NSW Audit Office - Financial Reports - 2006 - Volume 4 - NSW Police

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					                                        NSW Police

AUDIT OPINION

The audit of the NSW Police financial report for the year ended 30 June 2006 resulted in an
unqualified Independent Audit Report.


KEY ISSUES

Death and Disability Scheme

From 23 June 2005, NSW Police provides death and disability insurance for police officers employed
after 1988. Police officers employed before 1988 have death and disability insurance.

Under the new scheme, NSW Police self-insure the partial and permanent disability risks. They are
in the process of establishing a corporate structure and governance arrangements to manage the
scheme.

All post 1988 police officers are insured against death and disability under the Crown Employees
(Police Officer Death and Disability) Award 2005. There are two components of coverage:

      death and total and permanent disability insured by First State Super Trustee Corporation
      partial and permanent disability self insured by NSW Police.

At 30 June 2006, the estimated scheme liability was $29.2 million.

Property Management Changes

The management arrangements for the NSW Police property portfolio altered for the second time in
as many years.

The success of the prior outsourcing arrangement cannot be determined due to the lack of
reporting on key performance indicators by the then service provider.

On 31 March 2006, the Minister for Police entered into a five-year contract with a private sector
entity to provide for property management services for NSW Police. The new contract includes
performance reporting and monitoring.

The Ministry for Police managed the outsourcing arrangements until 31 March 2006.

Police Property Services was established in April 2006. This new group is responsible for developing
and directing strategies for the identification, acquisition and disposal of property assets within the
NSW Police portfolio. The group is also responsible for providing property based strategic planning
and asset management.

Part Sale of the Sydney Police Centre (Repeat Issue)

During 2001-02, NSW Police agreed to sell part of the Sydney Police Centre. The sale is not
complete and NSW Police has not yet recognised a gain or loss on the transaction.

NSW Police believes the sale is not complete and is experiencing difficulties in transferring the
property titles at the Land Titles Office. In the meantime, the purchasers of the land are using the
property as though the transaction is finalised.

NSW Police assumed control of the sale from the Ministry for Police from 1 July 2006. It is
discussing the matter with the purchasers and hopes to complete the sale during 2006-07.

We first raised this matter in our 2001–02 audit.


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PERFORMANCE ISSUES

Risk factors for crime include unemployment, education standards and quality of housing. NSW
Police does not directly manage these risk factors, but it does participate in multi-agency
committees dealing with these matters.

Over the past few years, rates of crime against people and crimes against property have generally
fallen within NSW and nationally. Overseas research suggests that the following factors contribute
to falling crime rates:

       investment in private security measures
       more secure housing
       reduced availability of drugs and firearms
       police working more closely with the community.

NSW Police believe that community links are also crucial to their crime reduction strategies.

The crime rates on the following pages are largely derived from the Australian Bureau of Statistics.
The Bureau acknowledges that not all crimes are reported to or recorded by the police in the
various jurisdictions and this impacts on the comparability of recorded crime levels between States.
For example, NSW records incidents as crimes that some other jurisdictions may not.

The Bureau is working with Police jurisdictions to develop a National Crime Recording Standard to
improve comparability. In the meantime, care should be taken in interpreting the data below.

Crimes Against People

The trend for crime rates against people in New South Wales are compared to the national average
in the following table:

  Year ended 31 December                            2005             2004            2003            2002       2001


  Crime rate per 100,000 persons
  NSW (i)
  Homicide                                            4.4              5.7             7.3             4.9        6.0
  Armed Robbery                                      46.7             48.7            56.4            52.4       79.3
  Unarmed Robbery                                    75.9             73.9            93.8           100.9      123.0

  National average (ii)
  Homicide                                            3.8              4.3             4.8                5.0     5.5
  Armed Robbery                                      30.6             30.0            36.2               39.9    57.9
  Unarmed Robbery                                    52.0             52.2            63.0               67.0    79.1

   Source: (i)    NSW Crime Statistics and Research, NSW Recorded Crime Statistics 2005
           (ii)   Australian Bureau of Statistics 2006, Recorded Crime Australia 2005, Cat. No. 4510.0

Recorded crimes against people in New South Wales have reduced over the last five years, which is
consistent with other Australian states and territories. However, the rates are consistently higher
than the national average.




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The graph below shows the trends in recorded crimes against people for both armed and unarmed
robbery. This year, there was a marginal increase in unarmed robbery and a fall in armed robbery.

                                 NSW Crimes Against People (per 100,000 population)

             140
             120
             100
              80
              60
              40
              20
                  0
                              2001               2002               2003               2004                  2005
                                                   Year ended 31 December

                                                Armed robbery              Unarmed robbery

   Source:   Australian Bureau of Statistics 2006, Recorded Crime Australia 2005, Cat. No. 4510.
             NSW Crime Statistics and Research, NSW Recorded Crime Statistics 2005

Crimes Against Property

Crimes against property are the most frequent of all crime categories. The following table
compares the New South Wales rates with the national average:

   Year ended 31 December                               2005             2004            2003            2002       2001


   Crime rate per 100,000 persons
   NSW (i)
   Unlawful entry with intent                           1,146.7         1,273.0         1,477.2         1,680.1     2,014.3
   Motor vehicle theft                                    432.4           493.7           522.3           633.6       820.1

   National average (ii)
   Unlawful entry with intent                           1,004.6         1,127.0         1,321.9         1,490.7     1,675.5
   Motor vehicle theft                                    397.2           437.8           494.7           577.7       720.7

   Source: (i)        NSW Crime Statistics and Research, NSW Recorded Crime Statistics 2005
           (ii)       Australian Bureau of Statistics 2006, Recorded Crime Australia 2005, Cat. No. 4510.0

The rate of decline for crimes against property is consistent with the national average. Most other
Australian states and territories also experienced a decline.




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The graph below shows the trends in recorded crime against property for unlawful entry with intent
and motor vehicle theft. Both categories have declined over time.

                          NSW Crimes Against Property (per 100,000 population)

             2,500                                                                                          900
                                                                                                            800
             2,000                                                                                          700
                                                                                                            600
             1,500
                                                                                                            500
                                                                                                            400
             1,000
                                                                                                            300
              500                                                                                           200
                                                                                                            100
                 0                                                                                          0
                          2001               2002            2003             2004             2005
                                                Year ended 31 December

                          Unlawful entry with intent (LHS)               Motor vehicle theft (RHS)

   Source:   Australian Bureau of Statistics 2006, Recorded Crime Australia 2005, Cat. No 4510.0
             NSW Crime Statistics Research, NSW Recorded Crime Statistics

Crime Investigations

In 2005-06 NSW Police spent 26.4 per cent (25.8 per cent in 2004-05) of its net cost of services on
criminal investigations. Police effectiveness in this area can be measured by the proportion of
investigations finalised within 30 days of the offence becoming known.

                                       Proportion (%) of Investigations             Proportion (%) of Investigations
                                            Finalised in 30 Days                 Finalised in 30 Days that Involved an
                                                                                  Offender Being Proceeded Against
   Crime                             NSW     National NSW             NSW          NSW      National NSW            NSW
                                             Average Ranking         Ranking                Average Ranking        Ranking
                                    2005       2005   2005            2004        2005       2005    2005           2004


   Homicide                           62.8      64.2       4/6         6/6          90.0      93.0        4/4        6/6
   Robbery                            18.3      23.1       6/8         7/8          63.8      74.9        8/8        7/8
   Unlawful entry with intent          7.6       9.3       6/8         6/8          65.1      80.7        8/8        8/8
   Motor vehicle theft                 6.8      11.7       8/8         8/8          64.1      71.8        8/8        7/8
   Other theft                        12.0      14.9       7/8         6/8          86.5      85.2        3/8        2/8

   Source: Australian Bureau of Statistics 2006, Recorded Crime Australia 2005, Cat. No. 4510.0 (Companion Data)

The clearance rates in New South Wales are below the national average for most categories. There
have been some minor changes in results compared to other Australian states and territories in 2005.


CONTROL ISSUES

Annual Leave Liability (Repeat Issue)

The NSW Police annual leave liability continues to increase, reflecting higher accumulated leave
hours and wage rate increases. We have commented on this increasing provision for some years.

NSW Police will have difficulty in reducing the provision as it has become entrenched. The increase
in the provision has emerged over a number of years.



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The increase in annual leave liability might result in future funding, rostering and staffing
difficulties when employees take leave. During the year, NSW Police paid-out approximately
$3.0 million to reduce annual leave entitlements.

The change in the annual leave provision and accumulated annual leave hours over time is charted
below.

                          Annual Leave Provision and Accumulated Leave Hours


       180                                                                           6000
       160
                                                                                     5000
       140
       120                                                                           4000
       100
    $m                                                                               3000 hours
        80
        60                                                                           2000
        40
                                                                                     1000
        20
         0                                                                           0
                  1999      2000    2001   2002    2003     2004    2005    2006
                                            At 30 June

                  Annual leave provision $'000 (LHS)      Accumulated Leave Hours (RHS)

   Source:   NSW Police

A small portion of the increase over time can be explained by higher police numbers. Since 1999,
police numbers increased by 8.6 per cent whilst accumulated leave hours have increased by
91.7 per cent.

The challenge for NSW Police is to reduce the liability without interrupting frontline service
delivery. The reduction of annual leave liability is a key performance indicator for Local Area
Commanders.

NSW Police has advised us that they will continue to focus on reducing leave liability through better
planning and monitoring at Local Area Command level.

Overtime

Overtime hours remained constant in 2005-06, 1.0 million overtime hours at a cost of $32.6 million
(1.0 million hours and $29.8 million in 2004-05).

Corporate Services Efficiency Review

NSW Police has implemented a number of projects to achieve cost savings without interrupting
front line service delivery. We understand the projects will improve the efficiency of corporate
services. These projects will result in:

        modifications to application systems
        automation of manual processes and other technological advancements
        restructures
        changes to policies and procedures
        centralisation of functions.

Other

We identified minor opportunities for NSW Police to improve its internal controls and advised
management.


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COMPLIANCE ISSUES

We tested NSW Police’s compliance with:

      NSW Premier’s Department circular 2003-02 Electronic Information Security – Business
      Continuity Planning, and
      Treasury Guidelines and Policy Paper TPP04-01 NSW Government Procurement Policy.

NSW Police complied with these requirements.


OTHER ISSUES

Commissioner’s Confidence

Under section 181D of the Police Act 1990, the Police Commissioner has the power to remove
officers if he does not have confidence in their competence, integrity, performance or conduct.
The Commissioner lost confidence in 18 officers during 2005-06. Two of these officers have been
reinstated by the Industrial Relations Commission.

Alcohol and Drug Testing

There were 10 positive alcohol readings for police officers compared with nine the previous year.
The number of alcohol tests conducted was 7,757 (9,194 in 2004-05). Of these tests, 39 were
targeted, 23 follow-ups and the remainder were random.

During 2005-06, NSW Police conducted 22 (22) targeted drug tests, with three (two) returning
positive results. Of the 598 (513) random drug tests there was one positive result to amphetamine
type substances.

Court Cases and Costs Against NSW Police

NSW Police advised us that it uses databases of the Crown Solicitor’s Office and the Treasury
Managed Fund to manage its claims.

Contingent liabilities from legal claims lodged against NSW Police and pending court decisions
decreased slightly to $111 million at 30 June 2006 ($112 million at 30 June 2005). If a claimant is
successful, the settlement will be met by NSW Treasury Managed Fund.


FINANCIAL INFORMATION

Abridged Operating Statement

   Year ended 30 June                                                     2006            2005
                                                                          $’000           $’000

   Employee related                                                    1,608,203        1,494,466
   Other expenses                                                        484,231          446,433
   TOTAL EXPENSES                                                      2,092,434        1,940,899

   TOTAL REVENUE                                                          46,574           36,828

   Loss on sale of non–current assets                                      1,500             220
   Impairment Loss                                                           168             109

   NET COST OF SERVICES                                                2,047,528        1,904,400
   Government Contributions                                            2,026,901        1,919,420

   SURPLUS/(DEFICIT)                                                      (20,627)         15,020




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Net cost of services increased by $143 million largely due to an increase in employee related
expenses including the costs arising from the death and disability insurance scheme of
$40.3 million.

Abridged Balance Sheet

   At 30 June                                                               2006           2005
                                                                            $’000          $’000


   Current assets                                                          83,636            63,251
   Non–current assets                                                   1,259,153         1,163,843
   TOTAL ASSETS                                                         1,342,789         1,227,094

   Current liabilities                                                    349,575           185,805
   Non–current liabilities                                                215,492           310,508
   TOTAL LIABILITIES                                                      565,067           496,313

   NET ASSETS                                                             777,722           730,781



Non-current assets increased by $95.3 million mainly due to property, plant and equipment
additions of $116 million, revaluation increment of $68.0 million offset by deprecation expense of
$80.9 million.

Total liabilities increased by $68.8 million largely due to a $19.3 million increase in employee
liabilities and the death and disability insurance scheme liability of $29.2 million.

Program Information

NSW Police allocates revenue and expenditure to specific programs based on an analysis of roster
duties conducted during the year. The table below details the net cost of services on each program.

   Year ended 30 June                                         2006                          2005
                                                                           Net Cost        Net Cost
                                              Revenues    Expenses       of Services*    of Services*
                                               $’000       $’000            $’000           $’000


   Community support                          26,548     1,193,639       1,167,091        1,058,251
   Criminal investigation                      12,295      552,843         540,548          490,428
   Traffic                                      4,098      184,281         180,183          194,991
   Judicial support                            3,633       163,339         159,706          160,730
   Total all programs                         46,574     2,094,102       2,047,528        1,904,400

   * Includes gain/(loss) on sale of assets



POLICE ACTIVITIES

The primary objective of NSW Police is to work with the community to establish a safer
environment by reducing violence, crime and fear.

In terms of the Police Act 1990, the Commissioner is given responsibility for the effective, efficient
and economical management of NSW Police. In exercising these functions the Commissioner is
subject to the direction of the Minister for Police.

For further information on NSW Police, refer to www.police.nsw.gov.au




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