The Government has in recent years, initiated a number of projects that involve contractual commitments to private sector entities for the construction and/or service delivery arrangements associated with these projects⁵¹. Several of these initiatives have resulted from the need for new or replacement infrastructure or services and changes in technology.

It is important to mention that the arrangements are directed to improving community assets and service obligations. As such, there is the expectation by both the Parliament and the South Australian community that high standards (ie administratively, procedurally and legally) will be maintained in the management of these projects and contract arrangements.

Audit has commented in past Annual Reports to Parliament on various issues arising from its review of the processes associated with government projects. Last year's Report included specific comment with respect to:

PREVIOUS COMMENTS

In last year's Report, I indicated that the changing patterns of public administrative arrangements, particularly with respect to private sector participation in the provision of infrastructure and services, gave rise to several policy/procedural shortcomings concerning a number of important administrative and accountability matters.

Two specific areas to which I drew attention were the developments relating to the promulgation of the 'Prudential Management Framework' and the 'Project Handbook'. Both of these publications were, at the time of my last Report, yet to be finalised.

In concluding my comments in that Report, I indicated that the finalisation of these two initiatives required urgent attention. Both publications focus on ensuring proper evaluation and management of significant and complex projects and provide standards of accountability and value for money outcomes. Without adequate guidance on these matters there was a significant risk of projects being mismanaged with consequent financial loss to the Crown.

The Prudential Management Framework (PMF) was endorsed by Cabinet in May 1998 and applies to all arrangements between the private and public sectors. The PMF is designed to:

• identify the broad principles associated with prudential management;
• foster and promote prudential culture in the public sector;
• ensure public confidence in the 'checks and balances' on government decision making, accountability and effective performance.

PROJECT HANDBOOK

In July 1998 the Project Handbook was also circulated to all government agencies. The purpose of the Project Handbook is to consolidate into a single resource, the various government policies, guidelines and principles governing contracting out, private sector provision of public infrastructure and major or significant arrangements between the private and public sectors generally.

The Project Handbook incorporates:

• Prudential Management Framework;
• Treasurer's Instruction No 17: Evaluation of Public Sector Initiatives and Guidelines for the evaluation of Public Sector Initiatives;
• Cabinet Handbook;
• Annual Reporting Requirement.

It is intended that the Handbook will be a living document which will be updated as required.

It is considered important that updates to the Handbook should, in part, reflect learnings in respect of major project management experiences of agencies. Later parts of this section of the Report include comment on deficiencies noted during the year in relation to certain project and contract management practices within government agencies.

Last year I indicated that Parliamentary Committees undertake an important role in scrutinising the activities of the Executive Government, particularly in the context of the expenditure of public money.

I made comment that the Public Works Committee is invested with specific statutory powers and responsibilities associated with the examination of major public works projects undertaken by the Government. Further, given the importance of the role of the Public Works Committee, its statutory charter, and the integral role it plays in providing a control mechanism for the expenditure of public money on public works, any matter that impedes its operation and its effectiveness is a matter of importance.

In making those comments I raised a number of issues which arose from an audit review of several Public Works Committee reports. In concluding my comments, I recommended that to ensure that the Public Works Committee was in a position to report to Parliament on several of its functional responsibilities, the Committee would be materially assisted by receiving, in all cases upon which it is required to report, representations/evidence from certain Executive Government agencies.

During 1997-98, following consultation with the Public Works Committee, the Department of the Premier and Cabinet issued a circular to agencies which lays down procedures for submissions seeking the review of public works by the Public Works Committee. These procedures address the substance of the issues raised in last year's Report.

During the year the Government announced that it proposed to undertake Stage 2 of the Hindmarsh Soccer Stadium Upgrade, at a cost of $18.5million.

This project was referred to the Public Works Committee and in April 1998, the Committee tabled an Interim Report in Parliament. The majority report indicated that as the Committee had not been given all material evidence needed for the proper evaluation of the project according to law, the Committee was unable to endorse Stage 2 of the works or lodge its Final Report to Parliament.

On the 16 June 1998, the Public Works Committee tabled its Final Report on the proposed works. The majority report indicated that given some specific concerns with the proposed works and those concerns outlined in their Interim Report, the Committee was unable to recommend that Stage 2 proceed.

The matters raised by the Public Works Committee, in its Interim and Final Reports will be considered as part of the 1998-99 audit process, as the matters may have consequences in respect of discharging audit responsibilities associated with issuing opinions on the internal controls and financial statements of the agency responsible for financing the stadium upgrade.

Many agencies of the public sector have or will have an association with projects that can be complex, involve a significant commitment or outlay of public monies and, include participation by the private sector.

The projects can be building construction, information technology developments or outsourcing of government agency management and service delivery activity. Irrespective of the nature of the project, proper due diligence and management exercised in relation to the initiation, evaluation, and the executive stages of the project, will facilitate cost effective project outcomes.

Last year's Report identified some inadequacies in project management relative to some developments reviewed. The issues included, cognisance by agencies of meeting certain Public Works Committee requirements prior to project commencement and funding; the requirement for the Department of Treasury and Finance to be consulted on a timely basis regarding project proposals and evaluation of those proposals; and the management and documentation of project risks.

GENERAL AUDIT OBSERVATIONS AND COMMENTS

In 1997-98 Audit identified issues of a project management nature relating to information technology developments in progress in various government agencies and in respect of the Mount Gambier and Port Augusta Hospital infrastructure developments.

Key Audit observations arising from the project reviews of information system developments are outlined in the section entitled 'Information Technology in South Australia: Some Audit Issues' in Part A.4 of this Report. Observations commented on relate to the suggested adoption by government agencies of a consistent best practice project management methodology and, those factors that have limited the cost effective and timely implementation of some information systems in agencies.

In respect of the Mount Gambier Hospital and Port Augusta Hospital projects, both developments were approved as private sector infrastructure developments (ie privately funded projects). Audit review revealed that funding of the developments was not confined to the respective private sector financed leased costs but also involved the application of significant capital funds from the South Australian Health Commission (SAHC) Capital Works Program. In addition issues relating to the Commission's capital asset management policy and process were considered in need of review. These matters are the subject of expanded comment hereunder.

SPECIFIC AUDIT COMMENTARY ON HOSPITAL DEVELOPMENTS

Background

In the latter part of the 1996-97, Audit examined, in a limited context, some matters associated with the Mount Gambier Hospital redevelopment. That development (which was completed in June 1997), together with the Port Augusta Hospital project (completed in December 1997), involved private sector financing and was reviewed mainly in respect of the 1996-97 financial statement reporting implications of the arrangements.

The 1996-97 Report (Pages A.4-31 to A.4-32) included comment with respect to the Mount Gambier Hospital development arrangements.

Audit undertook a wider examination of both Hospital developments in the latter part of 1997-98. The following outlines matters identified during the review process.

The development of the hospital was not confined to the private sector financed leased cost of $23.8million, but also involved the application of public funds from the SAHC Capital Works Program.

At June 1998, SAHC funds applied to the development amounted to $5.5million. Of that amount $2.8million related specifically to the cost of provision of furniture and equipment for the new hospital.

Audit noted that the Minister for Human Services provided retrospective approval in January1998 for the equipping cost of $2.8million. Notwithstanding, Audit raised with the SAHC whether Cabinet had been informed of the overall project completion cost. The SAHC advised Audit in early September 1998 that an advice to Cabinet has been prepared. Audit is to obtain and review a copy of the advice.

As with the Mount Gambier Hospital development, the Port Augusta Hospital project was an approved private sector infrastructure development. A review of the project also revealed that the funding of this development was not confined to the respective private sector financed leased cost of $18.2million. At June 1998 funds of $3.1million from the SAHC Capital Works Program had also been applied to the project.

Audit's review of this project was conducted concurrently with a detailed internal review that was being undertaken by the Principal Project Consultant of the SAHC. The comprehensive report of the Consultant clearly indicated that a number of unsatisfactory matters associated with capital asset management policy, process and practice, contributed to the additional funds requirements of $3.1million. In brief they included:

• absence of a clear statement of agreed outcomes in respect of the project development;
• lack of clear definition of project management responsibilities between parties involved with the project development, covering roles, controls and accountabilities;
• lack of appreciation of application of risk management principles;
• unsatisfactory cost planning and management, including processes in place to control cost authorisation;
• absence of a routine project review process.

The Principal Consultant's Report also indicated that the SAHC was undertaking 'a radical overhaul of its procedures in managing all stages of capital facility procurement.' In response to a request from Audit specific procedural changes were advised to Audit in early September 1998. Further, the SAHC advised at the same time that a submission to Cabinet advising of the project completion cost and outcomes had been endorsed on 24August1998. Audit has received and reviewed the endorsed Cabinet submission.

The project contract documentation in respect of the Port Augusta Hospital provided for payment to the contracting builder of an 'Early Occupation Payment' (an early completion payment), if the date of completion was to occur within a certain timeframe before the expected completion date. An early occupation payment claim was submitted by the builder pursuant to the contract and payment made by the SAHC. Audit is reviewing the nature of this type of contract provision and payment with reference to the project contract arrangement of the Port Augusta Hospital.

It is apparent and confirmed by SAHC internal review of the Port Augusta Hospital project outcomes that major shortcomings were present in the project management arrangements adopted by the SAHC in relation to the Mount Gambier and Port Augusta Hospital developments.

Although the hospital developments were earmarked and approved as private sector financed developments, significant additional funds met from the SAHC Capital Works Program were applied to the developments.

Significant project developments and service delivery arrangements executed by the government with external parties (constructor, service provider, facility owner) involve both parties entering into formalised arrangements (principally through contractual agreements).

In recent years many of the arrangements entered into by government involve a contractual term extending over a long period of years. In general terms, the formalised contractual agreements covering the arrangements between the government and external parties, include provisions governing the performance and accountability obligations of both parties. It is critical that such contractual obligations are appropriately monitored through well established contract management and review processes to ensure adequate performance and compliance⁵².

Last year's Annual Report included specific comments regarding contractual compliance management on some major contracts reviewed by Audit in 1996-97. The comments were made in relation to the SA Water Corporation - Adelaide Outsourcing Contract; SA Government Light Vehicle Fleet - Sale and Leaseback Arrangement; and Modbury Hospital Outsourcing Arrangement. Further, the comments concerned matters requiring attention to address shortcomings in contract management, including monitoring and reporting on contractual obligations to ensure performance and compliance.

During 1997-98 Audit revisited matters noted from the 1996-97 reviews of the abovementioned major contracts and undertook reviews of other arrangements in respect of contract performance and compliance. The other arrangements reviewed during the year related to administration arrangements of certain sporting stadiums and government building maintenance and minor works services outsourcing arrangements.

In brief terms matters noted from the 1997-98 review were:

• Last year's review of certain contract arrangements highlighted the importance of the government contracting agency having a structured and complete approach to the review of the contractual obligations of the parties to the contract (ie government and external parties).

• Despite the improvement noted in contract management associated with the abovementioned arrangements, deficiencies were observed during the year in regard to contract arrangements applying in respect to the government's outsourcing of building maintenance and minor works services and the administration of sporting stadiums.

The following commentary relates further on matters reported on last year and includes specific comment concerning issues arising out of the 1997-98 reviews of sporting stadium administration arrangements and government maintenance and minor works outsourcing arrangements.

South Australian Water Corporation entered into a contract in December 1995 with United Water International Pty Ltd for the operation, maintenance and management of Adelaide's water and wastewater systems,

Last year's review of the arrangement encompassed two main components of the contract, namely, operations and maintenance and economic development.

The main audit observations from the 1996-97 review was that the Corporation had yet to establish a complete framework for the review and monitoring of the operations and maintenance obligations of the contract.

The 1997-98 audit indicated significant improvement in the contract management process exercised over the operations and maintenance aspects of the arrangement. The audit also noted a number of initiatives taken to improve the monitoring of the economic development aspect of the contract.

More detailed commentary regarding the 1997-98 audit review process and outcome in relation to this contract is provided under the section entitled 'South Australian Water Corporation' in Part B of this Report.

Modbury Hospital Contract Arrangement

Last year's Report noted that a Post Implementation Review of the Modbury Public Hospital Management Agreement had been completed in June 1997. Further, it was commented, that arising out of that review and the performance of an independent assessment indicating benefits to the government through re-negotiation of the Agreement, Cabinet in August1997, approved amending the contractual arrangements between Modbury Hospital and Healthscope.

Specific audit commentary regarding developments associated with the Modbury Hospital contracting out arrangements is provided in the section entitled 'Government Contracts: The Modbury Hospital Contract: Audit Commentary and Recommendations' in Part A.3 of this Report.

The Government entered into a sale and leaseback facility managed by the Commonwealth Bank of Australia on 9 May 1996. The main benefit from entering into the facility was the anticipated achievement of a lower cost of funding the government's vehicle fleet. The Government sold all existing vehicles to a company for $175.8million and the book value of the vehicles at the time was $169.9million. The facility is set up on a perpetual basis with both parties having the option to terminate the agreement from year eight onwards. Once notice has been given that the facility is to be terminated the agreement has a 'wind down' period of seven years.

It is mentioned that in respect of the financial statement reporting of the facility, there remains a divergence of opinion between Audit and the Department of Treasury and Finance and the Department for Administrative and Information Services (formerly ServicesSA) on the interpretation of a number of key definitions in Australian Accounting Standard AAS 17, 'Accounting for Leases'. As the difference in interpretation results in a material difference to amounts disclosed in the financial statements of the Department for Administrative and Information Services (DAIS), Audit continues to issue a qualification in respect of certain asset and liability disclosures relating to the sale and leaseback arrangement. An extract of the qualification included in my Independent Audit Report in relation to DAIS financial statements is contained in the section entitled 'Department for Administrative and Information Services' in Part B of this Report.

Last year's Report included comment that the anticipated benefit of reduced cost of financing the Government's vehicle fleet under the arrangement was dependent on a number of factors, including changes in residual values of vehicles; changes in taxation law; and the number of replacement vehicle leases.

Audit indicated that due to the long term nature of the lease facility and anticipated benefits to be derived under the arrangement, there was a need for proper management over the ongoing arrangements. In this regard it was conveyed that the Department of Treasury and Finance was in the process of putting in place firm arrangements to ensure effective management and monitoring of the parameters critical to the arrangement and expected to periodically employ the services of external financial advisers to assist in this process.

Audit noted that vehicle residual values have fallen over the past year, with no immediate improvement or further deterioration expected, due to certain favourable new car purchase price conditions prevailing as a result mainly of the Asian economic crisis. This changed condition necessarily impacts on the cost of the leaseback facility to government and is illustrative of the importance for ongoing monitoring, assessment and reporting on the cost/benefit of the arrangement at appropriate points in time.

In June 1998, Audit communicated in writing to the Department of Treasury and Finance, requesting advice on any review and assessment that had been undertaken of the impact of the fall in vehicle residual values on vehicle lease rental determinations and the anticipated benefit of the leaseback facility to government. Advice was also requested regarding the nature of the arrangements that had been put in place to ensure ongoing effective management and monitoring of the facility.

The Department of Treasury and Finance advised that an external financial adviser was engaged to verify and advise on various aspects of the lease facility. The financial adviser's report of July 1998 indicated that the facility continued to provide a financial saving, albeit at a reduced level.

With respect to ongoing monitoring and reporting on the facility the Department advised that it was now in a position to monitor the effects of changes in variables affecting the anticipated financial benefit under the facility arrangement. The Department also envisages that it will continue to periodically employ external financial experts to assist the Department in the management of the arrangement.

In March and April 1998 the Department for Administrative and Information Services (DAIS) finalised outsourcing arrangements with respect to facilities management services provided in relation to selected government agency assets. The overall arrangement provided for three private contractors (referred to as Facilities Managers) to supply building maintenance and minor works services, with each contractor being allocated service responsibilities to government agencies within different geographical areas covering metropolitan Adelaide. The estimated value of work relating to the three contracts was $35 million. Building Maintenance Services of DAIS was retained to provide services to a fourth geographical region.

An important aspect of the outsourcing arrangements was the development of a management information system, the 'Facilities Asset Management Information System' (FAMIS), to be utilised by the Department, Facilities Managers and the relevant client government agencies in the operational, financial and performance management of the outsourced maintenance activities.

The critical nature of the system in respect of the outsourcing arrangements was evident by its inclusion in the formalised contract documentation with the outsourced Facilities Managers. That documentation required that the Facilities Manager's computer hardware and software be able to interface, read, write and exchange data with the Department's computer hardware and software ie FAMIS.

The functional requirements of FAMIS include the capacity to:

• enable client government agencies to communicate their needs to Facilities Managers;
• capture all work related data for asset management or contract management purposes. For example, type of work and labor, materials, equipment and resources used;
• capture Facilities Manager performance related data for contract management purposes. For example, customer satisfaction, responsiveness and expenditure against budget;
• enable querying and reporting by DAIS of work and performance related data.

In recognition of the critical nature of the system for the effective operation and management of outsourced maintenance arrangements, Audit undertook a review of the system with specific focus on obtaining an understanding of the overall implementation status of FAMIS.

The review identified that full implementation and use of the system by all Facilities Managers, DAIS and all client government agencies had not been achieved at the time of finalisation of the contractual arrangements with the Facilities Managers (April 1998), and indeed at the time of finalisation of the Audit review (July 1998).

In addition to the position status concerning the implementation and operation of FAMIS, it was ascertained that, as DAIS provides services to government agencies through the Facilities Managers, there was commitment to establish Service Level Agreements (SLAs) between DAIS and these government agencies. The introduction of proposed SLAs between DAIS and the relevant client government agencies had not been effected.

In view of the critical nature of FAMIS and the SLAs for the effective operation and management of the outsourcing arrangements the concern regarding their respective implementation status was reported to DAIS.

The Department has responded indicating that FAMIS is expected to be fully operational by September 1998. With respect to SLAs, the Department advised that the drafts prepared in conjunction with each client government agency prior to the commencement of the contracts will be finalised for the 1998-99 financial year once each agency's facilities budget has been confirmed.

Audit review revealed that a critical computerised system for the operational and financial control of major outsourced maintenance and minor work service activity had not been implemented at the commencement of the outsourcing arrangements. Further, SLAs formalising agreed service delivery requirements had not been completed.

This has resulted in the Department not being in a position to implement immediate effective management and control of the outsourced activities. The essential need for early active contract management and completion of key documentation of agreed service delivery requirements is the subject of further commentary in Part A.3 of this Report.

The Government has, over many years, supported the construction or upgrading of sporting stadiums. In recent years the financing arrangements applying in respect of the construction or upgrade of certain stadiums has involved a mix of government capital contributions and the provision of government guarantees for loan contributions by sporting associations.

The varying financing arrangements have resulted in a number of different management structures and arrangements being put in place. In general terms, where the sporting association has been unable to financially contribute to the stadium it has been built and operated by the Government (eg Velodrome) and where there has been a financial contribution by the Sporting Association the stadium is managed by the sporting association (eg Hindmarsh Soccer Stadium and the Mile End Netball Stadium).

During the latter part of 1997-98 Audit undertook a review of the management arrangements applying in relation to some of the stadiums.

Audit focused on those arrangements where a party external to the Government manages the daily operations of the stadiums. These comprise the Hindmarsh Soccer Stadium, Mile End Netball Stadium, and the Pines Hockey Stadium. A separate Audit review of the contractual arrangements in place for the Athletics Stadium was also undertaken. A brief commentary on the management arrangements operating in respect of each of these stadiums follows:

The South Australian Soccer Federation (SASF) lease the facility from the City of Charles Sturt and are therefore responsible for the management of the stadium. The Government has contributed to the redevelopment of the stadium through the provision of capital funds and by guaranteeing the loan repayments for SASF's contribution. Pursuant to a Funding Deeds (October 1996 and October 1997) the amount of SASF's loan repayments is restricted to the funds collected by way of levies on spectators with any shortfall in loan repayments being met by the Government.

The stadium is owned by the Government, but pursuant to a Development and Funding Deed (December 1996), the South Australian Netball Association (SANA) contributed to the construction costs. The Government has guaranteed SANA's loan repayment for its contribution. SANA has been appointed to operate the facility and pursuant to the Deed its contribution to the loan repayments is restricted to the operating result of the Stadium with the Government meeting any shortfall. SANA do not receive a management fee as it has been licensed to occupy and use the facility. There is provision for SANA to purchase the facility at the end of the term of the financing arrangements.

The stadium was built, and is owned by, the Government. Hockey SA currently manage the facility although the management arrangements have not been ratified by any formal documentation.

The stadium was constructed, and is owned by the Government. The South Australian Athletics Stadium (a subsidiary of the Minister for Industry, Trade and Tourism formed under the Public Corporations Act 1993) has responsibility to oversee the management of the stadium. Based on submissions received in response to a Request for Proposal document the then Minister of Recreation and Sport approved the appointment of the Athletics Association of SA Inc to provide management services for the stadium.

Audit Observations and Comments

As mentioned above there is no formal documentation supporting the management arrangement in place between the Department of Industry and Trade (Office of Recreation and Sport) and Hockey SA.

In relation to the Hindmarsh Soccer Stadium and the Mile End Netball Stadium the respective Funding Deeds include similar key accountability provisions, notably:

• the operations of the stadiums must be accounted for as separate profit centres;
• a separate management committee with Ministerial representation must be formed to oversee the operations of the stadiums. Key responsibilities of the committees include the establishment and maintenance of accounts and accounting records for the stadium profit centres, preparation of annual budgets and to seek to maximise use, and therefore revenue, of the stadiums;
• a five year business plan must be prepared and maintained for the stadium profit centre operations;
• separate financial statements must be prepared for the stadium profit centres;
• the accounts, accounting records or accounting systems or procedures, including those in relation to the stadium profit centre must be audited each financial year by an auditor approved by the Minister;
• the Treasurer, the Minister, or any duly authorised employee, agent or contractor may inspect the books, accounts or other documentation relating to the management, administration or affairs of the sporting associations, including those in relation to the stadium profit centres;
• for each financial year an annual report concerning the affairs of the stadium profit centres must be prepared and forwarded to the Minister;
• Ministerial or Treasurer's representatives can attend meetings of the sporting associations where issues relating to the management of the stadium are to be discussed.

The parties including, the Minister, the Treasurer, the Minister's nominees to the management committees, the sporting associations and the Department of Industry and Trade (Office of Recreation and Sport) all play important roles in ensuring compliance with the overall accountability provisions of the Funding Deeds.

The Audit review identified that the Office of Recreation and Sport had prepared summaries of the respective Deed provisions and status reports covering the key accountability provisions contained in the Deeds. The status reports reflected correspondence forwarded by the Office of Recreation and Sport to the sporting associations and the responding information provided by the associations.

The status reports indicated that a number of key provisions in both Deeds had not been sufficiently addressed by all parties since the Deeds were put in place. The following provides further information with respect to some of the matters noted by Audit and reported to the Department of Industry and Trade (Office of Recreation and Sport) on 27August1998 for advice of action proposed in relation to the matters.

At the time of the audit the soccer committee was yet to be formed and there was a vacancy for a Ministerial representative to the netball committee. In addition to representatives on the management committees the Deeds also provide for attendance of nominees of the Treasurer or Minister as observers at meetings of the sporting associations.

Audit raised with the Department the matters regarding the unsatisfactory position concerning the committees and sought advice of formal arrangements planned or implemented between the Minister, Minister's representative, Department and sporting associations with respect to communication of issues associated with the management of the stadium profit centres.

In the case of netball, a report prepared in August 1996, prior to approval for the construction of the stadium, has been used as the initial business plan. The Department wrote to SANA in January 1998 indicating the need to update the plan. SANA responded in April 1998 advising that updating of the plan could commence towards the end of the 1998 calendar year.

With respect to soccer, several documents have been provided but none satisfy the requirements set out in the Deed.

At the time of the Audit review the provisions in each Deed for review of the operations and record keeping in relation to the stadiums had not been exercised. This was despite the fact that both stadiums had not been able to fully fund the sporting associations' loan repayments during the year thereby requiring the Government to meet the shortfall.

The repayment of the sporting association loans is limited by the Deeds to funds arising from defined activities. In both cases the quantum of these funds is dependent upon the operating performance of the stadium profit centres. The Deeds both contain requirements for the sporting association to promote the profitable use of the facilities.

Audit enquired of the Department as to whether an independent review of operations, accounting records and procedures was planned to ascertain compliance with the accountability arrangements set out in the Funding Deeds, including the integrity of attendance recording mechanisms (spectators for soccer and spectators and players for netball).

Both Deeds include a provision for the approval of the auditor of the sporting association and a requirement that the audit include the accounts, accounting records and systems or procedures maintained in relation to the respective facilities.

In both cases the nominated auditor has been approved without consideration of the scope of the audit to be performed. Audit suggested that the Department obtain a copy of the engagement letter to ensure that the scope of the audit includes the operations of the independent profit centre for the respective stadium. It was further suggested that the Department seek to have a clause inserted in the engagement letter that provides for copies of any findings by the auditor in relation to the operation of the stadiums to be provided to the Department.

In addition to the common issues, the Audit review noted a number of unresolved matters specific to each Deed. For example, the Netball Deed has specific provisions requiring the collection of a levy for each player playing on the Edward Park courts. Correspondence sighted by Audit between the Department and SANA indicated that the levy was not being collected.

The Department of Industry and Trade (Office of Recreation and Sport) responded in a quick and positive manner to the issues raised by Audit.

The response detailed certain strategic arrangements proposed to be put in place to improve markedly aspects of diligence and management to be exercised by all parties involved with the various stadium operations. An extract from the Department's response follows:

The response detailed the further strategic arrangements to be discussed with the responsible Minister. Those arrangements are not outlined herein as Audit at the time of finalising this Report has not received formal advice by the Department of the outcome of discussions with the responsible Minister.

The response also conveyed positive actions being taken to address the specific issues raised by Audit.

As mentioned earlier, the Athletics Association of South Australia Inc provide management services in respect of the stadium. Audit noted that although the Association was awarded the management arrangement in October 1997, a formalised contract document between the Stadium Board and the Association was still in draft form at the time of audit of the operations of the stadium (July 1998).

This matter was referred in writing to the Chairman, South Australian Athletics Stadium in August 1998. The Chairman responded in early September 1998 indicating that the amended draft contract has been forwarded to the Athletics Association of South Australia Inc for signature.

The Government has provided significant financial support for the construction and/or upgrade of sporting stadiums, either through the direct provision of funds for development costs or by provision of government guarantees for loan contributions to the development costs made by sporting associations.

The management of sporting stadiums involve differing accountability frameworks. Each of the frameworks rely on several parties to ensure compliance with the accountability elements of the frameworks. The parties involve the responsible Minister, the Treasurer, the Minister's nominees to Boards and Management Committees, the sporting associations and, the Department of Industry and Trade (Office of Recreation and Sport).

The outcome of the audit review of stadium management arrangements revealed deficiencies with respect to meeting adequate standards of accountability. The Department acknowledges these deficiencies and is proceeding to address the issues.

Agencies of government enter into project developments and contract arrangements that can involve a significant commitment or outlay of public monies. The projects and contracts to which I refer relate to major building construction, significant information technology projects and management and service delivery outsourcing arrangements.

Last year's Report conveyed that specific project guidance (ie Prudential Management Framework and Project Handbook) was still to be completed and that its finalisation should be a high priority. During the year the Framework and Handbook were completed and released to agencies in July 1998.

Audit reviews of various project and contract arrangements, still give rise to identified issues of significance that reveal inadequacies in project and contract initiation, evaluation and execution as well as performance review of accountability obligations associated with the arrangements.

Agencies have been provided with a comprehensive policy guidance framework to facilitate the effective planning and management of project processes. Agencies will need to reflect the principles of the guidance framework in their respective project processes. This will enhance the prospects for the achievement of quality and cost effective project outcomes.

The policy guidance framework will need to be continually revisited to reflect experiences gained from specific major project implementations of agencies.

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