State entities 2025

This report summarises the audit results of 241 Queensland state government entities, including the 22 core government departments. In this report, we also provide an overview of the ports and water sectors, entities and their results, major transactions, and activities in 2024–25.

Most entities’ financial statements are reliable

Most state entities’ 2024–25 financial statements are reliable and comply with relevant laws and standards. The Auditor-General qualified the audit opinion for the Queensland Police Service’s financial statements because it did not obtain the necessary approvals prior to entering a $116 million long-term lease arrangement.

From 2025–26, 9 Queensland Government corporations will commence sustainability reporting. This is the start of phased in reporting and auditing, which is required by the Corporations Act 2001. The reports will include information on the corporations’ climate-related governance, risks and opportunities, and emissions data.

Internal controls are generally effective, but core payroll and expenditure controls require attention

The systems and processes (internal controls) entities have in place to support reliable financial reporting are generally effective. Because they are so significant, we covered information systems controls in a separate report called Information systems 2025 (Report 6: 2025–26).

There has been increased turnover of board chairs and chief and senior executives, including directors-general. Effective attention to change ensures that benefits are achieved and helps to manage risks associated with continuity, culture, and operational impact.

All entities should ensure that core payroll and expenditure controls, such as separation of duties, review of pay runs, and reconciliations, are operating effectively and are supported by up-to-date procedures.

Entities that have strong controls reduce their exposure to fraud and error. Vendor-related frauds continue to occur in the public sector. Focus is needed to ensure that controls, such as independently checking the source of requests to change bank accounts, are in place.

Some entities continue to use non-disclosure agreements combined with ex-gratia payments for exiting employees. There are risks related to these arrangements when they are used frequently and without adequate policies and oversight.

Results of our focus on procurement activities

This year, we focused on internal controls for procurement activities and found deficiencies that require attention. Effective procurement processes facilitate value for money and integrity of decision making.

We recommended to entities that they improve:

• conflict of interest management, ensuring that conflicts are identified and managed
• governance and management of procurement processes
• contract oversight and management
• accuracy of information published on the Open Data Portal.

We do not make any new recommendations in this report. However, during our audits we reported internal control deficiencies directly to individual entities covered by this report.

Further action needed on prior year recommendations

In prior years, we have made recommendations to address weaknesses in information and technology controls. We have found that the security of information systems has improved, but we still found control deficiencies that require further action.

Our previous recommendations remain relevant, and we have included further details relating to these in our report Information systems 2025 (Report 6: 2025–26).

We have included a full list of prior year recommendations and their status in Appendix E.

Reference to comments

In accordance with s.64 of the Auditor-General Act 2009, we provided a copy of this report to relevant entities. In reaching our conclusions, we considered their views and represented them to the extent we deemed relevant and warranted. Any formal responses from the entities are at Appendix A.

In this report, we analyse the results of financial audits and identify learnings for all Queensland state government entities.

Figure 2A summarises the entities.

Names of entities

In Appendix F and Appendix J, we provide detailed listings of entities grouped by current ministerial portfolios and using the current names of the departments as of the November 2024 machinery of government changes. In Appendix D, we provide further information on the machinery of government changes.

Specific sectors and information systems

We prepare separate reports on certain sectors (such as energy and health) in which we report on our assessment of the financial reporting and internal controls of the sectors. This year, we have also prepared a report on information systems controls. This recognises the collective need across government for more focus on the security of information. These reports can be found on our website at www.qao.qld.gov.au/reports-resources/reports-parliament.

Departments

In this report, we use the term ‘core departments’ to refer to those gazetted as departments under the Public Sector Act 2022, as shown in Figure 2B. They are responsible for most public services provided by departments. As our report focuses on the audit results for 2024–25, we refer to the 22 core departments (referred to as departments in this report) that existed during that period. This includes the Department of Energy and Climate that was abolished under machinery of government changes in November 2024.

The other 6 departments were established under the Financial Accountability Act 2009. These departments are the Electoral Commission of Queensland, Legislative Assembly of Queensland, Office of the Governor, Office of the Inspector-General of Emergency Management, the Public Sector Commission, and the Public Trustee of Queensland.

How we present information in our dashboards

The Queensland Audit Office’s dashboard, www.qao.qld.gov.au/reports-resources/qao-queensland-dashboard, brings together important information about the finances and services of Queensland state and local government entities. In doing so, it uses 3 common ways to divide the state into regions:

• local government areas
• statistical areas – used by the Australian Bureau of Statistics and by state entities to collect and report on information, including the state budget
• hospital and health service areas.

This allows users to search by an address and identify the services and the financial results for their local area, including for councils, education, health, water, and electricity.

The following 2 data dashboards are also available on our website:

• Water data visualisation dashboard – this includes drought status, primary industries, and the total capacity and storage level of water storage facilities, where publicly available
• Grants data visualisation dashboard – this explores grants paid by the Queensland Government, either by local government area or by funding agency. This interactive tool uses public information available on the Queensland Government Open Data Portal to summarise the number and value of grants paid. It also categorises grants into funding uses, recipient types, and funding agencies.

This chapter provides an overview of our audit opinions for Queensland state government entities.

Chapter snapshot

Audit opinion results

As at 30 November 2025, we issued unmodified opinions for all state entities except for 5 entities outlined below.

An unmodified opinion means the results in the entity’s financial statements can be relied upon, as the financial statements were prepared in accordance with the relevant legislative requirements and Australian accounting standards.

All departments and most other entities (86 per cent of all entities) had their audit opinions certified within their legislative deadlines (2023–24: 88 per cent).

Figure 3A summarises the audit opinions issued for state entities for their 2024–25 financial statements, and Appendix F provides further details. In Appendix K, we provide a list of entities for whom audit opinions have not yet been issued.

In addition, we issued 12 unmodified opinions for entities audited by arrangement, meaning audits outside of the Auditor-General’s mandate.

Modified audit opinions – non-compliance or insufficient supporting information

We issued 5 modified opinions in 2024–25 (2023–24: 7). We do this when financial statements do not comply with the relevant legislative requirements and Australian accounting standards and as a result, are not fully accurate and reliable. There are 3 types of modified opinions: qualified, adverse, and disclaimer.

Of the 5 modified opinions we issued, we:

• qualified 4 opinions, which we do when the financial statements comply with relevant accounting standards and legislative requirements, except for a specified area. These qualifications related to:
  • Queensland Police Service for a failure to comply with prescribed requirements related to a lease arrangement, by not obtaining the necessary approvals prior to entering the contract
  • water entities not being able to provide sufficient evidence to support the recorded value of property, plant and equipment at Bones Knob Water Board, Ingie Water Authority, and Kaywanna Bore Water Board
  • Bones Knob Water Board’s inability to prove the existence of property, plant and equipment, and intangible assets, such as internally generated software and the recoverability of trade debtors.
• disclaimed the opinion for Bollon West Water Authority, which means we were unable to express an opinion as to whether the financial statements complied with the requirements of the Financial and Performance Management Standard 2019 or the minimum reporting requirements published by Queensland Treasury.

Appendix F lists the details of the entities that received modified opinions.

Queensland Police Service did not comply with approval requirements

In 2023–24, Queensland Police Service (QPS) did not comply with the prescribed requirements in relation to establishing and keeping accounts. These prescribed requirements set out the processes and approvals required for certain transactions of public sector entities.

QPS leases buildings and equipment to enable it to deliver its services. In October 2023, QPS became legally bound to a long-term arrangement on a property without obtaining the approvals required under the Financial and Performance Management Standard 2019 and the Queensland Leasing Approval Policy for Public Sector Entities.

Commitments relating to the arrangement total $116.3 million over 15 years. Payments commenced in August 2024 and QPS commenced including the arrangement in its 2024–25 financial statements. QPS did not disclose this lease arrangement to us during our 2023–24 audit.

The value of this arrangement as at 30 June 2025 is reported as a right-of-use asset of $65 million and lease liability of $68.5 million. A right-of-use asset represents a right to use an asset during the lease term, while the lease liability reflects QPS’s obligation to make lease payments over that period. The total commitment is larger than the asset and liability because they are discounted to represent today’s value.

By not obtaining the necessary approvals, QPS did not meet the requirements for keeping financial records that correctly record and explain its transactions and account balances to enable the preparation of a true and fair financial report. In response, QPS has committed to improve its policies and procedures for procurement and leasing.

Compliance with prescribed requirements: considerations for departments and statutory bodies Entities must comply with a wide framework of legislation, standards, and whole‑of‑government policies that govern financial management and the preparation of financial statements. Key instruments include: Financial Accountability Act 2009 Statutory Bodies Financial Arrangements Act 1982 Financial and Performance Management Standard 2019 (FPMS) including policies prescribed under it, including Financial Reporting Requirements Queensland Procurement Policy Queensland Leasing Approval Policy for Public Sector Entities Project Commencement Approval Policy. In our document Leading accountability – Governance (www.qao.qld.gov.au/reports-resources/better-practice/leading-accountability-governance), we: include an appendix that identifies the key FPMS requirements and the relationships between those requirements and other documents and guidance explain that all statutory bodies are established and operate under the provisions of their own enabling legislation. The enabling legislation typically sets the purpose and specific powers of the agency. Applying prescribed financial reporting requirements goes beyond meeting minimum obligations. It depends on effective structures, processes, and monitoring controls, supported by audit committees that provide independent challenge, assurance, and oversight to reduce reporting risk and strengthen accountability.

Opinions with an emphasis of matter

We included an emphasis of matter in our audit reports on 39 financial statements (2023–24: 40). We do this to highlight an issue we believe the users of financial statements need to be aware of. It does not change the audit opinion, meaning the financial statements are reliable.

This year, the emphases of matter were to highlight:

• 32 entities that only applied certain accounting standards in the preparation of financial reports because the financial reports were only of interest to a small group of users
• Queensland Hydro Pty Ltd, which faced uncertainty regarding its future direction and funding
• 3 entities (the Department of Energy and Climate, Silkwood Drainage Board, and Ingie Water Authority) that had either ceased operations or were likely to be dissolved in the coming year
• 3 entities (Endpoint IQ Pty Ltd, QIC Infrastructure Portfolio No. 2 Trust, and QIC Diversified Fixed Interest Fund) that faced uncertainty regarding their ability to pay their debts as and when they fall due, and that only applied certain accounting standards in the preparation of financial reports because the financial reports were only of interest to a small group of users.

Opinions not yet issued

In Appendix K, we list those entities whose audits were not yet complete at the date of this report. These are small entities, and most are water boards, water authorities, or river improvement trusts that did not meet the legislative deadline of 31 August. They have done the same in previous years.

Finalisation of overdue financial statements

When we tabled State entities 2024 (Report 11: 2024–25) in April 2025, 23 state entities had outstanding financial statements from prior years. As at the date of this report, of those 23 entities:

• 5 have had unmodified audit opinions for these financial statements (refer to Appendix J)
• 4 are still outstanding for 2023–24 (refer to Appendix K)
• 14 are still outstanding from 2015–16 to 2022–23 (refer to Appendix K). Of these, the audit opinion for one water authority has been outstanding since 2015–16, and one for a river improvement trust since 2017–18.

We also include in Appendix K the 18 remaining financial statements that entities have not completed for the 2024–25 financial year.

Other audit certifications

Appendix G lists the other audit and assurance opinions we issued, including:

• those requested by entities – to provide assurance over internal controls (systems and processes) at shared service providers, that deliver payroll, accounts payable, and information technology services to entities
• to meet reporting requirements for grant agreements (funding from the state and federal governments) and regulatory information notices – which the Australian Energy Regulator uses to collect information from energy distribution entities to decide how much these entities can earn
• to meet compliance requirements under legislation, including those for Australian financial services licences. Certain entities must hold a financial services licence to issue or manage financial products or deal in certain investments.

Entities exempted from audit by the Auditor-General

This year, 9 Queensland state government entities were exempted from an audit by the Auditor-General (2023–24: 9). Some are foreign-based controlled entities over whom the Auditor-General has no jurisdiction. For others, the Auditor-General assessed the entities as small and of low risk to the financial position of the Queensland Government as a whole.

These exempt entities are still required to engage an appropriately qualified person to audit their financial statements. Appendix H lists the reasons for their exemptions and the audit opinions they received.

Entities not preparing financial statements

Not all Queensland public sector entities prepare financial statements. This year, 180 entities were not required, either by legislation or the accounting standards, to prepare financial statements (2023–24: 146). We have identified them in Appendix I.

Timely tabling of annual reports

The average time ministers took to table annual reports increased by 7 days from last year, as shown in Figure 3B. Earlier tabling deadlines, due to the October 2024 state election, reduced the average time between certification of financial statements and tabling reports by one week compared to previous years.

Twelve per cent of annual reports were tabled on the final tabling day. Earlier tabling of annual reports improves transparency as it provides stakeholders and the public with current, relevant information to enable informed decision-making.

Preparing for upcoming financial reporting changes

Financial reporting standards continue to evolve, and there are 3 new standards to be considered by reporting entities in future years. Climate-related reporting requirements will start to impact state entities, with 9 state owned companies to prepare a sustainability report for the 2025–26 financial year, for the first time. There is also a new accounting standard for insurance applicable from 2026–27, along with changes to how financial statements are structured and presented from 2027–28.

Changes to climate-related reporting from 2025–26 onwards

Nine Queensland state owned companies will prepare a sustainability report for 2025–26 in accordance with the Australian Accounting Standards Board’s AASB S2 Climate Related Disclosures. This report will disclose information about climate-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, its access to finance, or cost of capital.

The climate-related financial disclosures aim to provide transparency and comparable information to stakeholders and will be prepared alongside existing financial reporting requirements.

The Corporations Act 2001 requires certain companies to prepare sustainability reports on a phased in basis. Figure 3C details the criteria for when the reporting period starts for different company types and sizes. As mentioned, 9 state entities currently meet the Group 1 requirements. Another 8 entities are forecast to meet the Group 3 requirements.

In 2024–25, some entities undertook readiness assessments on their progress towards their first sustainability report. Entities reviewed their governance procedures and updated board and sub‑committee charters. Many entities also refined their processes, reviewed their controls, and tested their estimation methodology for calculating emissions.

This year, we published advice on how reporting entities can prepare for the new climate-related financial disclosures standard: www.qao.qld.gov.au/blog/how-reporting-entities-can-prepare-new-climate-related-financial-disclosures-standard. In this blog, we look at the new climate-related disclosure standard in more detail, and the key focus areas for reporting entities. We also provide information to help support entities’ preparation, including a check and challenge list of questions to help kick-start entities’ thinking and planning.

Climate-related reporting: considerations for governance boards and audit committees Where an organisation has identified climate-related risks and opportunities, governance boards should be considering the following: physical risks, arising from rainfall variability, extreme weather, rising seas, and extreme heat transition risks, including policy, legal, technological, regulatory, and financial changes arising from efforts to transition to a lower carbon economy. All audit, risk, and governance committees should consider how their entities will report on and control their climate-related risks and opportunities. Governance boards for entities reporting under the Corporations Act 2001 should ensure they have taken reasonable steps to understand the processes their entities are undertaking to prepare compliant climate-related financial disclosures.

In 2026, we will perform limited assurance engagements over the 9 Queensland state entities preparing sustainability reports. In this type of engagement, we will express an opinion as to whether anything has come to our attention that would cause us to believe the climate information is materially misstated.

We will apply a phased approach to assurance over sustainability reports, moving to reasonable assurance from 1 July 2030. This level of assurance is higher than limited assurance. For reasonable assurance engagements, we will express an opinion as to whether we were able to obtain sufficient appropriate evidence to conclude that the climate information is free from material misstatement.

Queensland Sustainability Report

Queensland Treasury is considering how these sustainability standards might impact existing whole‑of‑government reports, including the Queensland Sustainability Report. The Queensland Sustainability Report is not currently prepared in accordance with the Australian Accounting Standards Board’s AASB S2 Climate-related disclosures standard.

Queensland’s departments and statutory bodies are not currently required to prepare individual sustainability reports.

Other financial reporting changes

Changes to presentation and disclosure in financial statements from 2027–28

AASB 18 Presentation and Disclosure in Financial Statements introduces a major overhaul to how financial statements are structured and presented in Australia. It replaces parts of AASB 101 and requires entities to classify income and expenses into 5 categories: operating, investing, financing, income taxes, and discontinued operations, and to include 2 new mandatory subtotals – operating profit or loss, and profit or loss before financing and income taxes.

The standard also strengthens how information is grouped together or separated and when it must be shown in the primary financial statements versus the notes to support the statements. It will apply to for-profit state entities from 1 July 2027 and not-for-profit state entities from 1 July 2028.

Proposed relief currently under consideration by the Australian Accounting Standards Board would, if approved, largely restrict these changes to for-profit public sector entities, and possibly universities, with minimal or no changes to not-for-profit state entities or whole-of-government financial statements prepared under AASB 1049.

Insurance standards – some entities are also preparing for a new accounting standard on insurance

A new accounting standard, AASB 17 Insurance Contracts, will affect some Queensland state entities that provide insurance services, such as WorkCover Queensland and the Queensland Building and Construction Commission. The standard is intended to combine all existing insurance standards into one. It also introduces changes to how entities recognise and measure insurance contracts. This standard will apply to the public sector from 1 July 2026.

Entities are at different stages of assessing the impact, which goes beyond accounting adjustments. It will also affect how financial statements are presented, and it may require reviews of existing systems to ensure they are adequate. Preparation is crucial, as the standard requires comparative information for the 2025–26 financial year to be presented in the 2026–27 financial statements.

WorkCover Queensland is preparing for AASB 17 by updating systems, actuarial models, and disclosures.

The Queensland Building and Construction Commission is assessing AASB 17 impacts, and reviewing reporting systems and disclosures to ensure compliance under its regulatory framework.

Queensland Treasury is working with impacted entities to identify any transitional accounting adjustments to existing reported balances in the whole-of-government financial statements as at 1 July 2026, and any changes in measurement that may apply to future years. 

Queensland Government’s 2024–25 consolidated financial statements

The Financial Accountability Act 2009 requires the Treasurer to prepare annual consolidated financial statements for the Queensland Government. These financial statements are published in the 2024–25 Report on State Finances of the Queensland Government.

On 15 October 2025, the Auditor-General issued an unmodified audit opinion on the Queensland Government’s 2024–25 consolidated financial statements, which means the financial statements can be relied upon. In addition, they were completed and certified nearly 2 months earlier than last year.

This year, our analysis of the financial performance and position of the state’s finances is reported in our report Managing Queensland’s finances 2025 (Report 10: 2025–26).

This chapter features an analysis of some of the major transactions and activities within public sector agencies in 2024–25. We also provide an update on the state’s interest in the Queen’s Wharf project. Major investments of the state are discussed in our report Managing Queensland’s finances 2025 (Report: 10: 2025–26).

Chapter snapshot

Grant expenditure is increasing and expected to grow

Grant expenditure for departments increased by $691.2 million (12.4 per cent) between 2024 and 2025 and is expected to continue to grow, as shown in Figure 4A. In 2024–25, most grant expenditure was for training and skills, housing, early childhood education and care, and assistance to local government authorities.

Government agencies typically provide grants in various forms, including contributions, subsidies, incentives, donations, debt forgiveness, rebates, and/or other funding arrangements. While government grants help achieve government objectives and outcomes, they can carry risks if they lack clear objectives, are overly complex, or are not adequately overseen.

In future years, we will be undertaking a program of work over selected entities to assess the effectiveness of their grant administration and management practices. Our insights into how grants are planned, assessed, approved, and acquitted will be included in a future report to parliament.

In addition to the above, this year we have published guidance on designing and delivering better grant programs: www.qao.qld.gov.au/blog/designing-delivering-better-grant-programs. 

We also continue to publish our interactive Understanding grants dashboard: www.qao.qld.gov.au/understanding-grants. It can be used to explore and compare information on government grants in Queensland by local government area and funding agency. It also includes additional information relevant to understanding the local context for specific grants.

Increase in contractor and consultant spending

Spending across the total state sector on contractors and consultants increased by $553 million in 2024–25 to $4.3 billion, highlighting the continued importance of achieving value-for-money outcomes. Total state sector refers to the Queensland Government as a whole, covering all departments, statutory bodies, and government owned corporations, reported on a consolidated basis.

Figure 4B shows the contractor and consultant expenses since 2020–21.

Historically, more than half of the contractor and consultant expenses are for construction and professional, scientific and technical services.

On 1 July 2025, Queensland Government Consulting Services (QGCS) was established as a division of the Queensland Treasury Corporation. It will provide consulting services to government departments, focusing initially on strategy, policy, and advisory related consulting services.

Increased costs to community infrastructure from 2025 weather events

As the frequency and severity of disaster events has grown over the past 4 years and supply chain costs have increased, Queensland’s community infrastructure is being repaired more often and at higher cost.

In 2024–25, Queensland faced bushfires, storms, monsoonal rains, and a cyclone, with severe weather damaging homes, roads, and communities across the state. 73 of Queensland’s 77 local government areas activated support under joint federal–state Disaster Recovery Funding Arrangements, with recovery and resilience programs now estimated to exceed $3.6 billion. Most of the payments are made by the Queensland Reconstruction Authority (QRA) and they are expected to increase further in 2025–26.

Figure 4C summarises actual grant expenses and disaster events for 2021–22 to 2024–25, and budgeted expenses for 2025–26.

Entities responsible for essential public assets (for example, infrastructure) may receive disaster recovery funding to reconstruct these assets when damaged by disasters. Strong asset management practices support these entities’ ability to prioritise reconstruction, invest in resilience measures, and manage all costs of an asset throughout its life.

In 2025, we published advice on what Queensland public sector entities should consider when assessing the impact of these events on their financial statements: www.qao.qld.gov.au/blog/assessing-impact-natural-disasters-your-financial-statements. In this blog, we provided practical information and advice on what entities need to do and think about if a disaster has affected the condition of their assets.

If a disaster affects asset condition, entities should promptly assess damage, involving asset managers or engineers, to determine whether assets need repair, replacement, write-off, or impairment, and reassess useful lives and valuations. They should document assumptions, distinguish between capital and operating costs, and ensure appropriate accounting and disclosures.

Managing the impact of changes to senior leadership

Those charged with governance, such as boards and executives, and directors-general within state entities, are responsible for the overall governance of entities. They set the strategy and risk appetite, monitor an entity’s performance, and ensure their entities conduct themselves in an accountable and transparent manner.

This year, in assessing risks to governance controls, we reviewed the changes to those charged with governance at state entities.

Between 1 July 2024 and 31 October 2025, around one quarter of all statutory body board members and chair roles were newly appointed. For government owned corporations the level of appointments was higher with almost all board chairs and 76 per cent of board roles being new. For departments, 13 director-general appointments were made across the 28 departmental entities.

Changes to those charged with governance provides an opportunity for new ideas and changes in strategic focus. Some of the changes in leadership occurred before the end of their expected terms. As a result, entities need to manage the changes effectively to minimise impacts and risks associated with loss of corporate knowledge and continuity.

Our previous report on Appointing and renewing government boards (Report 17: 2021–22) assessed the processes that entities use to renew and appoint board members of Queensland Government entities. This report contains better practice principles for appointing members to boards. Some key recommendations for the appointment of board members from the report were for the Department of the Premier and Cabinet to:

• collect consistent information on the characteristics of all people appointed to boards to allow it to analyse the diversity of members and report publicly on how boards reflect the diversity in the broader community
• develop, in collaboration with Queensland Treasury and relevant departments, a whole-of-government overarching framework – aligned to better practice as outlined by the ASX Corporate Governance Council and the Australian Institute of Company Directors – for the appointment process for large boards
• evaluate the effectiveness of the Queensland Register of Nominees database to readily identify people with the skills needed
• set fair and competitive remuneration rates for board members, commensurate with size, complexity, and responsibility.

Queen’s Wharf development largely completed

Queen’s Wharf is a multi-billion-dollar integrated resort development project. It includes a new casino, hotels, public spaces, and residential apartments. The state entered into a development agreement with Destination Brisbane Consortium (the consortium) for this project in November 2015.

The consortium provided the state with cash and non-cash consideration (infrastructure assets and maintenance services) in return for the right to develop and operate the precinct. The Department of Housing and Public Works (DHPW) is the owner of most of the land and buildings within the Queen’s Wharf Precinct.

The new casino opened on 29 August 2024, and on this date, DHPW entered into several long-term, 99‑year leases with the consortium. The leases transferred control of specific land and heritage buildings – $402 million in land and $21 million in buildings – within the precinct from DHPW to the consortium.

During the year, DHPW removed these assets from its books and, in exchange, now recognises:

• the previously deferred cash ($71 million) that was received up front as part of the original deal, but was unable to be recognised until the project was completed
• public infrastructure assets ($265 million in total), including the Neville Bonner Bridge
• an intangible asset ($76 million), reflecting the contractual right to future maintenance services over certain public spaces in the precinct.

As at 30 June 2025, there remains a liability of $32 million relating to the cash received for the freehold land for the uncompleted residential project within the precinct. When legal title to the remaining freehold land is transferred, the remaining liability will be recognised by DHPW. This is not expected to occur until 2030.

In addition to the above arrangements, on 19 September 2024, DHPW also entered into lease agreements with Star Entertainment QLD Limited (Star). These leases are for 99 years and transferred control of several assets, including the Treasury Building (the old casino building), from DHPW to Star. On the same date, Star transferred its interest in the Treasury Building lease to Griffith University, making Griffith University the tenant under the 99-year lease. Griffith University is currently refurbishing the building’s fit out to open a new Brisbane CBD campus in 2027.

Internal controls are the people, systems, and processes that ensure an entity can achieve its objectives, prepare reliable financial reports, and comply with applicable laws. In this chapter, we report on the effectiveness of these controls at Queensland’s state entities and we identify areas of focus in which they need to improve. This report excludes analysis of information system deficiencies, which we cover in Information systems 2025 (Report 6: 2025–26).

Chapter snapshot

Nearly half of all internal control deficiencies relate to procurement and payroll

We assess whether the internal controls entities use to prepare financial statements are reliable. We report any deficiencies in the design or operation of those to management for their action. The deficiencies are rated as either:

• significant deficiencies, which are those of higher risk that require immediate action by management
• deficiencies, which are those of lower risk that can be corrected over time.

Overall, to the extent that we tested them, we found the internal controls state entities have in place to ensure reliable financial reporting are generally effective, but can be improved.

Figure 5A shows the types of deficiencies we have identified across state sector entities in our audits this year.

More than 200 internal control deficiencies were reported across the state entities in 2024–25, with procurement and governance accounting for the largest concentrations. Most deficiencies were new in 2024–25 (153 in total), while 53 remain unresolved from prior years. Of the 53 unresolved significant deficiencies and deficiencies, 40 per cent are long-standing, highlighting the need for timely action to address identified control deficiencies in key financial processes.

In addition to the deficiencies shown in Figure 5A, we identified and reported a further 357 information systems-related deficiencies to management. Of these, 225 were new significant deficiencies and deficiencies in 2024–25 and 132 were unresolved from prior years. Information systems control weaknesses continue to be the most common source of main deficiencies. As noted earlier, these matters are discussed separately in Information systems 2025 (Report 6: 2025–26).

Procurement and contract management processes

We audit procurement and contract management processes and controls, with a focus on the appropriateness of procurement methods, decision making processes, and whether conflicts of interest are declared and managed.

The focus resulted in new control deficiencies in 3 areas of procurement, as shown in Figure 5B.

The 2 most common issues related to the use of the Open Data Portal – a tool for publicly released government data – and managing conflicts of interest, with the following significant deficiencies raised this year:

• conflict of interest management: an entity did not effectively identify, declare, or manage conflicts of interest, leading to non-compliance with procurement guidelines and raising concerns about the integrity of procurement decisions
• governance and frameworks: an entity lacked robust procurement and contract management frameworks, including clear policies, evaluation panel structures, and documentation processes aligned with the Queensland Procurement Policy 2023
• procurement and contract oversight: an entity lacked effective oversight of its procurement – failing to justify single-supplier use, monitor contracts, or ensure value for money. These gaps create a risk of inefficient spending and poor accountability
• Open Data Portal and transparency: an entity did not comply with Queensland Government contract disclosure requirements, as contracts over $10,000 were not consistently published on the Open Data Portal within the required 60-day time frame.

The new Queensland Procurement Policy 2026 will be effective for state entities as of 1 January 2026. Entities for the 2025–26 financial year will need to ensure compliance with the correct procurement policy at the time of procuring goods or services.

Governance

‘Governance’ refers to the framework of rules, systems, and processes that entities abide by. It ensures that public resources are managed effectively and services are delivered in line with expectations.

This year, the most frequent type of issue we raised related to the governance of special payments, which are ex-gratia expenditure or other payments not under a legal contract. Issues were also raised in relation to the management of conflicts of interest.

Special payments made to employees

Public sector entities sometimes make special payments, including ex-gratia payments. An ex-gratia payment is made at the discretion of the entity, without any legal or contractual obligation to do so. In 2024–25, 39 state entities spent $17.6 million on special payments (2023–24: 54 entities spent $19.6 million).

All state sector entities, except for government owned corporations, must include in their annual financial statements the total amount for each type of special payment (for example, ex-gratia) and a description of the nature of all special payments greater than $5,000.

We identified significant deficiencies and deficiencies in the control processes related to special payments and reported these to the relevant entities. Key themes include:

• lack of formal policy implemented to establish a framework for determining special payments
• insufficient documentation to support special payments
• no formal approval for special payments.

Formal policies are needed to define the criteria for making special payments, along with a documented process for their approval, to support the appropriate spending of public funds.

Over 18 per cent of special payment issues we raised during 2024–25 related to the use of a deed of release – also known as a non-disclosure agreement – in conjunction with special payments to employees. While there are situations where non-disclosure agreements might be necessary to protect sensitive information or privacy, it is important to ensure that they are used only in appropriate circumstances and that there is appropriate oversight.

Management of conflicts of interest

Governance includes identifying and managing potential, actual, or perceived conflicts of interest. This process supports maintaining integrity, trust, and accountability in government decision-making.

In Queensland, the Public Sector Act 2022 and the Code of Conduct for the Queensland Public Service require employees to:

• disclose conflicts of interest, whether actual, perceived, or potential
• take reasonable steps to manage or remove them.

To ensure transparency and accountability, it is essential that all Queensland state entities keep their conflicts of interest policies and processes for managing conflicts of interest up to date. This includes ensuring documented strategies to identify, address, and manage conflicts of interest remain current.

Where conflicts cannot be appropriately managed, it is expected that employees exclude themselves from any decision-making regarding those matters involving perceived or actual conflicts of interests.

Expenses and expense management

Operating expenditure for the total state sector has increased by approximately 3 per cent to $33.8 billion. Internal controls over expenditure help to ensure that public funds are used appropriately and in accordance with approved budgets and policies.

The main areas of expenditure control deficiencies and their impact are shown in Figure 5C.

Payroll

Across the state sector there are 305,823 full-time equivalent employees (4.9 per cent more than last financial year) with employee expenses representing 35 per cent of the total expenses (up 8.75 per cent on last financial year).

Entities establish controls over employee processes and payments, which we test as part of our audits of the financial statements. Figure 5D shows the most common areas of payroll deficiencies we have identified in the past 2 years.

Of the payroll deficiencies, 57 per cent relate to weak pay run processes and controls (how entities calculate, record, and distribute pays). Entities need to more effectively review payroll reconciliations and key pay run reports, such as those needed to process and review payroll accurately and on time to ensure employees are paid correctly. A consistent number of payroll deficiencies arise from miscalculation of employment entitlements and from errors or incomplete information in employee separation records.

Effective pay run processes and controls reduce the risk of fraud, prevent reputational damage and loss of public trust, and ensure employees are paid accurately and on time.

There are ways to strengthen the pay run processes and controls, as shown in Figure 5E.

To further help improve pay run processes and controls, we continue to recommend that state entities take the following specific actions:

• implement standardised onboarding and departure checklists to ensure employee information is accurate
• conduct regular review of changes to payroll masterfile data to prevent operational risk and financial loss
• provide training to existing and new payroll employees to promote compliance with policies and procedures.

Most Queensland ports are operated by government owned corporations and operate on a for-profit basis. They are designed to provide efficient, commercial arrangements with the private sector and deliver a return to government.

State-owned entities own and operate the majority of bulk water infrastructure. Water entities are a mix of government owned corporations and statutory bodies. Some operate to achieve a profit and others are not-for-profit entities. They all generate revenue from charging their customers for their services, based on recovering costs associated with their activities.

Both port and water entities own infrastructure that is considered critical for economic activities and services to Queenslanders.

To meet demand associated with future population and industry growth, there are major water projects planned for Queensland. There are also significant costs from the need to maintain the safety and quality of dams owned by the state.

Port and water entities experienced changes to board membership in 2024–25. The total number of chairs and board members reduced from 28 to 24 across 4 port entities and from 35 to 36 across 6 water entities between 1 July 2024 and 31 October 2025. Boards changes include:

• 40 new board chairs and members appointed (21 for port entities and 19 for water entities)
• 38 former board chairs and members departed (25 from port entities and 13 from water entities). Of these, 20 from port entities and 11 from water entities left before their terms expired.

This chapter provides an overview of the ports and water sectors, the entities within them, their results, and major transactions and events in 2024–25.

Ports entities

Government owned port corporations play an important role in growing the Queensland economy. They form a major component of the supply chain including the trade of minerals, agriculture, and other exports. They provide cargo handling services and import and export infrastructure supporting the shipping industry and regional development. Due to the nature of the services provided, they are classified as critical infrastructure by the Australian Government.

There are 4 government owned port corporations, responsible for managing 19 of the 21 ports along the Queensland coastline:

• Gladstone Ports Corporation Limited (Gladstone Ports)
• North Queensland Bulk Ports Corporation Limited (North Qld Bulk Ports)
• Port of Townsville Limited (Port of Townsville)
• Far North Queensland Ports Corporation Limited (Ports North).

Gladstone Ports is the largest of the government owned corporations, and holds 59 per cent of the total property, plant and equipment balances held by the sector.

In addition to the ports above, the Port of Brisbane Pty Ltd is responsible for the Port of Brisbane. It is operated under a 99-year lease to the private sector from the Queensland Government. The lease commenced in 2010 and it continues to be regulated by the state. The 4 port corporations and their responsibilities are included in Figure 6A.

Overview of entities in the sector

Snapshot – ports entities

Results of our audits of ports sector entities

We issued unmodified audit opinions on the 2024–25 financial statements for all 4 government owned ports corporations. See Appendix F for more detail.

This means the results in their financial statements can be relied upon, as they were prepared in accordance with the relevant legislative requirements and Australian accounting standards. The entities’ internal controls are generally effective.

All entities reported their results within their legislative deadlines.

Gladstone Ports continues to have significant deficiencies relating to governance

In State Entities 2024 (Report 11: 2024–25), we reported on the governance controls at Gladstone Ports, stating that it needed to strengthen its governance and oversight. While management has taken steps to address our previous recommendations, we found 2 new significant governance deficiencies this year (2023–24: 4) relating to:

• the termination clauses in the employment contracts of 4 senior executives that exceeded the requirements of the Queensland Treasury policy on executive remuneration
• the absence of an approved conflict of interest management plan for a relationship that was declared by a key management personnel member.

Financial performance and position of ports sector entities

This section analyses the financial performance and position of port sector entities. It also considers emerging issues relevant to the sector.

Financial results improved due to increased user charges and asset values

Overall profits across the sector increased by $12.5 million in 2024–25 to $201.3 million. Profits were increased by revenue received from customers and an increase in income from updated Gladstone Ports' asset values, reversing part of an earlier reduction that had been recorded as an expense.

Revenue received from customers primarily related to cargo handling, port usage income, and rental income from investment properties. Prices charged to customers increased in line with the consumer price index.

In 2024–25, total dividends to the Queensland Government, as shareholder, decreased by $4.5 million to $157.5 million (2023–24: $162 million).

Port entities have $3.5 billion in assets and $1.1 billion in borrowings

Port entities own $3.5 billion in assets, most of which relate to port infrastructure, channels, and swing basins. These assets include wharves, the underwater shipping paths into the port (channels), and the open areas within the port where ships turn around (swing basins).

Figure 6B summarises the reported balances by major classes of assets.

Port entities’ assets and capital projects are funded from profits, equity injections, and borrowings. The government provides equity injections as a form of capital funding for the construction of new assets or to replace existing assets.

The state, through shareholding ministers, provided funding to North Qld Bulk Ports, Ports North, and Port of Townsville of $113.9 million (2023–24: $120.7 million) in total to support capital projects.

Borrowings of $1,133.6 million (2023–24: $1,103.1 million) are provided through Queensland Treasury Corporation and included in the public non-financial corporation balances reported by the state. Borrowings increased by $30 million for Port of Townsville’s channel upgrade project.

Gladstone Ports holds 68 per cent of total port sector borrowings, with the remainder held by North Qld Bulk Ports and Port of Townsville. Their gearing ratios, which measure the proportion of total capital funded by debt, range from 23 per cent to 36 per cent in 2024–25 and indicate a greater reliance on equity than on borrowings to fund their assets.

Status of key projects in the ports sector

The port entities continue to undertake significant infrastructure projects, investing $200 million in new assets and infrastructure in 2024–25 ($158.8 million in 2023–24). They have budgeted to spend $252.7 million on capital projects and maintenance in the 2025–26 financial year.

Cairns Marine Precinct Common User Facility – Ports North

This is a large, shared ship-maintenance and repair hub in the Cairns Marine Precinct that will give multiple operators a place to work on vessels without needing their own specialised facilities.

A total of $387 million has been committed to the construction of the facility, comprising $207 million from the Queensland Government and $180 million from the Australian Government.

The project is currently being reassessed, with the form of the project, cost, contribution by the private sector, and timing under review.

Successful delivery of the Common User Facility depends on the project team maintaining strong governance, controlling costs, and securing additional funding or partnerships.

Channel upgrade – Port of Townsville

The Port of Townsville’s 5-year, $251 million project to widen and deepen the shipping channel was completed in December 2024. It was funded by the Queensland and Australian governments, and Port of Townsville.

The project was the first stage of a $1.6 billion port expansion plan, which includes the creation of up to 6 new berths, 150 hectares of land reclamation, and the channel widening and deepening they have already completed.

Water entities

Water entities and some local governments in Queensland manage water supply, treatment, storage, and distribution. They ensure safe, reliable drinking water, treat wastewater, maintain dams and pipelines, and support sustainable resource use. State government entities also plan infrastructure, monitor water quality, and protect environmental and public health across urban and regional communities.

Queensland’s water entities primarily earn revenue from residential and business customers for water supply, and from infrastructure charges paid by developers to fund the cost of new or upgraded infrastructure.

The Queensland Competition Authority (QCA) regulates pricing and service standards for water and wastewater services provided by water entities. It conducts investigations and makes recommendations to the government on how bulk water prices should be set. This identifies how much revenue bulk water entities can earn. The government considers these recommendations and approves water prices. Other water entities consider the findings and can set their own prices.

For distributor-retailers, such as Urban Utilities and Unitywater, water and sewerage charges (connection and usage charges) are determined by the entities. QCA has commenced a price monitoring investigation into the 2 entities for the period 1 July 2026 to 30 June 2030 (the price monitoring period).

The revenue earned by water entities affects their cash flow, which in turn impacts asset values and returns to shareholders. Asset values are commonly assessed using a discounted cash flow method, which estimates value based on expected future cash flows.

There are 4 main Queensland Government entities in Queensland’s water sector – 3 are statutory bodies and one, being Sunwater, is a government owned corporation:

• Queensland Bulk Water Supply Authority (trading as Seqwater)
• Sunwater Limited (Sunwater)
• Gladstone Area Water Board
• Mount Isa Water Board.

There are 2 local council owned statutory bodies in South East Queensland:

• Urban Utilities
• Unitywater.

There are also 15 category 2 water boards in Queensland (category 2 water boards are smaller water authorities).

Overview of entities in the sector

Snapshot – water sector

Results of our audits of water sector entities

We issued unmodified audit opinions to all 6 water entities, meaning their financial statements can be relied upon. All entities met their legislative deadline of 31 August 2025. The entities’ internal controls are generally effective.

The results of the audits for category 2 water authorities are listed in Appendix F, Appendix J and Appendix K.

Sunwater had ineffective project management of its billing system project

During 2024–25, Sunwater cancelled the proposed implementation of a new customer relationship management system and water accounting and billing system, called CASPr.

The project started in June 2020, with an approved budget of $38.98 million. Following significant delays and escalating costs, the project was terminated. Total expenditure on the project was $23.6 million.

Initially, irrigation pricing included $18.5 million in recovery of costs over 15 years for the CASPr project. However, as the project will not proceed, the portion of CASPr costs expected to be recovered in 2025–26 and 2026–27 will be rebated to irrigators. There will be no recovery from customers.

In its review of the project, Sunwater identified that:

• the outcomes and expectations for the project to support future business needs were not well understood
• the increase in complexity in requirements and the level of detail required from the initial design resulted in additional time and increased costs
• reporting, project governance, and oversight was hindered by reduced visibility and escalation of issues to the relevant governance committee and the board, and identified risk areas were not effectively addressed
• delays in managing identified vendor performance issues, and a lack of direct management of all vendors, contributed to delivery issues.

The project highlighted the importance of having a rigorous initial design phase and the need for a clear understanding of system complexities and alignment with future business requirements. Sunwater has embedded relevant lessons learned from the project in its project governance framework.

Delivering technology projects continues to be challenging for entities. In our report Delivering successful technology projects (Report 7: 2020–21), we reviewed several projects and identified 5 key factors that contribute to successful delivery, as shown in Figure 6D.

Financial performance and position of water sector entities

This section analyses the financial performance and position of water sector entities. It also considers emerging issues relevant to the sector.

Profits have declined due to asset write downs and increased spending

Overall, operating profits across the water sector decreased by $220.5 million in 2024–25 to $345.7 million – mainly due to an increase in expenses of $462.7 million (13.6 per cent) related to write downs in the value of assets of Urban Utilities ($218.2 million) and Sunwater ($150.4 million).

Despite lower profits, shareholder and participant returns (dividends declared) increased this year by $58.7 million to $260 million.

In 2024–25, the Queensland Government contributed $298 million (2023–24: $779 million) to Gladstone Area Water Board, Seqwater, and Sunwater to construct water infrastructure including the Fitzroy to Gladstone Pipeline.

Figure 6E outlines the profit after income tax of the water entities.

In 2024–25, total revenue increased to $4.38 billion (2023–24: $4.22 billion), an increase of $156.8 million, or 3.7 per cent. This is mainly due to the increase in water allocation sales by Sunwater, which is a private entitlement to a share of water in a water scheme typically purchased by irrigators and industrial users.

Water entities trade with each other, and in presenting our analysis of the water sector revenue, we have not eliminated these transactions between entities.

Value of Urban Utilities’ network assets have been written down

Urban Utilities uses its network of assets to generate revenues by charging customers for providing water and sewerage services. The network is reported in financial statements at fair value (representing an estimate of the value the network could be sold for in an arm’s length transaction). In 2024–25, Urban Utilities estimated that it would receive a lower proportionate of revenue from its total network assets. The total network assets increased because of a higher proportion of developer contributed assets that do not generate income for the entity but are required to be maintained. As a result, the fair value of network assets was reduced by $434 million.

The entity’s reserves were used for a portion of this reduction but $218.2 million was recorded against profit as an impairment expense once the reserves were fully used. Any future write-downs will also be recorded against profits because the reserves are now at nil.

Employee expenses increased

In 2024–25, employee expenses were higher due to salary and wage increases and more employees to deliver new supply and storage projects. As at 30 June 2025, water entities had 3,913.5 full-time equivalent employees, an increase of 7.5 per cent from 2023–24. The largest employer was Urban Utilities, with 1,235 employees.

Total employee costs in 2024–25 were $517.6 million (2023–24: $477.9 million), an increase of $39.7 million or 8.3 per cent. Average employee expenses per employee were $132,262 (2023–24: $131,247).

Asset balances are increasing

In 2024–25, water entities reported total assets of $27.2 billion (2023–24: $26.2 billion), representing an increase of 3.8 per cent.

Property, plant and equipment totalled $24.7 billion (2023–24: $24.1 billion), accounting for 90.8 per cent of total assets. The 2.5 per cent increase is primarily driven by continued investment in water infrastructure assets to address increased population.

At 30 June 2025, water sector entities had accumulated nearly $3 billion in costs to construct assets (work in progress), representing 11.6 per cent of total property, plant and equipment. These assets represent the value of incomplete projects, including the raw materials, labour, and overhead costs invested so far.

Figure 6F shows a 5-year comparison of the value of work in progress by water entity. The steady increase in assets under construction over 5 years reflects investment in future services and capacity, but close monitoring is needed for project completion, cost control, financing, and ensuring the assets deliver the intended benefits.

Status of key activities in the water sector

Infrastructure projects are increasing

The water entities continue to undertake significant infrastructure projects, investing $1.69 billion in new assets and infrastructure in 2024–25 – an increase of $142.8 million from $1.54 billion in 2023–24.

In 2024–25, the Queensland Government provided $318 million in total funding for 3 of the 6 water entities through equity injections for Seqwater, Sunwater, and Gladstone Area Water Board.

Figure 6G shows the key 2024–25 water infrastructure projects in progress.

The Queensland Government is developing a new water security plan to replace the Queensland Water Strategy developed in 2023. This plan is due to be released in 2026 and will include a revised Strategic Water Infrastructure Plan outlining a pipeline of bulk water infrastructure projects, which is expected to include dam improvements.

Dam safety and improvement programs

Dams are a significant portion of water infrastructure assets, and they require regular inspections and maintenance to ensure that they comply with the requirements of the relevant legislation including the Water Supply (Safety and Reliability) Act 2008 (the Act). Dams are owned by Sunwater, Seqwater, and Gladstone Area Water Board, as well as local governments and the private sector.

Each dam owner is responsible for improvements to their dam/s and must ensure they manage safety risks. The significant cost of the statewide dam improvement programs continues to be a challenge for entities. The Queensland Budget 2025–26 allocated $346.2 million to ensure state-owned dams meet modern engineering standards and operate safely. The costs are funded through additional borrowings, funding from the state and federal government, and revenue from current and future water prices.

The sector’s returns to shareholders are likely to be impacted as dam improvement programs continue to involve significant infrastructure investments and rising construction costs.

Regulatory pricing reviews for irrigators and water customers

Sunwater and Seqwater‘s prices for irrigators from 2027 onwards are currently being reviewed by the Queensland Competition Authority to provide advice on how capital expenditure is recovered in prices. The government will consider this advice in setting prices for the 2027–28 and 2028–29 financial years.

Gladstone Area Water Board’s (GAWB) bulk water prices have been informed by the non-binding regulatory recommendation that they reduce their overall revenue by 6.8 per cent ($50 million) over 5 years (noting that prices may still rise due to asset growth and higher operating costs).

The Queensland Competition Authority is currently reviewing GAWB’s pricing arrangements for its water security assets, including the Fitzroy to Gladstone Pipeline, for the 2027–2030 period, with a final report due in May 2026.

Queensland Competition Authority is also conducting a 2-stage price monitoring investigation into Unitywater and Urban Utilities for the 2026–2030 period, with the final report for Stage 1 due in April 2027.