Don’t blame the APS for East West Link, says auditor

By David Donaldson

Tuesday December 15, 2015

It’s not often audit reports bear welcome news for the bureaucracy, but that’s what happened on Monday.

An Australian National Audit Office report on federal departmental advice given on Victoria’s ultimately abandoned East West Link toll road has absolved public servants of responsibility for a series of poor decisions made by the federal government.

Instead it was the elected representatives, led by Prime Minister Tony Abbott, who ignored advice not to give an advance payment of $1.5 billion to Victoria.

ANAO was critical of the government’s decision to commit $3 billion in payments to Victoria before Infrastructure Australia processes, established to assess the merits of nationally significant infrastructure investments, could be completed. Of that, $1.5 billion was paid to the Victorian government before the project was cancelled, years ahead of the time it was required. The report estimated spending would not reach $1 billion until 2016–17.

ANAO found the relevant department had given appropriate advice to government that there were problems with the route it planned on taking:

“The Department of Infrastructure and Regional Development (DIRD) provided clear advice to government that the $1.5 billion was being paid in advance of project needs, and proposed an alternative payment approach that aligned payments with project progress.”

Unusually, auditor-general Grant Hehir was reluctant to make recommendations on bureaucratic processes, as they were found to be either satisfactory or bypassed by politicians:

“The ANAO has not made any recommendations in relation to entity advisory processes given the audit found that the funding decisions had been informed by well-considered departmental advice, and that Infrastructure Australia’s assessment processes had been bypassed. The ANAO has made one recommendation to the Department of the Treasury for it to commence action under the federal financial relations framework to recover the advance payments from Victoria.”

The project was cancelled but the money has not yet been paid back by Victoria. ANAO highlights that the choice of a memorandum of understanding to underpin the transfer of funds “was not an effective approach to managing the particular risks involved with approving funding” as it is not legally enforceable. The single recommendation the auditor made was for the Treasury to request the Treasurer commence a process to claw back the $1.5 billion via an alternate legal path.

Paying the money when the federal government did “resulted in the estimated fiscal balance deficit for 2013–14 being $1 billion higher than would otherwise have been the case had payments been linked to the expected cash flow needs of the project”, argues the auditor — adding to the perception that the previous government had overspent. As a corollary, “the estimated fiscal balance deficits for 2014–15 and 2015–16 included in the May 2014 budget papers were lower as a result of the advance payment”.

Departmental advice helped to mitigate some of the risk once it became evident the project may not proceed — though some risks were unable to be dealt with due to it not being possible “to clearly specify the project scope in the approval documentation because significant project development work still needed to be undertaken in order for a business case to be prepared”, even though an advance payment of $1 billion had already been made on that section of the project.

The national auditor was kinder to federal public servants than his state counterpart was with the VPS. In a highly critical report released last week, the Victorian Auditor General’s Office argued the Victorian public service failed in its obligation to go beyond merely appraising government of risks, but provide “frank and fearless advice” in the best interests of the state.

That assertion drew a heated response from Victorian Department of Premier and Cabinet secretary Chris Eccles. In a letter, he rejected acting auditor-general Peter Frost’s argument, suggesting it would undermine the public service as a trusted and apolitical institution and erode longstanding conventions at the heart of the Westminster system:

“In an environment where advice is contestable, and can be sought from parties that have no obligations to neutrality, DPC remains of the view that the public service’s credibility and influence with government would likely diminish if the public service repeatedly and explicitly recommended a course of action that is contrary to the government’s settled policy.

“If the draft report’s implications were followed to their logical conclusion, it would appear to permit public servants to refuse to enact lawful government decisions on the premise that the public service is the best judge of what is in the public interest.”

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