A recent audit into 40 NSW government agencies has uncovered significant payroll management failures, including cases where hundreds of terminated employees continued to receive salary payments, some for years after leaving their roles.
The review identified 481 terminated employees at a single government agency who were still paid in the last financial year, despite some having resigned as far back as 2018. The agency involved has not been named.
Across six cases directly examined in the audit, a total of $429,000 in overpayments occurred. One former employee received more than $295,000 in salary payments between 2021 and 2024 after their role had ended.
The report found that delays in processing terminations and leave, along with other payroll errors, were the key contributors to these overpayments. The agency involved is now taking steps to recover the funds.
When questioned about the specific agency responsible, the Audit Office stated that the purpose of the report was to highlight risk areas across the public sector and declined to provide further details.
The auditor general’s report highlighted serious concerns about payroll governance and data management, stating:
“Weak controls over access to employee master data and the offboarding of terminated employees from payroll systems and as signatories on bank accounts can elevate the risk of salary overpayments, fraud and misappropriation of cash.”
The audit also found:
- Ineffective oversight of grants in one agency
- Missing conflict of interest declarations in others
- Inadequate fraud risk assessments, increasing the likelihood of fraudulent or corrupt activity going undetected
The report also drew attention to extensive use of contingent workers, workers engaged through third party suppliers for what are intended to be short-term arrangements. The audit found:
- 227 contingent workers had been in their roles for more than five years
- Some contingent workers earned more than senior executives
- 17 contingent workers were paid more than $550,000 in the last financial year
- An additional 37 workers were paid more than $400,000
While the report noted that high salaries may be justified in cases requiring specialist skills, it recommended detailed assessment and market evaluation to support such decisions.
Wages and employee-related expenses remain the NSW government’s largest cost. Following the removal of the public sector wage cap in 2023, employee expenses are projected to:
- Reach $50.3 billion in 2025-26
- Increase by 3.7% annually to $56.2 billion in 2028-29
