Julian Hill (Bruce, Australian Labor Party) | Link to this | Hansard source

On behalf of the Joint Committee of Public Accounts and Audit, I present the committee's report No. 495 inquiry into Commonwealth grants administration, incorporating a dissenting report—a very rare phrase for our committee.

Report made a parliamentary paper in accordance with standing order 39(e).

by leave—At the outset—because we have three reports to table, two of them relatively significant—I apologise for what I might say is a table-athon. I asked the Table Office to split them up but they said we have to do them all at once, so we're going to be here for a while.

The ramifications of this report into Commonwealth grants administration are serious, and the implementation of the committee's recommendations will make a significant difference to how grants are assessed and awarded across the Commonwealth. Tens of thousands of grants, at a cost of tens of billions of dollars, are awarded by the Commonwealth via grants every year, and taxpayers deserve value for money. Unfortunately, clear evidence of a serial noncompliance with the Commonwealth grant rules and guidelines and program guidelines under the previous government was presented in evidence to the committee—across multiple programs. In plain English, the previous government rorted and manipulated billions of dollars of grants for purely political purposes. It is rare that I am lost for words, but I was struggling to think of enough adjectives to describe the size of this industrial-scale rorting. Giant, massive, stupendous, humongous, vast, colossal, immense, mammoth, gigantic slush funds—they treated taxpayer money as if it were Liberal Party money. Instead of transparently allocating public funds, the previous government pursued this industrial-scale rorting for blatantly partisan purposes.

Rorting grants programs doesn't only waste money—it degrades public trust. The committee was especially appalled to receive clear evidence in writing and in public hearings that the politicisation of the previous government's regional grants programs corroded public trust to the point that some councils simply stopped applying due to the evidence-based belief that they would never get a fair go. Principles of fairness, competitive process by default, transparency and value for money were simply disregarded, and records of critical decisions were not kept.

It's difficult to know, from reading the dissenting report, what is more perplexing: that the previous government did what they did with billions of dollars of taxpayer funds or that they still do not acknowledge that what they did was utterly wrong. If the first step to recovery is to admit that you have a problem then it's clear from the attitude to this inquiry that the Liberal and National parties are still living in denial. It is simply not good enough. Through the inquiry, those trying to defend this egregious behaviour said, 'No illegality was identified,' when the assessment processes were repeatedly, systematically and systemically perverted—especially so when the funding decisions resulted in ridiculously partisan outcomes. Just because you can do something doesn't mean you should. Dismissing legitimate criticism and evidence of the Liberals' industrial-scale rorting of grant programs as politically motivated is surely peak irony.

I note that, curiously, they did not disagree with the recommendations for change—they were just very upset that they were exposed for their rorting. It's really unclear why they dissented. The numbers tell the story. The reports of the Auditor-General examined in this inquiry—and they examined a large number of reports—the evidence revealed shockingly partisan outcomes across major grants programs, including: the multibillion-dollar Urban Congestion Fund, which included the infamous commuter car parks; various regional grants programs; the Regional Grants Fund; and the Safer Communities Program. In the now-defunct commuter car park program established by the previous government under the UCF, almost 75 per cent of the funding—and this is for urban areas, mind—went to coalition sees with no competitive process. A whole chunk more went to seats they were trying to win—colour-coded spreadsheets, secret shadow assessment processes run out of ministers' offices. At the hearing we spent quite some time inquiring—though we never did get a good answer—how on earth a set of pedestrian traffic lights on a small, two-lane road in Camberwell was in any way a national urban congestion priority, but it was right outside Josh Frydenberg's electorate office, so that must have been the reason.

The committee clearly acknowledges in the report that ministers rightly retain discretion and authority to accept or reject funding recommendations by officials and apply their own critical judgement. They're not rubber stamps. But the committee supports the Auditor-General's view that ministerial discretion around grant awards is not absolute. Ministers are not gods. They're subject to the law and the rules, and must properly and fully document their reasons for decisions. Non-competitive grant processes will sometimes be necessary or even preferable under the rules, such as in cases of urgency or where, for a policy reason, there's only one suitable recipient. Notably, the Auditor-General indicated that the non-competitive processes had started to become the norm under the previous government and that there's a need to amend the rules to strengthen the default presumption in favour of competitive programs.

Regarding election commitments, the committee agrees with the Auditor-General's view that grants that are formally approved by ministers before a caretaker period, and then announced during an election period, are not election commitments. They're decisions taken by government that are recorded in the pre-budget bottom line and are not election commitments. It is perfectly legitimate and appropriate for a government to establish dedicated programs to implement their election commitments, but, as the Auditor-General advised the committee, they remain subject to the grant rules and the PGPA Act. They have to follow the law. They still have to demonstrate compliance with the guidelines and show value for money for the investments. Many payments fall outside the scope of the grants rules framework as well. In particular, the current arrangements are that corporate Commonwealth entities—which, peculiarly, includes the NDIA, as an example—are not subject the Commonwealth grant rules, but the committee sees no reason why this should continue to be the case, given the rules are not onerous.

I'm not going to go through all six recommendations, you will be pleased to know. They're aimed at strengthening the Commonwealth grants administration processes, and they include implementation of an eighth principle in the grant rules—get this—that the decision-makers must adhere to the guidelines. Strangely, we got to the point in a then Liberal dominated committee—it was after the sports rorts last term, I think—where they made the recommendation that their own ministers needed to follow the rules. The previous government, in an act of duplicity, responded to that report and said they'd implement it, but they didn't actually do anything. So we recommend that this time the change be made.

We recommended there should be clarification of how an election commitment is defined in the Department of Finance guide on government grants. There should be a range of actual changes to the grants rules, to strengthen them, to provide that competitive merit based processes should be the default. The program guidelines must disclose the role of stakeholders, including MPs, and outline how the advocacy from stakeholders, and their input, will be considered—no shadow processes like we saw, with billions of dollars, where only Liberal MPs got to input to the grants programs. No secret, coloured spreadsheets.

Sharon Claydon (Newcastle, Australian Labor Party) | Link to this | Hansard source

Just a moment. Arising on a point of order?

Bert Van Manen (Forde, Liberal Party) | Link to this | Hansard source

Yes. I'd ask the member for Bruce to withdraw his earlier comment about the former government because I think it's completely unparliamentary, and he should know better than that. I'm not going to repeat it, for the sake of the House, but he knows what he said.

Sharon Claydon (Newcastle, Australian Labor Party) | Link to this | Hansard source

I didn't hear anything, but if you would withdraw for the benefit of the House—

Julian Hill (Bruce, Australian Labor Party) | Link to this | Hansard source

I issue a general withdrawal to satisfy the member for Forde, for whatever it related to. You can tell me later. I'm not withdrawing the accusation of rorting, because that's what the evidence said, and I'm reading directly from the report's findings, Member for Forde.

We also say that funding approvals against agency recommendations must be clearly recorded, reported promptly to the Minister for Finance and published online within three months.

This change is greatly upsetting to the National Party: the committee has recommended that decision-makers should no longer be able to just choose their favourite projects from a great big pool of recommendations. This was the favourite trick of the National Party. They'd get a great big list from the department, and it would show all the projects that were eligible. There might be $4 billion of projects and $400 million of funding, and then the minister would just pick. Under the current rules, that's not rejecting a funding recommendation, so we think that needs to change. There are very limited circumstances where that would be acceptable. Other factors by which grants will be assessed should be fully transparent and appropriately evaluated and scored. They had a trick later in their time in office where they started adding in these 'other factors', which was their way of trying to legitimise the secret, coloured spreadsheets. We also say that the onus should be reversed and that the rules should apply to all corporate Commonwealth entities unless exceptions are made. There are a range of findings in relation to the grants hubs.

It's disappointing that the bipartisan tradition of the audit committee has been breached on this occasion, as these recommendations and findings should receive bipartisan support because they're based on compelling evidence. As I said, in their dissenting report they didn't disagree with the recs; they just didn't like the evidence that called them out. Given the denial that they're still in, it's not surprising. Hopefully the implementation, if the government takes it up, of the committee's recommendations will make a material difference to grants administration and contribute to rebuilding public trust.

I thank the numerous contributors to the inquiry. I thank the committee secretariat—I see the committee secretary over there, Jenny Adams, who's doing an absolutely sterling job managing our numerous inquiries—for their professionalism in supporting the work of the committee.

I move:

That the House take note of the report.

Sharon Claydon (Newcastle, Australian Labor Party) | Link to this | Hansard source

In accordance with standing order 39, the debate is adjourned. The resumption of the debate will be made an order of the day for the next sitting.