The New South Wales government has been accused of using public money to win favour with the public and “punish” councils that rejected forced merger proposals, in a damning report tabled by a parliamentary committee on Tuesday.
The Public Accountability Committee’s first report on its inquiry into state government grant programs has made 13 findings, including that the second round of the Stronger Communities Fund scheme, known as the ‘tied grants’ round, was a “clear abuse” of the grants process.
“It was an improper allocation of public money and falls well short of principles of proper grants administration and public expectations,” the committee concluded.
Of the $252 million allocated during the tied grants round, 95% went to councils in coalition-held or marginal electorates, the report noted.
While no witness to the inquiry took responsibility for approving projects under the tied grants round, the committee has found that Premier Gladys Berejiklian and deputy premier John Barilaro had approved the projects, and had directed the Office of Local Government (OLG) to make the payments.
Further, Barilaro’s office “failed to comply with the basic rules of good governance” by not keeping records detailing the basis on which Barilaro determined to allocate $61.3m of taxpayer money under the scheme.
The guidelines for the tied grants round were revised nine months before the 2019 state election. The report has criticised the OLG for failing to publish the revised guidelines, for not having a process for assessing potential projects for funding, and for not holding or recording any conflicts of interest in relation to the grants.
In the report foreword, committee chair David Shoebridge slammed the Stronger Communities program and the state government’s handling of the scheme.
“The Stronger Communities Fund tied grants round was an alarming example of the lack of transparency and accountability in NSW government grant programs,” he wrote.
“The fund was originally established to assist councils created from the NSW government’s failed council amalgamations, but morphed into a brazen pork-barrel scheme.”
The committee has concluded that the guidelines for the tied grants round were “deliberately devised to accommodate the pork-barrelling scheme”, to partially resolve legal disputes involving Hornsby Shire Council and Parramatta City Council, to curry favour with the public in coalition and marginal seats, and to “punish” local councils that had objected to forced amalgamation proposals.
Hornsby received $90m without any due process or merit assessment, which the committee said was a “misuse of public money by the NSW government for a political purpose unrelated to the objects of the grants scheme”, while Parramatta received $16m.
In October, the inquiry heard that Berejiklian’s senior policy adviser, Sarah Lau, had shredded briefing notes and deleted electronic records on the list of approved projects. The documents had shown the premier had played a role in approving the grants, despite having repeatedly denied signing off on the projects, the inquiry heard.
The committee has found that the notes had been used as “formal funding briefs” by which Berejiklian approved projects for the tied grants round. It also concluded that staff from the premier’s office had breached the State Records Act 1998 by destroying the notes.
As a result, the committee has called on the State Records and Archives Authority Board to reconsider its decision not to pursue further action against Berejiklian and her office.
Shoebridge said the scheme was an example of how NSW government grant processes lack transparency, accountability and oversight, and has pointed to a larger issue.
“The committee came to the conclusion that the current grants system is broken and in need of a fundamental overhaul,” he wrote.
“The lack of accountability and transparency in grant processes is symptomatic of a wider problem with oversight of NSW government budgeting and spending. In particular, changes to how funding is represented in annual appropriation bills have reduced the ability of the Legislative Council to adequately review the budget and government spending.”
The committee has made 15 recommendations, including that the NSW government:
- Increase the powers and remit of the NSW auditor-general to include ‘follow the dollar’ powers like other state and territory jurisdictions,
- Enable the auditor-general to conduct more regular performance audits on the design and guidelines of government grant programs,
- Ensure all grant programs have mandatory elements such as a designated decision-maker, eligibility criteria, a process for identifying and assessing proposed projects, and program guidelines that are clear, detailed and publicly available,
- Update the Good Practice Guide to Grants Administration to ensure it aligns with current best practice, and ensure that key requirements of the guide are enforceable,
- Ensure the OLG is audited for each grant funding round it administers.
The committee has also recommended that the Legislative Council refer its concerns with the “inappropriate design and maladministration” of the tied grants round to the NSW Audit Office and the Independent Commission Against Corruption for investigation, and include the committee’s report and transcripts of evidence.
The state government should also work with Local Government NSW to overhaul its current model of grant funding to local councils, the committee said.
In a dissenting statement, coalition committee members Trevor Khan, Matthew Mason-Cox, and Natalie Ward argued the Stronger Communities Fund has helped councils improve amenities and quality of life for their communities.
“This has included upgrades to parklands, surf clubs, water infrastructure in drought-affected areas, road works, sporting and recreation facilities, tourism, environmental projects and youth facilities,” they said.
“The report fails to acknowledge that the Stronger Communities Fund has provided more than $468 million to local councils to kickstart delivery of much-needed infrastructure for their local communities.”