https://www.smh.com.au/national/nsw/dispute-over-rail-entity-dents-trust-between-nsw-treasury-and-watchdog-report-20220728-p5b5ed.html

The relationship between NSW Treasury and the government watchdog has been seriously dented by a stand-off over a controversial rail corporation set up to artificially inflate the state budget.

An assessment of Treasury’s dealings with the auditor-general over the corporation that now controls the state’s rail assets, including trains, says trust between the two agencies has been eroded by the long-running saga.

The Transport Asset Holding Entity controls billions of dollars worth of the state’s rail assets including trains and stations.

The Transport Asset Holding Entity controls billions of dollars worth of the state’s rail assets including trains and stations.Credit:Steven Siewert

“Damaged relationships will take some time to repair,” said the assessment by a former senior public servant, which was released by Treasury on Thursday. “Both parties agree trust has been dealt a blow.”

The Transport Asset Holding Entity (TAHE) has been the subject of intense criticism since a /Herald /investigation last year revealed https://www.smh.com.au/national/nsw/the-cover-up-of-a-financial-mirage-that-has-inflated-the-nsw-budget-and-may-put-rail-safety-at-risk-20210528-p57vy0.html it had been set up to shift billions of dollars of expenses off the NSW budget and into the new rail body to inflate the state’s coffers. It sparked a parliamentary inquiry into the rail corporation.

Auditor-General Margaret Crawford delayed signing off on the government’s financial accounts by months late last year due to major concerns about TAHE and, in February, accused Treasury ofobstructing its investigation https://www.smh.com.au/national/nsw/nsw-treasury-accused-of-cover-up-over-controversial-rail-corporation-20220209-p59uy7.html into the rail corporation.

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The assessment by former public service commissioner Stephen Sedgwick found that the time it had taken to establish TAHE arguably “took too long”, and that Treasury had committed to a position on the rail corporation before “developing a sufficiently detailed business case”.

“Treasury’s substantive engagement with the Audit Office on the accounting issues came too late for so significant and so complex a case,” he wrote.

Treasury relied extensively on consultants from KPMG in its handling of the rail corporation, which led to the auditor-general warning in February that agencies risked shopping for opinions to support their desired outcomes.

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While Sedgwick found no evidence of “forum shopping”, his report said that it was unclear whether all in Treasury were “sufficiently aware of the risks or of how blurred the lines became at times” between consultants and them being “part of team Treasury with an outcome to achieve”.

Shadow treasurer Daniel Mookhey said alarm bells would ring in the boardrooms of the world’s rating agencies when they learnt that the Audit Office had stopped trusting the NSW Treasury.

“TAHE is [NSW Premier] Dominic Perrottet’s trick to dupe NSW about the true state of our finances,” he said. “It’s blown up in the premier’s face. It’s blown up the budget too.”

Labor has promised to abolish TAHE https://www.smh.com.au/national/nsw/labor-promises-to-dismantle-state-s-scandal-ridden-rail-corporation-20220622-p5avnz.html and return control of billions of dollars’ worth of trains and other rail assets to NSW’s transport agencies if it wins government at the next state election.

Treasury said in a statement that it accepted all the recommendations in the report and was considering how best to implement them.

“We look forward to working with the auditor-general and her office to usher in a new era of deep engagement and professional trust between Treasury and the Audit Office,” it said.