More than one in three NSW Health employees are failing to take their full annual leave entitlements, resulting in a $1.8 billion liability and increased risk of fraud, an audit says.

More then 15,300 employees took no leave at all during 2018-19, the NSW audit office found.

The Auditor General’s Health 2019 report  says 36.9 per cent of the state’s health workforce is carrying excess leave, “which remains a challenge” for the NSW health cluster.

That figure represents an increase from 34 per cent last year, the audit says. It warns that both patient care and the health and wellbeing of staff can be compromised by insufficient leave, and excessive leave entitlements can have a negative impact on cash flow.

Ensuring that managerial and administrative staff take leave is also a protection against fraud, the report says, because it is more likely to be detected when their duties are performed by other people.

The NSW Ambulance service had the highest percentage of employees with annual leave balances in excess of 30 days.

The service reported significantly higher overtime payments than other health entities, with overtime payments of $83.1 million in 2018-19, representing 9.8 per cent of total salaries and wages.

Eighty-five per cent of employees received overtime payments, with average overtime payments coming to $19,400 last year, and 27 employees paid more than $100,000 in overtime each.

“Overtime is paid at premium rates and, if not effectively managed, can result in higher costs and work, health and safety issues, particularly when fatigued employees perform high-risk tasks,” Auditor General Margaret Crawford says in the report.

Ms Crawford also notes that the complex award structure under which NSW employees are paid presents risks to NSW, including “significant risk” from fraud and error because of the scale of the workforce.

The report recommends that health entities should review their management of excess annual leave on a monthly basis and agree to formal plans with employees to reduce leave balances.

She also says staff who perform key control functions should be encouraged to take at least two consecutive weeks leave a year to mitigate the risk of fraud.

Internal control deficiencies

The report looked at key findings from recent financial audits of the Health Department, local health districts, specialty health networks, heath corporations and independent health agencies across the state.

It found more internal control deficiencies increased in 2018-19 with a quarter related to information system controls, which also increased the risk of fraud and error.

The report also found 40 instances of non-compliance with fees and payment principles at the eight aged care facilities operated by NSW Health.

However, the good news is that the quality of financial reporting by health entities continues to improve, with fewer misstatements in financial audits than last year and less significant errors.

The NSW Health cluster recorded a net $1.1 billion profit in 2018 with 121, 571 full time equivalent positions, the audit shows.