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Environment and Communications Legislation Committee
18/02/2019
Estimates
ENVIRONMENT AND ENERGY PORTFOLIO
Australian National Audit Office

Australian National Audit Office

CHAIR: I welcome officers from the Australian National Audit Office. I think we will go straight to questions. I don't believe there would be an opening statement at all.

Senator WHISH-WILSON: This is figure 1.1 from your report on the Great Barrier Reef Foundation. Your recent audit of the Great Barrier Reef Foundation grant looked primarily at the process of awarding the money, the $444 million, rather than the amount or the decision to award the amount, is that correct?

Mr Boyd : I don't understand the distinction; the amount is part of the decision to award the grant.

Senator WHISH-WILSON: So you looked at whether that was the right amount to—

Mr Boyd : Not in that respect, as to what amount—

Senator WHISH-WILSON: That's what I mean.

Mr Boyd : No, we weren't looking at whether that was—

Senator WHISH-WILSON: Did you assess on what basis the $444 million was awarded, or whether it was appropriate?

Mr Boyd : Our understanding was that the amount relates to enabling there to be an announcement that a total package of $500 million would be made available to the reef, this obviously being the largest component of that.

Senator WHISH-WILSON: Yes, I've read it and I understand. I just wanted to confirm up-front that you didn't look at whether that was the right amount of money to fulfil any particular outcome.

Ms Rauter : The ANAO generally doesn't audit government policy decisions.

Senator WHISH-WILSON: That's what I thought. In figure 1.1, almost in passing, your report states:

16 June 2017

Government advised by DoEE of the need to 'escalate the response to the declining health of the reef' to avoid an 'in-danger' listing by the World Heritage Committee

Can you provide me with a little bit more detail on that particular component of it.

Mr Boyd : That was written advice provided to government by the department as part of, if you like, what we refer to as a comprehensive development process. The fact that more money needed to go into the reef was something the department had been advising for some time. You'll see that one there is one of a number of instances we referred to in the lead-up to the eventual decision to going down a different path of awarding a grant to the foundation where the department was advising there's a need for additional funding to go into the reef.

Senator WHISH-WILSON: Who within the department advised or informed you of the decision back then on 16 June to escalate funding because of an imminent World Heritage 'in danger' listing?

Mr Boyd : No-one in the department advised us as such; we examined all the records of advice provided by the department, including that particular piece of advice.

Senator WHISH-WILSON: And that was provided directly to the minister's office, is that correct?

Mr Boyd : Yes, it was written advice provided by the department.

Senator WHISH-WILSON: You viewed that advice. Did it provide any indication or any evidence around the amount of funding that was required to avoid an 'in danger' listing by the World Heritage Committee?

Mr Boyd : Over the course of the development process, various amounts were discussed by the department in its advice looking at a way forward. We looked at both ministerial advice to the portfolio from the ministers to the department and submissions made by the portfolio minister to his cabinet colleagues.

Senator WHISH-WILSON: I take it, then, that at that stage from 16 June through to 6 November 2017 the first package of $238.9 million provided to ministers was a work in progress for what needed to be escalated?

Mr Boyd : I think that's a reasonable characterisation.

Senator WHISH-WILSON: Is it your understanding that this is what precipitated these other payments? We have that one on 6 November, another package on 29 November and then ultimately a preferred option of $320 million offered on 2 March?

Mr Boyd : As part of each budget process, including additional estimates, some of these get picked up—I don't know if you're aware; they're called portfolio budget submissions—where ministers, assisted by departments, will provide advice to cabinet and put to the ERC areas where they think further spending is needed.

Senator WHISH-WILSON: It might sound a bit innocuous, but you do have it as the start of your time line when the grant started. Although Mr Knudson offered me some similar advice today when I asked him, I found it very hard to get that answer from anyone in the Senate inquiry prior to this—that it was a World Heritage 'in danger' listing, or the threat of that listing, which precipitated a chain of events ultimately leading to the grant.

Mr Boyd : As you'll see, we've used quotation marks there in places. We try to faithfully reflect what we see as the advice both through what's called a section 19 process, where the department sees a formal draft of our report and through what comes before that, where departments provide drafts, which are called report preparation papers. This chart was included in each of those drafts, so if the department felt that there was something inaccurate or incomplete in what we were depicting then it was more than open to them to suggest that to us.

Senator WHISH-WILSON: Can I check some information we received during our Senate inquiry. As chair of the committee I wrote to ex-Prime Minister Malcolm Turnbull asking him to provide his account of events. On your time line you have:

2 March 2018

Preferred option of $320.5 million over 6 years for Reef protection

Then, four days later:

6 March 2018

Government decided that a proposal be brought forward…

Was it your understanding that the decision to accept or reject the proposal for $320 million was on 6 March?

Mr Boyd : My recollection of the papers around that was that yes, what was sitting before ministers at that time was that 2 March briefing. What's reflected on 6 March is the decision taken with that briefing as part of the input to the decision-making process. Sometimes when we audit these things we see a decision taken with no written input. On this occasion there was written input, but the decision wasn't to go with what had been recommended to ministers. That happens. It's not the first and I expect won't be the last time that we will see that.

Senator WHISH-WILSON: There were essentially two substantive changes. The amount was $443 million, so significantly more than the $320 million, and it was going to be provided to a single provider. That would involve, in your words, 'a partner outside the General Government Sector' to co-fund. Is that your understanding?

Mr Boyd : They're probably not our words insomuch as we very closely reflected their terms of the decision. If the decision is to agree to the recommendation, it is quite easy therefore to follow that chain, because you'll see all the lead-up work leading to the recommendation. If you need to unpack what has been decided where the decision is to agree to a recommendation, that is available to us as auditors. On this occasion, where the decision was different to what was put forward, it is more difficult for us to unpack it in that way. We learn more from talking to the people who were there in the department at the time and also seeing what transpired afterwards.

Senator WHISH-WILSON: You have to forgive my not knowing but, when you do audits, are you able to see ministerial communications with the department?

Mr Boyd : Yes.

Senator WHISH-WILSON: Mr Turnbull, in responding to the committee, confirmed:

… that the Hon Scott Morrison MP, then-Treasurer and now Prime Minister, and Senator the Hon Matthias Cormann, the Minister for Finance, preferred the approach of a single payment as it would improve the capacity of future Commonwealth Budgets, and because the outlook for 2017-18 'looked promisingly strong'.

They were the words from Malcolm Turnbull to the committee. Did you see any correspondence or any advice on that aspect?

Mr Boyd : Prior to that decision?

Senator WHISH-WILSON: No. I'm trying to figure that out, but I'm wondering—it was going to be my next question—whether you had seen anything between that 2 March date and the 28 March date, or the 21 March date.

Mr Boyd : Once that decision was taken, in terms of understanding why it was important that the funds flow in that financial year. And probably the more important thing, as we understand the decision, wasn't so much that it be a single party but that that party—or parties, as it could have been, because one of the issues we raise is whether there could have been some competitive tension—needed to be outside the general government sector, because if the payment was made, for example, to a Commonwealth entity within the general government sector, in terms of the budget accounting rules, those funds would not have been treated in the same way as by paying it outside the GGS.

Senator WHISH-WILSON: This is actually not on the time line, but are you able to tell me when there was correspondence between Senator Cormann and the now Prime Minister in relation to a single payment to be made that financial year?

Mr Boyd : The materials we were seeing were more communications from within the department, between officials within the department, as well as some communications with ministers' offices. And most of the communication I'm talking about there was more in the form of emails and so forth—either emails directly talking about it or emails saying, 'This is what we've been told.'

Senator WHISH-WILSON: Probably in relation to that: on 6 March the government decided that a proposal would be brought forward for a tied reef fund with a partner outside the general government sector to be funded that year, 2017-18. Then there were the 9 March discussions in the minister's office about a new cabinet submission. The next date was 21 March, which is what I want to ask you about, when advice provided to government by the Department of the Environment and Energy identified the foundation as the obvious partner. Was it your understanding from the documentation you looked at that on 6 March there was no discussion or mention of the foundation at all?

Mr Boyd : That is our understanding. It's something we attempted to confirm with the department. When we audit grant programs, obviously a key thing is who's going to receive money, and when it's through a non-competitive process that hasn't otherwise been advertised then obviously a key question is, was that decision as recorded on 6 March—the foundation was not named—was it always intended to be the foundation, or was the department genuinely charged with identifying a suitable partner? All the evidence we saw, both contemporaneous evidence at the time and the advice we got from the department when we asked them about this, was that the foundation hadn't been identified or suggested to them. It was in the other direction. They were told to find a partner, and it was the department that identified the foundation as, in their terms, the obvious partner. So, that was the advice back to government—that it should go to the foundation.

Senator WHISH-WILSON: It just seems to me, from having gone through the recent inquiry on 6 March, that the government had made a decision for a tied reef fund with a partner outside the general government sector. There weren't many suspects, at least at that stage.

Mr Boyd : No, there weren't many. I guess the sorts of things we looked at—the department had done some work in the period before then, looking at how they could work with other sectors to have them raise money to contribute to reef activities. Again, that had identified a number of partners. WWF was one, and the Conservation Foundation, and the foundation was identified—I'll put it this way—as the most successful in a space where there hadn't been a lot of success. So, at that point the department had its own consulting advice and said the foundation was raising about $3½ million a year, which is much more than what we're talking about here, but that was still more than others had been raising. The question we had in coming to the view that it was the foundation—what steps did the department take to investigate other possibilities?—the advice as reflected in our audit report was that the department said to us, 'There's nothing recorded, but we had internal discussions about other possibilities', and that was the extent of it.

Senator WHISH-WILSON: Did that surprise you, that there was nothing recorded? Is that standard?

Mr Boyd : Well, as I said, a clear thing with a grant is who you're going to award the grant to. I think you'd say this was a very sizeable grant, through a non-competitive process. Identifying who would be the recipient of that is quite an important matter. We obviously would have preferred that if there was a canvassing of other options then they be recorded—not just who was being considered but the pros and cons of each of them.

Senator WHISH-WILSON: The advice provided by the department on 21 March identified the foundation as the obvious partner. Are you able to say who within the department provide that advice or came to that decision?

Mr Boyd : My recollection is that it was the relevant first assistant secretary in the area the department responsible for this that identified the foundation as the most obvious partner.

Senator WHISH-WILSON: Could you give me their name?

Mr Boyd : Stephen Oxley.

Senator WHISH-WILSON: I will have to go back and check, but, if you then go down a little bit further down the time line, the government decided on 28 March that they should have discussions with the foundation about this tied partnership and the awarding of $443 million and then 10 or 11 days later the Prime Minister met with the chair of the foundation. I will ask Mr Pratt when he comes back, but we did go through this in the Senate inquiry. My understanding was the decision to award that in the meeting with the Prime Minister wasn't well known by key people in the department or other people, yet your time line shows the Department of the Environment and Energy made that decision 2½ weeks earlier.

Mr Boyd : In terms of making a decision, they made a decision that the partner they would propose to ministers was the foundation. It was at that meeting, which I understand the then environment minister was also present at, that it was first raised with the foundation as to whether they'd be prepared to be the recipient of such a grant.

Senator WHISH-WILSON: It's a bit of a personal crusade of mine, because, to point, I haven't been able to find out whose idea this was. Based on your time line and what you've told me tonight, it was a generic idea to start with. It was a theoretical idea to have a refund to someone outside the public sector, and then 2½ weeks later a recipient was identified, but no-one has put their hand up and said, 'This is my idea.' Can you give me any further illumination, apart from Mr Oxley?

Mr Boyd : In terms of the idea that it be the foundation, as I say, that came from within the department. If you look at chapter two of our audit report, we look a bit more broadly at the Reef Trust, where we look at the other funding which has been coming out of the reef trust. The foundation has been one of the recipients of funding but, by all means, not the only recipients. The department was familiar with the foundation. They were used to dealing with them. They were also used to dealing with some others. From what we can gather, the thing that really stood out about the foundation was the fact that they were seen as the entity that had been most successful up to that point in time in terms of raising funds from sectors other than government to contribute towards reef activities. The things that we point to in the audit report is that, when you look at the foundation's fund raising, there's a history of fund raising there, but even then it's by no means anything like the scale we're now talking about.

Senator WHISH-WILSON: It's $9 million, if I remember rightly, versus $444 million. Thank you for your report. It has been duly noted in our Senate inquiry recommendations and final report. If you don't mind, I'll put some more detailed questions on notice around my questions tonight.

CHAIR: Thank you very much, officers from the ANAO. You are now released.