The new disclosure reports on the spending split between South Australian and non-South Australian businesses. It was necessary to modify the audit opinions for a significant number of agencies in relation to this new disclosure. We found issues with the approach taken sufficient significance that we did not consider the information disclosed was materially correct for those agencies. 

The new requirement presents challenges for agencies 

The new financial reporting requirement builds on the rules established under Treasurer’s Instruction 18 Procurement for procurements from February 2023.  

While new requirements are always challenging to respond to, the fact that around half of the agencies required to report this information were not able to do so in a way that was materially correct for 2023-24, despite putting in a significant amount of effort, indicates the complexity of this particular requirement. 

It is worth pointing out, however, that much of the work done in 2023-24 has the potential to benefit agencies in future as decisions made for ongoing contracts will not need to be reassessed, and processes undertaken for the first time this year will inform approaches within agencies for new arrangements they enter into. 

While agency approaches to the new requirement have differed, in general we have seen that an approach that is well structured, considers all the categories of agency expenditure that could possibly be captured by this requirement and then systematically works through these categories considering the population, types of spending, vendors and nature and value of the underlying arrangements, has been the most successful.

The nature of the disclosure requirement captures a very wide range of spending for potential inclusion. Starting with a process that considers the broadest possible population and then systematically working through it has been the most successful approach from our experience this year. 

Keeping a central record of all key decisions was also beneficial to the process this year, as it made updating information or responding to queries easier. Where documentation of the arrangements and conclusions made is clear and centrally held, it also has the potential to help in future years by removing the need to perform some of the same work again. 

The Department of Treasury and Finance has advised my Office that it plans to review the outcomes of this process for 2023-24 to inform the process in future. It has also advised us that it plans to help the agencies that will apply the new requirement for the first time in 2024-25 be well prepared for meeting the new requirement in 2024-25, noting that it will be able to use the experience from 
2023-24 to better inform the process.  

• examine the contracts 
• report on the probity of the process leading up to the awarding of the contracts.  

In October 2023, the SA Government commenced a competitive, single-phase procurement process for passenger transport in five regional contract areas. Consistent with the requirements of the PTA, we expect to report on this procurement in 2025.  

My predecessor reported in 2023 that the statutory threshold in the PTA to audit and report on the probity of the processes leading to contracts being awarded for passenger services is too low, and results in the inefficient use of audit resources. I share his view that the threshold should be markedly increased to be relative to other major government contracts. This will reduce the risk that matters warranting audit attention are displaced by outdated statutory limits. 

SAHMRI 2 proton therapy unit

The SAHMRI 2 project is a collaboration between the public and private sectors to establish Australia’s first proton therapy unit. The SAHMRI 2 project involves:

• developing a building that will house the proton therapy system, provide dry lab research and clinical trial facilities for the South Australian Health and Medical Research Institute (SAHMRI) and other A Grade commercial space for dry lab, clinical or office use
• purchasing a proton therapy system
• developing and operating a proton therapy unit.

SAHMRI is a not-for-profit health and medical research institute. It is not a public authority and I do not audit its accounts. Notwithstanding this, I consider the arrangements comprising the SAHMRI 2 project and the State’s involvement to be of public interest.

In 2018 the Commonwealth and SA Governments entered into an agreement under which the Commonwealth agreed to provide $68 million to the State to fund the purchase of a proton therapy system. The agreement requires the State to bear the risk if costs exceed $68 million (excluding exchange rate risk). The Commonwealth Government has paid the State the $68 million. 

The SA Government entered into a grant funding agreement with SAHMRI to transfer the $68 million of Commonwealth funding to SAHMRI to use to pay for a proton therapy system. The State has paid $45.8 million under this agreement. The State has also made other contributions to the project.

I intend to provide a status update on the SAHMRI 2 project in a separate report to Parliament this year that will include: 

• a summary of the project arrangements and the amounts the State has spent and committed to the project
• information on the financial, legal, commercial and operational exposures to the State from the project 
• how the SA Government is managing its exposures. 

Local government contract management review

We are currently progressing a review of contract management with two councils, focusing on areas such as risk management, performance management, contract variations, and contract extensions and renewals.

We found the following gaps in key areas:

• Strategic planning for specialist homelessness services does not reflect the current operating environment or targets for measuring success.
• No analysis being performed on current services to identify service gaps and determine funding required to support people experiencing or at risk of homelessness.
• A lack of direction on how services are to be prioritised during periods of high demand.
• Limited oversight of how service providers plan to achieve intended outcomes.
• Service contract design does not enable effective performance monitoring.
• Limited oversight and reporting on system and service outcomes and performance.

These gaps increase the risk that South Australians experiencing or at risk of homelessness will not receive the support they need to obtain or maintain sustainable housing and may experience housing insecurity for longer.

Steps are being taken to improve the management of homelessness services including implementing an outcomes measurement framework, improved governance and a new sector governance group to oversee the specialist homelessness services system.