The Department for Water Resources (DWR) is an Administrative Unit that was established pursuant to the Public Sector Management Act 1995. That establishment occurred on 14 February 2000 as part of a wider restructure of certain government functions.
DWR mainly comprises certain water resource management functions (and associated staff, assets and liabilities) transferred from the former Department for Environment, Heritage and Aboriginal Affairs and the Department of Primary Industries and Resources.
Further, as a part of that restructure the Minister for Water Resources was incorporated.
The principal objectives of DWR are to:
achieve a strong, consistent and collaborative focus on water issues for the benefit of South Australia;
at a national level, ensure South Australia’s interests are recognised and protected in water reform initiatives and the key water resources shared with other States;
take a lead role at the national level in managing water resources in the important areas of the Murray-Darling Basin, Lake Eyre Basin and the Great Artesian Basin;
at the State level, be the lead government agency for the policy, management and administration of the State’s water resources.
The Structure of the Department and its relationship with the Minister is shown in the following chart.
The net cost of services for the period 1 March 2000 to 30 June 2000 was $8 million and the Department received an appropriation of $10 million.
Subsection 31(1)(b) of the Public Finance and Audit Act 1987 provides for the Auditor-General to audit the accounts of DWR in respect of each year.
The audit program covered all major financial areas of activity 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.
DWR is reliant on other agencies to provide important administrative services such as payment of salaries and wages, accounts payable, asset recording and maintaining a general ledger. The major agencies providing these services are the Department for Environment and Heritage and the Department of Primary Industries and Resources. As a part of the conduct of audits for those agencies, consideration was given to the activities of DWR with the view of forming an opinion with respect to the financial statements and internal control.
During 1999-2000 specific areas of audit attention, at DWR and the agencies providing administrative services to DWR, included:
accounts payable
salaries and wages
revenue raising and receipting
property, plant and equipment
general ledger.
During the year a letter communicating the issues arising from the audit was forwarded to the Chief Executive. Details relating to the main issue contained in that letter are outlined in ‘Audit Findings and Comments’ hereafter.
As explained, DWR is reliant on the Department for Environment and Heritage and the Department of Primary Industries and Resources to provide important administrative services. Commentary regarding the general financial controls has been included in this Report under those respective agencies. No matters arose from those audits that were significant to DWR.
The Water Licensing System is used to record and manage licences and permits (and the conditions attached to these) issued in relation to the taking of water from prescribed watercourses. In addition, the Water Licensing System is used for the raising of water based levies that have been declared by the Minister in accordance with the Water Resources Act 1997. Where water based levies relate to a Catchment Water Management Board, DWR provides the Board with revenue raising, invoicing, collection and related administrative services.
Previous years’ audits of the Department for Environment, Heritage and Aboriginal Affairs have revealed a number of fundamental control weaknesses in the Water Licensing System and associated management systems that raised concern in relation to the reporting of reliable financial information relating to water based levies. These control weaknesses resulted in a qualified audit opinion being issued on the financial statements of those Catchment Water Management Boards where water based levy revenues were material.
A follow-up audit in July 2000 revealed that DWR was endeavouring to undertake an internal audit of water licences and reconcile all revenue raised for the 1999-2000 financial year back to validated licence data for each Catchment area. Audit considered these to be positive steps towards improving the reliability and accuracy of licence and levy information recorded on the Water Licensing System. However, at the time of follow-up the internal audit and reconciliation processes had not been completed and Audit was not in a position to be able to assess the objectives, scope and outcomes of the work being performed. Further, Audit noted that a number of control weaknesses remain in relation to the Water Licensing System and associated management processes.
The response from DWR to the above matters outlined the progress with respect to the internal audit and indicated the key areas for review were licensed water allocations in the South East and River Murray. In addition, the Department provided a Draft Interim Report on the reconciliation of Water Allocations and Water Based Levy Raisings.
In regard to the internal audit, aspects of the review were not completed at the time of this Report and Audit was therefore unable to appropriately assess the work undertaken. Consequently DWR’s financial statements have been qualified with respect to Catchment Water Management Board Levies included in the Schedule of Administered Items.
The impact of the limitation with the Water Licensing System on the Catchment Water Management Boards is discussed under that part of my Report.
During the course of the audit, it was revealed that certain assets have been identified by DWR since its establishment, but not recognised, as uncertainty exists over where control and ownership rests and the appropriate entity that should recognise them. DWR advised that it has had insufficient opportunity to progress work on identifying these assets as they had not been previously recognised by the former Department for Environment, Heritage and Aboriginal Affairs prior to the transfer. DWR further advised it has established an implementation plan whereby control and ownership of those assets will be identified. These assets will be valued and recognised where DWR is deemed to control those assets. Due to the potential significance of these assets to the financial statements, the Independent Audit Report has been qualified with respect to assets. An extract from the Independent Audit Report is provided below.
Note 2(e) to the financial statements describes that certain assets have not been brought to account as at 30 June 2000. Due to the potential significance of these assets, I am unable to form an opinion on the completeness of values ascribed to assets included in the Statement of Financial Position and any resultant depreciation that may impact on the operating result.
The system used to raise and collect water based levies has limitations with respect to the recording and accuracy of transactions. The Department for Water Resources has undertaken corrective action to address those limitations. That work was not complete at the time of this Report. Due to the unresolved limitations within the systems utilised in relation to water based levies, I am unable to form an opinion on the completeness of the revenue item ‘User fees and charges’ and related accounts receivable balance for such levies reported in the Schedule of Administered Items relating to the Catchment Water Management Board Levies.
In my opinion, except for the effects on the financial report of the matters referred to in the qualification paragraphs, 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 Australian Accounting Standards and other mandatory professional reporting requirements, the financial position of the Department for Water Resources as at 30 June 2000, the results of its operations and its cash flows for the year then ended.
As required by subsection 36(1)(a)(iii) of the Public Finance and Audit Act 1987, the audit of the Department for Water Resources 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 Department for Water Resources 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.