WA’s Auditor General has raised concern about the terms on which DevelopmentWA acquires land from other government agencies in a report that otherwise commended improved financial controls.
Caroline Spencer expressed particular concern about agencies transferring land to DevelopmentWA at significantly reduced values compared to previously recorded amounts.
“These discrepancies significantly increase the risk of fraud, corruption or misconduct in relation to government land sales to third parties,” the Auditor General stated.
“It also gives the appearance, in the recipient entity, that these now proposed land developments are more profitable than they really are.”
In one case, the Housing Authority transferred land in Bentley to DevWA at an independent valuation of $2.65 million, based on DevWA’s plans for the land.
The same land had been in the Housing Authority’s books at $53.9 million, resulting in a big loss on sale.
In another case, the Public Transport Authority of WA transferred surplus land in High Wycombe to DevWA.
The land had a carrying value of $31 million but was transferred at $2.2 million, after Landgate valued the land based on DevWA’s intended use.
The Auditor General said the low valuation was incorrect as it assumed that a development application restricting the use of the land was in place, when in fact it was not.
In a third case, the Public Education Endowment Trust held land in Fremantle at a valuation of $6.9 million.
The former industrial land has been remediated and is part of DevWA’s Knutsford development.
After prompting from the Auditor General, the Trust recently obtained an updated valuation of $26.9 million.
The Auditor General’s report recommends that land assets should be transferred at the carrying value recorded by the transferring entity.
It also recommends that entities should clearly disclose in financial statements when land is transferred because of government decisions.
Further, government entities should verify the reasonableness and appropriateness of valuations performed by Landgate, particularly when there are significant movements in value or if valuations fall outside of expectations.
“Adopting this approach will provide transparency regarding site preparation costs and the actual financial impact on the State of the sale of public land assets,’ Ms Spencer said.
“Decision-makers as well as the community need visibility over any transfer, development and sale of publicly owned land to better understand the full costs and benefits, and to hold entities to account for achieving value for money outcomes.”
DevWA said parcels of land are normally transferred to it following a government decision and those decisions generally impose a designated change in land use.
That would result in a ‘constraint’ over the land, affecting its fair value.
DevWA has been approached for further comment.
The Auditor General’s concerns were included in an annual review of the financial statements, controls and key performance indicators of 141 of 144 state government entities.
The report found a continual improvement in the control environment and systems across the State sector, as well as in financial preparation and accountability.
Ms Spencer said the number of audit qualification matters in 2023-24 decreased from 37 at 19 entities to 26 at 16 entities, marking a two-year downward trend.
“It is a testament to what can be achieved when entities channel their focus, effort and resources into strengthening financial reporting and internal controls,” she said.
”We commend those entities that successfully addressed and removed prior qualifications.”
Ms Spencer said there was room for more improvement.
“The number of significant control weaknesses is pleasingly at a five-year low, however the number of qualifications is still too high, and too many entities continue to have repeat audit qualifications,” she said.
“Of particular concern are entities with three or more qualifications, as this points to broader control weaknesses and increased risks in delivering public service obligations and safeguarding the wealth of the State for all West Australians.”
