The New South Wales Treasury sent 1,000 pages of documents to the state’s auditor general in the early hours of Christmas Eve, on the same day she was due to sign off on the government’s finances, according to a damning new report.
The NSW opposition has called for people within the state’s Treasury to lose their jobs after the auditor general, Margaret Crawford, accused the department of an “unnecessarily obstructive and difficult” bid to withhold key information about a controversial $40bn rail corporation late last year.
In her report into the state’s finances, released on Wednesday, the auditor took the dramatic step of slapping Treasury with an “extreme risk finding” to “significantly improve governance processes to ensure complete and timely sharing of information”.
It is the second damaging report from the NSW auditor’s office in two days, after Tuesday’s report into the government’s Stronger Communities Fund found 96% of $252m in grants had been distributed in Coalition-held seats.
On Wednesday, Crawford detailed events leading up to her long-awaited signoff of the state’s finances on Christmas Eve after a three-month delay caused by her concerns surrounding the controversial Transport Asset Holding Entity (Tahe), which holds $40bn in NSW rail assets.
Last month the Guardian revealed Crawford had warned that the government could be forced to spend another $4.1bn over the next decade to address “significant uncertainties” in relation to Tahe.
Crawford said that during the long negotiation over the state’s audits between July and December, Treasury provided the auditor with “late, unsophisticated, and inaccurate forecasts” that “sought to support the desired outcome of higher projected returns” from Tahe.
“This process of seeking ordinary representations from NSW Treasury’s management, that all key documents were made available to audit, was unnecessarily obstructive and difficult,” she wrote in the report.
“Before management signed the representation to declare they had shared all relevant information, they shared at least a further 34 megabytes of data, or 23 reports (1,023 pages), with the Audit Office, around midnight, the morning of audit signing.”
Crawford also revealed how she had considered taking the unprecedented step of issuing a qualified audit over the state’s finances until the government agreed to provide $1.1bn in additional funding to pay for a huge increase in fees paid to Tahe for access to the state’s rail assets.
The increase was confirmed in a heads of agreement deal signed on 18 December 2021 between Tahe and its “customers”, the state’s rail networks.
Labelling Treasury’s disclosures as “inadequate”, Crawford’s damning report said the challenges in completing the audit had been “extraordinary” and had “tested the constructive partnership between the Audit Office and NSW Treasury”.
“Our assessments were hindered by errors and omissions in information and models provided by NSW Treasury to demonstrate expected returns from Tahe, as well as a lack of timeliness and completeness in their responses to requests for documentation to support NSW Treasury’s proposed accounting of government’s contributions to Tahe,” she wrote.
Labor’s shadow treasurer Daniel Mookhey labelled the report the “most severe lashing of any government I’ve ever read”.
“It’s clear that government and Treasury were engaging in misleading and deceptive conduct as they raced to stop the Tahe from detonating the state’s budget,” he said.
“The tactics of withholding information, and providing the auditor general with misleading answers are despicable.
“Those responsible need to lose their jobs. The premier, the treasurer and the Treasury all have serious questions to answer about the integrity of their actions in the Tahe saga.”
The government established Tahe in 2015 as a way of transferring the state’s $40bn of rail assets out of the hands of the transport department and into a state-owned corporation.
The decision had significant benefits for the government’s bottom line. Because Tahe could lease the state’s rail assets back to service operators such as Sydney Trains, the government could classify funding to the corporation as “equity injections” which did not have a negative impact on the budget.
But under accounting rules, Tahe was required to show both that the entity remained entirely independent of the government and that it would turn a profit. In November, the auditor said “significant accounting issues” remained with the body, and delayed signing off on the state’s finances.
While the government has trumpeted her unqualified audit, Crawford again warned of significant uncertainties to the government’s budget bottom line because much of the $5.2bn needed to fund the Tahe over the next decade has not been signed off in the budget.
A parliamentary inquiry into Tahe is set to resume on Thursday, with the chair, Greens MP David Shoebridge, saying the auditor’s report had cut through the “smoke and mirrors” presented by Treasury.
“Just over a month ago the premier and the now former treasury secretary was telling parliament and the public that the concerns over Tahe’s finances were unfounded,” he said.
“Today we know that the concerns are worse than we could ever have suspected.”
The treasurer, Matt Kean, has been contacted for comment.
