Great Barrier Reef: audit finds $443m grant subject to 'insufficient scrutiny'

An official audit has criticised the Australian government and the environment department for applying “insufficient scrutiny” to numerous aspects of a controversial proposal to award $443.3m to the Great Barrier Reef Foundation.

In a report tabled on Wednesday, the Australian National Audit Office said the department was given just 11 business days by the government to find a private organisation to deliver the record grant, announced in April last year.

The department decided the foundation was the “obvious” partner after just three days.

The report also finds that the administration costs associated with the grant could be as high as $86.41m.

The audit was begun last year after the grant was awarded to the small not-for-profit foundation without a tender process.

While it finds all decisions associated with the grant were informed by departmental advice, it identifies “shortcomings in aspects of the department’s advice, partly as a result of non-compliance with elements of the grants administration framework”.

The report says the government directed the department on 6 March last year to find a private partner that would receive the funds in full in the 2017-18 financial year so as not to impact on the forward estimates.

The department selected the foundation on 9 March and prepared draft advice for the government in seven days.

The ANAO identified numerous failings in the department’s approach including:
• insufficient scrutiny of the “capacity and capability of the foundation’s delivery partners to scale-up their activities”,
• insufficient scrutiny of the “foundation’s past fundraising performance”, despite the foundation’s fundraising efforts being a factor in the decision to award it the grant, and
• insufficient scrutiny of the “total administration costs of the partnership model”.

The audit finds the department focused on the foundation’s costs and did no evaluation of the likely administration costs for delivery partners that worked with the foundation. It says that, once these costs were factored in, the total administration costs associated with the grant could be $86.41m.

In a letter of reply to the ANAO, the foundation said $26.3m would be “allocated to conventional administration costs” and $17.9m to “project management”.

The report finds that the department did not properly consider the risks or potential conflicts of interest that could arise when it assisted the foundation to develop its grant proposal.

It says the approach taken by the department failed to set clear targets for what the grant was to achieve, did not allow for a proper assessment of whether it was value for money and gave “no consideration” to the financial cost to the commonwealth of paying the full grant amount in one year.

The report also states that “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”.

It makes six recommendations, including development of clear assessment criteria for grants being assessed without a competitive tender process, inclusion of performance targets in program guidelines for Reef Trust grants and a “probity framework” to manage risks associated with helping potential grant recipients to prepare their proposals.

Labor’s environment spokesman, Tony Burke, said the findings were “damning”.

“This is a government that is reckless with other people’s money,” he said. “The simple message to Scott Morrison and Josh Frydenberg is: it’s not your money, it’s not your money to throw away to your corporate friends.

“The reef belongs to all of us.”

Burke said that if Labor was elected it would stick to its plan to demand the remaining grant funds be returned.

In a statement on Wednesday, the environment minister, Melissa Price, said the report “confirms that the establishment of the partnership with the Reef Foundation was based on comprehensive policy development and detailed advice”.

Price said the ANAO’s six recommendations related to processes that were either already established or were in the process of being implemented by the department.

“None of the findings or recommendations affect the conclusion that the partnership is an effective way to boost the health of the reef,” she said. “It needs to be acknowledged that administrative costs are a normal and necessary part of most grants. Administrative funding for this grant is reasonable and consistent with the amount provided for other grants administered through the Reef Trust.

“The foundation has advised the audit office that the majority of their partners under the grant will receive no funds for administration of the project from the grant.”

Senator Peter Whish-Wilson, the Greens’ healthy oceans spokesman and the chair of a Senate inquiry into the grant process, said the report confirmed “what was already known – the decision to award the $444m grant to the Great Barrier Reef Foundation was rushed and flawed”.

“The process of awarding the grant was rushed, politically motivated and, as a result, full of holes,” he said. “The shortcomings identified in this report just add fuel to that fire.

“I pushed for a Senate inquiry to look into the grant because it was evident that the whole process was flawed and tainted with secrecy and unanswered questions.”

He said the deal should be scrapped and a new way found to fund reef protection.

“With this report, the Senate committee can now begin looking at what that way forward might look like,” he said.