Auditor-general slams NSW grants program, makes ‘extreme risk’ finding against Treasury

By Melissa Coade

February 11, 2022

Margaret Crawford
Auditor-General of NSW Margaret Crawford. (AAP Image/Brendan Esposito)

The NSW office of the auditor general has described a state government grants program as lacking integrity and consistent guidelines in a damning report, just days before another report illustrating the ‘unnecessarily obstructive and difficult’ conduct of the NSW treasury department.

Auditor-general Margaret Crawford released her findings about the grants for the ‘Stronger Communities Fund’ program on Tuesday. The grant, which was established ahead of the NSW state government elections in 2019, lacked formal systems, which “prevent(ed) accountability and transparency over the government’s approach to selecting councils for funding”, the auditor-general determined.

The report also found that there was ‘little or no basis’ for the selection of grant recipients, with 95% of all grant money flowing to 22 local councils belonging to NSW Coalition seats. 

Last year a NSW parliamentary inquiry into the controversial fund determined it was designed to facilitate pork-barrelling (a practice that while completely unethical is legal). The inquiry also found that the Stronger Communities Fund had been set up to punish local councils who had opposed council mergers.

The auditor-general said former NSW premier Gladys Berejiklian and her deputy, former Nationals leader John Barilaro, personally selected grant recipients on the basis of successful local councils having ‘worked constructively’ with the government as part of its council merger agenda. 

The politicians were found to have chosen the recipients by communicating their decision to the Office of Local Government. 

“It is difficult to understand the merit of project funding decisions, and it is troubling that the Office of Local Government did not seek justification to support projects put forward with limited documentation by the staff of the then premier, deputy premier and minister for local government,” the report said. 

The only record of approved grants via the fund was contained in a series of emails between Berejiklian and Barilaro, the report found, with the premier personally picking $142 million worth of grants for 41 projects. Barilaro identified 188 projects worth a total of $61 million via the program. 

On Wednesday this week, Crawford released another report detailing how the Department of Treasury sent her office 1,000 pages of documents on the same day the auditor-general would sign-off on government finances. 

Crawford made an ‘extreme risk’ finding against the department, calling on NSW public servants to significantly improve governance processes and deliver on the ‘complete and timely sharing of information.

The delayed information-sharing concerned the beleaguered state Transport Asset Holding Entity (TAHE), which has been subject to ongoing scrutiny over financial concerns for the government agency. A parliamentary inquiry into the agency resumed this week.

Crawford, who has previously warned that the agency could be forced to spend $4.1 billion over the next decade, accused the Treasury of ‘late, unsophisticated, and inaccurate forecasts’ between July and December of last year. 

Crawford suggested it had been ‘unnecessarily obstructive and difficult’ to obtain key documents from NSW Treasury’s management for auditing. In her view, this sluggishness on the part of bureaucracy had the goal of seeking to ‘support the desired outcome of higher projected returns’ from TAHE and she found Treasury’s disclosures to be ultimately inadequate.

Under accounting rules, the auditor needed the agency to demonstrate it was operating independent of the government and also returning a profit. 

“Our assessments were hindered by errors and omissions in information and models provided by NSW Treasury to demonstrate expected returns from TAHE, as well as a lack of timeliness and completeness in their responses to requests for documentation to support NSW Treasury’s proposed accounting of government’s contributions to [the agency],” Crawford’s report read.

Opposition leader Chris Minns described the saga as a budget disaster and ‘cover-up’ on Twitter, alluding to the $40 billion of rail assets that was transferred by the state-owned corporation in 2015.

The transfer had the effect of improving the government bottom-line because it could be badged as funding the agency via an ‘equity injection’, given it was leasing rail assets back to service operators like Sydney Trains.

Shadow treasurer and Labor MP Daniel Mookhey said it was clear the government and Treasury were engaging in ‘misleading and deceptive conduct’.

“The tactics of withholding information, and providing the auditor general with misleading answers are despicable.

“Those responsible need to lose their jobs. The premier, the treasurer and the Treasury all have serious questions to answer about the integrity of their actions in the TAHE saga,” he said. 

According to The Guardian, a coalition of councils, led by Inner West mayor Darcy Byrne, who believe they were adversely impacted by the rigged Stronger Communities fund have called for Berejiklian’s predecessor, Dominic Perrottet, be compensated for being overlooked. 

“We still desperately need financial assistance for infrastructure, and the premier should stand up today and commit to working with us on a compensation fund,” Byrne told The Guardian.

“It’s time now to act and show that he (Perrottet) is the premier for all of NSW not just blue-ribbon Liberal electorates.”

The auditor-general’s report also considered a $100 million Regional Cultural Fund, which found that in more than a fifth of cases, the NSW arts minister and Barilaro did not accept the recommendations for grant recipients – this despite the fact that the fund’s process was ‘robust and produced transparent and defensible recommendations’.

Create NSW did not document Barilaro or minister Don Harwin’s reasons for rejecting certain applicants recommended for grants, Crawford’s report noted. 


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