

 

 

 

Rental house ownership costs

11.4

10.2

12

Grants

10.2

8.0

28

Staffing costs

5.4

5.2

4

Other expenses

7.6

5.9

29

Total Expenses

34.6

29.3

18

INCOME

 

 

 

Commonwealth and State grants

27.2

38.3

(29)

Other income

12.4

11.8

5

Total Income

39.6

50.1

(21)

Net Result

5.0

20.8

(76)

 

 

 

 

Cash Generated from Operations

8.2

22.0

(63)

 

 

 

 

ASSETS

 

 

 

Current assets

21.9

23.7

(8)

Non-current assets

311.0

280.2

11

Total Assets

332.9

303.9

10

LIABILITIES

 

 

 

Current liabilities

3.0

3.3

(9)

Non-current liabilities

0.6

0.6

-

Total Liabilities

3.6

3.9

(8)

EQUITY

329.3

300.0

10

 

Income Statement

 

Income

 

Commonwealth and State government grants represent 69 percent of the Authority’s income which reflects the dependency of the Authority on this source of income.  Commonwealth and State government grants decreased by $11 million in 2006 due mainly to once off funding received in 2005 from the Department for Families and Communities for activities associated with the State Housing Plan.  Funding for the Plan of $7.3 million received in 2005 is to be applied to the construction and upgrade of Aboriginal community managed housing in rural and remote areas.

 

Rent from tenants represent 23 percent of the Authority’s revenue in 2006.

 

A structural analysis of operating revenues for the Authority in the four years to 2006 is presented in the following chart.

 

Expenses

 

Total expenses have increased by 18 percent to $34.6 million due mainly to a $2.2 million increase in grant expenditure and a $1.7 million increase in other expenses.  Grants represent community housing program grants provided by the Authority to fund the acquisition and maintenance of housing on behalf of Aboriginal communities. 

 

The increase in other expenses was impacted by the change in the method used by the Authority for estimating the provision for doubtful debts.  The provision for doubtful debts represents an estimate of the value of receivables that the Authority does not expect to collect and any movement in the provision is recognised in the Income Statement as an expense.

 

A structural analysis of the main operating expense items for the Authority is shown in the following chart.

 

 

Rental house ownership costs include maintenance, council and water rates, depreciation and insurance.

 

Net Result

 

The Authority’s net result decreased by $15.8 million to $5.0 million in 2006 due mainly to once off funding of $11 million received in 2005 from the Department for Families and Communities.

 

The following chart shows the income, expenses and net result for the four years to 2006.

 

 

Balance Sheet

 

The operations of the Authority are capital intensive as is reflected in the investment in rental properties.  The Authority’s rental properties were transferred to it from the Housing Trust on the Authority’s establishment or were acquired subsequently using funds from operations.

 

The increase in non-current assets is due to the Authority’s investment in new properties and revaluation increments of $24.3 million.

 

Analysis of non-current assets for the four years to 2006 is shown in the following chart.

 

 

In 2006 current assets includes cash and cash equivalents totalling $17.5 million.  Cash and cash equivalents are held for future rental housing capital projects and grant expenditure pursuant to the Community Housing Program.  At 30 June 2006 the Authority’s expenditure commitments totalled $9.6 million.

 

A structural analysis of current assets and both current and non-current liabilities for the four years to 2006 is shown in the following chart.

 

 

Cash Flow Statement

 

The following table summarises the net cash flows for the four years to 2006.

 

 

2006

2005

2004

2003

 

$’million

$’million

$’million

$’million

Net Cash Flows

 

 

 

 

 

 

 

 

 

Operations

8.2

22.0

13.7

7.9

Investing

(9.0)

(11.9)

(11.2)

(9.5)

Change in Cash

(0.8)

10.1

2.5

(1.6)

Cash at 30 June

17.5