The Police Department, an administrative unit established under the Public Sector Management Act 1995, is primarily responsible for providing a service that will reassure and protect the community of South Australia from crime and disorder and, that is responsive to the community’s needs and expectations.
The principal functions of the Department are represented as follows:
The change in net assets was $2.7 million ($20.9 million).
Revenues from the Community Emergency Services Fund were $16 million, representing the first year funds were received.
The accumulated surplus increased by $3.4 million to $91.7 million ($88.3 million).
Total administered expenses fell to $74.8 million ($95.6 million).
Compensation paid to firearms dealers was $1.5 million ($3.6 million).
Expiation fees collected remained relatively constant at $42.4 million ($42.2 million).
Subsection 31(1)(b) of the Public Finance and Audit Act 1987 provides for the Auditor-General to audit the accounts of the Department, in respect of each financial year.
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 statements and internal control.
During 1999-2000 specific areas of audit attention included:
expenditure, including accounts payable and salaries and wages
plant and equipment, including the adequacy of asset register maintenance
expiation notices system
firearms control system
security services operations
revenue, debtors, receipting and banking
Firearms Buy Back scheme.
Audit Communications to Management
During the year a number of letters were forwarded to the Department. The letters conveyed audit scope and findings with respect to the Police Security Services Division; the Firearms Control System; the Financial Management Framework, specifically; non-current assets; and other major financial management systems, primarily accounts payable and salaries and wages.
Responses were received to each of the management letters and were considered to be satisfactory. Follow-up discussions confirmed management’s responses and actions to address the specific issues identified. Further details relating to these matters are contained in ‘Audit Findings and Comments’ hereunder.
Audit assessed the Department’s control structure as being satisfactory.
While the audit had identified that some internal controls may not have been operating consistently throughout the financial year (refer comments hereunder), these did not warrant a qualified Controls Opinion.
Nevertheless, there was a need for the Department to review those areas where control weaknesses persisted over more than one reporting period. To some extent, foreshadowed structural changes in organisational responsibilities and business processes, together with enhancements in management information systems, may assist in providing longer term solutions and thereby avoid related risk exposures.
The principal findings made by Audit were in relation to:
While specific comment is made in relation to other areas of financial operations, Audit undertook a more holistic approach to reviewing the progress made by the Department with the implementation of the Financial Management Framework (FMF) and the mechanisms in place that would evidence compliance with the same. This was an important element in the formulation of the control opinion.
Audit concluded that the Department was either complying, or progressing towards complying, with the majority of the mandatory prescribed elements of the Framework. Nevertheless, areas were identified where there was opportunity for improvement.
These related to elements dealing with:
Monitoring and reporting of internal controls: Audit assessed that this function had not been assigned to a specific individual officer or group within the Department and that this may detract from the effectiveness of this control process.
The provision of adequate and appropriate training to management and staff of the agency to ensure they are capable of meeting agency objectives. Audit was advised that there were no formal training policies and procedures for ‘non-sworn’ employees and that, rather than a departmental wide approach, training and development was the responsibility of the management of each area. Audit considered that specific policies and procedures for ‘non-sworn’ employees should be developed.
Management responded that various monitoring processes operate within the Department to ensure that agency objectives are being met and satisfactory control processes are in place and monitored. These took the form of reviews of business plans, budget performance, reconciliations and checking functions at various organisational levels. Management reports were used to identify any existing or potential problems and to ensure corrective action is taken. Management also indicated that the Department’s Business Plan for 2000-01 would include a review of internal audit procedures as a priority, together with the development of an audit manual.
With respect to training and development policies and procedures for ‘non-sworn’ employees, management advised that a principal trainer had been appointed to coordinate training for these employees with the assistance of training officers and administration managers in the local service areas. This would entail the development of training packages and the delivery of training both in the metropolitan and country areas.
Other areas of financial operations were the subject of separate audit correspondence, notwithstanding that they too related to the FMF. Further comment is provided hereunder.
Audit’s review of the Department’s non-current asset system revealed that there were a series of issues, some of which had been raised in previous years.
Audit identified the following opportunities for improvement in internal controls:
That all assets are correctly classified in the non-current asset register and that the Department’s capitalisation policy for minor items is adhered to. An Audit review of stocktakes performed in the latter part of 1998-99 had identified that certain assets were recorded in the non-current asset register, but had not been physically sighted. These assets had been recorded in a temporary location, had an historic cost of $14.9 million and a total written down value of $1.5 million. The majority of these assets had a historic cost of below $2 000 each.
Departmental Response
Management responded that the number of assets recorded as having a temporary location had been significantly reduced and that the remaining assets would be correctly located by December 2000. Assets with values of less than $2 000 individually, but not included in a larger asset class, would be progressively expensed.
That assets be removed from the non-current asset register only by authorised officers.
Departmental Response
Management responded that authority to delete assets from the register would be delegated to appropriate managers, with due consideration to dollar value and seniority.
Documented reconciliation and verification procedures with respect to the central non-current assets register were not being complied with in all cases.
Departmental Response
Management responded that the associated reconciliations and documentation and explanations of variances, where appropriate, would be performed regularly in accordance with approved procedures.
The audit of the Police Security Services division identified various minor weaknesses in internal controls, including the duplication of processes within the accounts receivable function, as had been reported in 1998-99.
Other matters included examples where security services were being provided and charged in accordance with agreements that had expired. In addition, there were services being provided where there was no formal agreement. In some cases, these arrangements were subject to draft agreements or memoranda of understanding that were in the possession of clients for consideration.
Audit also noted that the costing summary setting out fees to be charged to clients for the provision of security services had not been reviewed since September 1996.
Management responded that it had since formalised agreements with a number of agencies and others were being pursued as a matter of priority. The Department indicated that the division had reviewed its costing summary, subsequent to September 1996 but that this had not been recorded. A further review was to be completed by July 2000. Other matters raised by Audit were satisfactorily addressed.
Matters raised by Audit included the need for improvements in the:
follow up of expired firearms licences, where firearms were registered against the holder of an expired licence. As at December 1999, there were almost 17 000 expired licences against which firearms were registered. A similar issue was raised in 1998-99 notwithstanding that there had been action taken and some improvement in the overall number of expired licences.
Departmental Response
Management responded that there had been a reduction in the number of expired licences to 14 700 by May 2000, but only after a very labour intensive effort, including the use of part-time contract workers. Further efforts would be made in this regard, but with the intention of using sworn and unsworn staff in lieu of contractors, where opportunities presented themselves.
follow-up of non-registered firearms (there were in excess of 8000 as at February 2000), purchased by holders of firearm licences.
Departmental Response
Management responded that this figure was reducing and represented only 2 percent of the total 400 000 firearms registered at that time. This figure was expected to reduce further as the operational section of the relevant branch more actively followed up its investigations.
use of reports produced by the system. Audit noted that 15 separate reports are produced monthly by the system but that some reports were either not used, contained information that was misleading or simply listed transaction trails. Audit recommended that a review be performed of reports produced by the system to ensure that the reports provide information that is useful.
Departmental Response
Management responded that the production and content of reports from the system was being reviewed with modifications anticipated to existing report formats.
documentation of policies and procedures, including description of the internal control environment for the complete system.
Departmental Response
Management responded that user manuals were being developed in line with the Financial Management Framework and that existing operating manuals were constantly subject to upgrade, as required.
Other minor matters reported during the year were being satisfactorily addressed by management consistent with the detailed responses received.
Matters dealing specifically with the Computer Information Systems environment are addressed hereunder.
Audit had undertaken a review of the CIS environment during 1989-99 and had identified a need for improved processes with respect to:
compliance with EDS documented contract management arrangements;
storage and testing of backup tapes;
authorised access to systems;
reinforcement of the obligations arising from IT security policies among those officers who have access to sensitive or confidential data.
Audit follow-up during 1999-2000 indicated improvements in these areas, consistent with previously advised actions by the Department. Other areas of the CIS environment subject to Audit review proved to be satisfactory.
As required by subsection 36(1)(a)(iii) of the Public Finance and Audit Act 1987, the audit of the Police Department 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 Police Department in relation to the receipt, expenditure and investment of money; the acquisition and disposal of property; and the incurring of liabilities, were sufficient to provide reasonable assurance that the financial transactions of the organisation were conducted properly and in accordance with the law.
Total operating revenues for the year ended 30 June 2000 were $21.1 million ($16.2 million) and represented 6.1 percent (4.9 percent) of total revenues.
Revenues from the State Government increased to $326 million ($318.4 million) and included contributions from the Community Emergency Services Fund of $16 million for the first time.
Operating expenses increased by $29 million (9.2 percent) to $342.8 million ($313.8 million). Some of the major factors causing this increase were the increased costs for police officers flowing from the enterprise bargaining wage increases operative from July 2000 and higher average staffing levels during the year. Other factors included the increased costs of operations, arising from events such as New Years Eve (2000) and Drug Action Teams, as well as the increased costs of workers compensation payments.
The accumulated surplus increased to $91.7 million ($88.3 million). This was largely consistent with the change in net assets after restructuring and reflected little other movement in the items within the financial position of the Department.