Audit finds bureaucrats applied 'insufficient scrutiny' to $443 million Barrier Reef grant
An official audit of a controversial $443 million government grant to the Great Barrier Reef Foundation has found numerous deficiencies by bureaucrats, including failure to scrutinise the sky-high administrative costs and properly mitigate against conflicts of interest.
The Environment Department took just three days to select the small foundation as the "obvious partner" for the grant, and helped draft the organisation's subsequent funding proposal, the Australian National Audit Office reported
But the audit did not accuse Treasurer Josh Frydenberg - the then environment minister - of any wrongdoing, saying he awarded the grant without a competitive tender based on "a clear funding recommendation" by bureaucrats who assured him the foundation met the criteria.
At the time, the foundation was in discussions for a government grant of just $5 million over five years, and the decision to award nearly $450 million was described by critics as "opaque" and "almost mind-blowing
In a review handed down Wednesday, the Australian National Audit Office said Environment Department bureaucrats applied "insufficient scrutiny" to the GBR Foundation's proposal.
In particular, it said the department failed to anticipate the true administrative costs of the foundation's subcontractors, ignored its past fundraising performance and neglected the capacity and capability of its partners to scale-up their activities.
The report also noted the department helped the foundation craft its proposal, which was not a unique occurrence, but that subsequent conflict of interest risks "were not adequately addressed
Imogen Zethoven, director of strategy at the Australian Marine Conservation Society, said this was "concerning".
"It’s not normal process and it's certainly not the experience of other non-governmental organisations," she said.
"Applying the pub test to this, it’s clear that this was an exceptional process driven by politics. That’s the bottom line
The audit found up to $86.4 million of the grant could be spent on administration, with half borne by the foundation's subcontractors. But the advice given to the minister focused only on the foundation's direct administrative costs, capped at 10 per cent, or $44.3 million.
The foundation's proposal did not address the administrative costs of its subcontractors, the ANAO said. Furthermore, Mr Frydenberg was told by bureaucrats that "low project delivery overheads" represented good value for money.
Ms Zethoven said once the department's own administrative costs were taken into account, the total expenditure on paperwork was "very high", accounting for about a fifth of the total grant amount.
The audit also criticised the lack of scrutiny given to the foundation's ability to attract co-investment. The minister was told it had a "good track record", though the $443 million grant significantly eclipsed the $90 million the foundation had raised in its history.
The ANAO report noted the department's compressed time frame in order to pay the grant before June 30, 2018. The department took just three days to decide on the GBR Foundation as the preferred partner, with only the Queensland government considered as an alternative.
While the department told the ANAO there had been "informal discussions" about other partners, there was no corresponding evidence.
"Opportunities to introduce some competition into the grant giving process were not explored and reasons for not employing a competitive, merit-based selection process to identify the partner were not documented," the ANAO concluded.
Responding to the audit, Environment Minister Melissa Price said the government remained "immensely proud" of the grant, and "none of the findings or recommendations affect the conclusion that the partnership is an effective way to boost the health of the reef".
Ms Price said administrative costs were a "normal and necessary part" of all grants and the level of admin funding in this case was "reasonable" and consistent with other grants.
However, Labor's environment spokesman Tony Burke said the "damning" audit showed the government was "reckless with other people’s money".
"It’s clear from this report that the Great Barrier Reef Foundation should not have been given this money," he said.
"It is almost laughable that the department helped them write their funding proposal and it still falls short."
The GBRF was founded in 1999 by late Queensland shale oil developer Sir Ian McFarlane and others. Its chairman, John Schubert, is a former Commonwealth Bank chairman and it is supported by some of Australia's largest mining companies.
In a statement, managing director Anna Marsden said the GBRF would work with the ANAO recommendations. She said administrative costs would not necessarily be as high as $86 million, as that figure assumed all subcontractors would be paid 10 per cent for admin.
"The GBRF is focused on fulfilling the obligations of the partnership because we are committed to protecting the reef and serving as a good guardian of taxpayer funds," Ms Marsden said
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