Shock report shows 481 people paid despite no longer being employed, employment budget blowouts of over $100m - welcome to the NSW public sector taxpayer money pit
NSW’s public sector is facing renewed scrutiny after the Auditor-General’s shocking new report that has uncovered widespread payroll errors, staffing oversights and heavy dependence on long-term contractors across major agencies. For HR professionals, the findings highlight structural weaknesses that continue to expose organisations to financial, operational and reputational risk.
Former employees still receiving pay
One agency continued paying 481 people who had already left the organisation. Some of those departures dated back to 2018. In six examined cases, overpayments totalled more than $429,000. One employee, who resigned in 2021, kept receiving pay for three years, adding up to more than $295,000.
These issues stemmed from slow or incomplete offboarding processes, delays in recording terminations and errors in updating payroll systems.
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Overtime blew a major hole in workforce budgets
Another agency suffered a large budget shock after overtime expenses surged well beyond forecast levels. Employee-related expenses overshot the budget by more than $100 million, with overtime making up over half of that figure. Poor monitoring and limited oversight were key contributors.
Excessive overtime is not just a budget problem—overreliance on extra hours can lead to burnout, WHS breaches and longer-term workforce fatigue.
Leave balances and payroll data still out of sync
The report also found continuing issues with leave management and payroll data integrity. Problems included mismatches between payroll reports and leave liabilities, missing or outdated leave records and insufficient oversight of excessive annual leave balances.
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These inconsistencies increase the risk of inflated liabilities, errors in financial reporting and exposure to fraud, particularly when employees with key control responsibilities do not take adequate breaks.
Contractors embedded in roles for years
Across the agencies reviewed, hundreds of contractors had been in their roles far longer than intended. More than 200 had been engaged for over five years, and one had continued for 15. Several were being paid at levels equivalent to senior public sector executives.
In some cases, recommended market reviews had not been completed, and approvals for high-rate extensions could not be located. One example involved a permanent employee who resigned and returned the next day as a contractor performing the same duties. What began as a short-term arrangement expanded into a multi-year engagement costing around $2 million.
Governance gaps in HR processes
The Auditor-General also highlighted weaknesses in governance frameworks that underpin HR and payroll operations. These gaps included insufficient controls over who can amend employee data, ex-employees still listed as bank account signatories, missing conflict-of-interest disclosures, outdated policies and incomplete fraud risk assessments.
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Such weaknesses leave organisations vulnerable to error, mismanagement and integrity risks.
Grant oversight affected by staffing issues
In one grant program worth tens of millions of dollars, delays in collecting and reviewing financial acquittal information made proper oversight difficult. Inefficient processes and staffing pressures contributed to incomplete or late reporting from service providers, increasing the risk of mismanagement.
The message for HR teams
The findings make clear that many agencies need stronger integration between HR, payroll, finance and governance functions. Key priorities include:
• improving the timeliness and accuracy of offboarding
• strengthening payroll controls and data quality
• closely monitoring leave and overtime
• tightening oversight of contingent labour
• ensuring policies, approvals and conflict-of-interest processes remain up to date
Read the report here
Without stronger systems and clearer accountability, agencies risk repeating the same issues year after year. The report serves as a warning that payroll and workforce governance are no longer back-office functions—they are core components of organisational risk management.
