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Joint Committee of Public Accounts and Audit
08/02/2012
Auditor-General’s reports Nos 47 (2010-11) to 9 (2011-12)

BOYD, Mr Brian, Executive Director, Performance Audit Services Group, Australian National Audit Office

JAGGERS, Mr Andrew, Executive Director, Department of Infrastructure and Transport

LONG, Ms Tina, Senior Director, Performance Audit Services Group, Australian National Audit Office

MARKOULLI, Ms Kerry, Assistant Secretary, Department of Finance and Deregulation

McPHEE, Mr Ian, Auditor-General, Australian National Audit Office

O'CONNELL, Ms Lyn, Deputy Secretary, Department of Infrastructure and Transport

SUUR, Mr Lembit, First Assistant Secretary, Department of Finance and Deregulation

Committee met at 12:15

CHAIR ( Mr Oakeshott ): We are moving into a public hearing of a review of the Auditor-General's Review of Auditor-General’s Report Nos 47 (2010-11) to 9 (2011-12). Before I begin, I welcome a delegation from Indonesia. I will not attempt to do names, despite the urgings of others, but I certainly acknowledge your presence. Enjoy your visit!

Before the hearing commences, will a member move that proceedings of today's public hearing be permitted to be broadcast? Thanks, Mr Frydenberg. There being no objections, it is so resolved.

I declare open today's public hearing, which examines Auditor General's Report No. 7 Establishment, Implementation and Administration of the Infrastructure Employment Projects Stream of the Jobs Fund. I welcome representatives of the ANAO, the Department of Finance and Deregulation and the Department of Infrastructure and Transport. Participants are asked to remember that only members of the committee can put questions to witnesses if this hearing is to constitute formal proceedings of the parliament and attract parliamentary privilege. If other participants wish to raise issues for discussion they should direct comments to the committee. It will not be possible for participants to respond directly to each other. Given the short time available, statements and comments by witnesses should be relevant and concise. Although the committee does not require you to give evidence under oath, I advise you that these hearings are formal proceedings of the parliament and warrant the same respect as proceedings of the respective houses. The giving of false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. The evidence given today will be recorded by Hansard and attracts parliamentary privilege. Before we proceed to questions, do any of the witnesses wish to make a brief opening statement to the committee?

Ms O'Connell : Yes, I have an opening statement. Firstly, the Department of Infrastructure and Transport has noted the findings of the audit report. We have accepted and agree with the recommendation as it relates to our portfolio, but I thought it would be useful to paint some of the context in which the Infrastructure Employment Projects program was developed and delivered. It was one of a group of three streams of programs delivered under the Jobs Fund at the time. It is a $150 million program within the context of the total Jobs Fund of $650 million. The other streams of the Jobs Fund were the Local Jobs stream and the Get Communities Working stream, both of which had very much the objective of immediate job creation. This was a separate stream on infrastructure employment projects, which had the object of employment, but also a twin objective of delivering some infrastructure. That is why it was a separate stream and why it was separately administered by the Department of Infrastructure and Transport. The other two streams were administered by the Department of Education, Employment and Workplace Relations.

In addressing the Infrastructure Employment Projects program, as part of the overall job stream, there were four target areas for the job stream. There were four target areas for the job stream. They were: (1) create jobs or retain people in jobs who were at risk of losing their job through downturn; (2) build skills for the future; (3) build community infrastructure or improve community amenity which generates local jobs; and (4) provide seed funding for social enterprises to start up, maintain or expand their services, generating jobs and improving community services. So, there are the twin objectives of infrastructure and employment. For all of those target areas three gateway criteria were applied. Firstly, the projects were in areas experiencing high unemployment, a significant rise in unemployment or vulnerability. Secondly, the projects had to be viable and ready to start. Thirdly, funding would not extend past 2010-11 and the projects were expected to be self-sufficient and/or require Australian government funding beyond 30 June 2011.

That is the context. It was one stream—the infrastructure component—of the three stream Jobs Fund. Consistent with the program guidelines, the department took the approach that the projects were to be initiated and selected by government. That was a decision by government in creating the Infrastructure and Employment Projects program that it wanted to retain some flexibility in this stream. The other two streams were submission based streams; this was not a submission based or competitive round process. There was also the case that in parallel with this there was a program called the Regional and Local Community Infrastructure program, which was about building community infrastructure. There were several streams within that. One was direct funding to councils for building community infrastructure; another stream was a submission based competitive round for building community infrastructure, aimed specifically at local government.

In that context there was a number of different programs running, some oriented directly at employment, some at community infrastructure building and employment. Some were submission based and competitive rounds and others were not. This one was deliberately designed to be not submission based in order to retain that flexibility. It also allowed organisations to be funded which were not local councils. The Wayside Chapel is a good example of a project that was funded under this program that is not a council based piece of infrastructure being built and delivered.

Once the projects were selected the departments worked to implement and manage those projects in an effective way, as the report has recognised. I do point out that in the audit report in paragraph 5.53, it found that the department effectively balanced those twin objectives of an economic stimulus imperative of creating jobs and of protecting the Commonwealth's interests ensuring that the project is delivered well and represents value for money. So, it is about balancing the twin objectives of creating employment and of ensuring the piece of infrastructure that is built represents value for money and is capable of being delivered.

We also note that there were certainly some delays with a number of the IEP projects, in particular as some of the proponents worked to secure the necessary partner funding and relevant approvals. As part of that balance, we held the view that we wanted to wait for those things to be in place before we signed off on any of the funding. Of the 12 projects that were within the purview of the audit, eight projects are now complete and there is considerable progress on two further projects. The other two will be completed by the end of this financial year.

The program did create jobs during the construction phase for the 12 projects that were within the purview of the audit: 2,749 people were directly employed during construction, as reported by the project proponents and a number of jobs were created as a result of those particular projects on an ongoing basis. As stated in our response to the audit, we feel the report did not adequately reflect that the IEP delivered long-term investment in community infrastructure, which has contributed to the construction sector's confidence in the areas where the projects were located and has also translated into longer term jobs. Again, the Wayside Chapel is an example. A further example is the Hobart Tennis Centre, where they were at risk of losing their status as one of the international preliminary rounds unless the project was initiated and delivered, which has effectively retained those jobs. We have not counted those on an ongoing basis. The figure I gave was just those direct jobs of people employed during the construction period.

As I said, the department has accepted the recommendation in relation to grant programs that do not involve a competitive process in future. We also note that that and responses to other audit reports are informing the improvements that we make to our program delivery and management across the department. I will just ask Andrew to briefly outline what some of those improvements are.

Mr Jaggers : The department has been trying to strengthen its program management and has taken into account the findings in the audit but also the commentary in the audit in that strengthening program. We have developed a program managers tool kit which is designed to improve consistency, quality and compliance in the delivery of administered programs. In practice, the program managers tool kit is a single point of access or a portal to information and tools and links that can assist in the design, implementation and delivery of administered funding programs. The tool kit links to Finance circulars about grant-reporting obligations, Financial Management and Accountability Act and regulation requirements and recently introduced risk assessment requirements for grant guidelines and the new policy proposals.

The tool kit organises its information around six phases of a program's life cycle: designing a program; implementing a program; selecting projects for funding; managing projects and their funding; closing a program; and evaluation. Departmental program managers and project managers have been working and using the tool kit, which was developed through 2011, so new programs that are being developed now are done so with the benefit of the tool kit and that information that is available and the training that has gone into staff around the tool kit.

We have also implemented program review processes to ensure that, as policy and programs are being developed, there is a robust policy critique of the work that has been done, that we are looking into the implementation arrangements to ensure that they are effective and efficient and that the review process continues throughout the life cycle of new programs. So the workshops that we are undertaking internally are feeding off the information that has been provided through ANAO reports but also the directions and information from Finance. So new programs are benefiting from the work that has been undertaken to improve and strengthen our program management.

CHAIR: Okay. Auditor-General.

Mr McPhee : In the interests of time, I am happy to table my statement, but I would just mention that Brian Boyd and Tina Long, who are with me today, have got considerable experience in this area of auditing the grants schemes and were also responsible for doing the audit work on the more recent report, No. 21, on administration of grant-reporting obligations.

CHAIR: Thank you. There are just a couple of administrative issues at our end. We and the Senate estimates committee have been trying to get some responses. I understand something was tabled last night as a response to questions on notice taken at the October supplementary estimates hearing, and several of those questions related to the ANAO report. Is anyone aware of that? The reason I raise it is that this is an information session for the members here. I just wanted to clarify, because from a very quick glance—they have gone live on the Senate website this morning—they do not look like adequate responses. Is there any consideration at your end of whether you feel you have answered those questions in a full and comprehensive way? From the conversations I am looking at, I suspect you are not quite sure what I am talking about.

Ms O'Connell : My understanding is that I do not think any of the answers to Senate questions on notice from estimates relate to the Infrastructure Employment Projects program. My recollection is that there were not any on the IEP program, but I can check and be corrected.

CHAIR: I am getting fed all sorts of bits of paper that say differently. Can you just check that and make sure they are as comprehensive answers as possible.

Ms O'Connell : I will.

CHAIR: From a quick scan of these, it looks like you are only going to open up a whole new round of questions, unless you provide some full and comprehensive answers to the questions that are being asked, through both Senate estimates and this process. The other administrative matter, because we have got you here and because the Department of Infrastructure and Transport provides support to Infrastructure Australia, we as a committee are waiting for a response that was due on 4 January to some infrastructure related recommendations in report No. 423. We want to seek advice from you either on notice or now as to where on earth that response is.

Ms O'Connell : Senator, I will take that on notice and I will ask the Infrastructure Coordinator and remind him of his obligations to respond.

CHAIR: Just to clarify, I am not a senator and very unlikely to ever be one. Thirdly, and before I hand over to others, the very obvious question: why did the Department of Infrastructure and Transport not apply the principles outlined in the Commonwealth Grant Guidelines?

Ms O'Connell : Our understanding is that there is not a finding in the audit report per se that says we did not follow the Commonwealth Grant Guidelines.

CHAIR: Sorry?

Ms O'Connell : There is not a finding that we did not follow the Commonwealth Grant Guidelines.

CHAIR: Is that a roundabout way of saying that you think you did?

Ms O'Connell : We believe we did. There is an audit report recommendation that talks about some suggested changes to the Commonwealth Grant Guidelines. They are probably best addressed by the Department of Finance and Deregulation.

CHAIR: Does Department of Finance and Deregulation want to answer, as directed?

Mr Suur : The recommendation from the ANAO that goes to the grant guidelines is one that asks that what we call the seven key principles of good grants administration, which are contained in the second part of the guidelines—in other words, in the best practice guidance, so not in the formal part of the guidelines—be extended to all forms of granting activity including where a grant program works through a non-competitive or a non-applications based process. In the grant guidelines we note that competitive grants processes represent better practice and the grants program in question was not a competitive process. But there are some principles which include robust planning and design, an outcomes orientation; proportionality, collaboration and partnership, governance and accountability, probity and transparency, and achieving value of public money which the ANAO has recommended ought to underpin all granting activity in the government whether it is through competitive or non-competitive rounds. We are adjusting the guidelines to make it clear that those seven principles apply to all granting activity.

CHAIR: Just to follow-up, if I could ask the Auditor-General: am I right that the audit report findings, in summary, were that the program did not achieve its objectives; the program was underspent, overtime and not targeted; and, thirdly, that there were significant public administration shortcomings, including failure to follow the Commonwealth Grant Guidelines? Were they your conclusions to this report?

Mr McPhee : They were our conclusions. I will ask Mr Boyd to add a few comments.

Mr Boyd : We are happy to expand on any of those matters, but particularly in terms of the direct question about the Commonwealth Grant Guidelines, paragraph 2.22 of our report on page 63 outlines our finding in respect of how the application, assessment and approval processes, as they were applied in not being properly reflected in the guidelines as to how the program would operate, did not in our view comply with the requirements of the Commonwealth Grant Guidelines.

In addition to what Lembit Suur from Finance notes, there is a broader issue there in terms of making it clearer in the Commonwealth Grant Guidelines the application of those principles to all programs so there can be no confusion in the future. But certainly in respect to this program we did make a finding that the Commonwealth Grant Guidelines were not complied with in that respect.

CHAIR: Okay, so I come full circle. Can I ask the same question again. Why were the Commonwealth Grant Guidelines not followed?

Ms O'Connell : In relation to the area outlined by the ANAO, we have accepted the recommendation there in terms of an implementation strategy that clearly identifies the avenues with which candidate projects were to be identified. We accept that we did not have that implementation advice and strategy. We did have guidelines for the overall program which identified it as a nonapplication based program. We did have those guidelines and they were publicly available—they were published at the time—but we certainly accept the finding that we should have gone further than that and had an implementation strategy that clearly identifies the avenues for those candidate programs.

CHAIR: So that we are clear for the record, do you think you followed the Commonwealth Grant Guidelines or do you accept the finding that was given by the Audit Office?

Ms O'Connell : We accept the recommendations of the Audit Office—

CHAIR: Which includes the failure to follow the Commonwealth Grant Guidelines.

Ms O'Connell : That is not in the recommendation. The paragraph that refers to it does not say explicitly that we failed to meet the Commonwealth Grant Guidelines. Mr Boyd just said it and I agree. That is not stated in the report. The report finds a shortcoming and we accept that shortcoming.

CHAIR: Just so that we clarify it—I am not trying to trap you; I just want to get it on the record: do you still think you followed the Commonwealth Grant Guidelines and you are also comfortable and consistent in thinking that you are accepting all the recommendations from the Audit Office?

Ms O'Connell : Yes.

Mrs D'ATH: Mr Jaggers, I know you went through the changes that have occurred as a consequence of the recommendations of the audit report. You said that there were new programs in place and they were being rolled out to improve your administrative processes in relation to grants. As a committee we hear that a lot—that there are programs now in place. What I am interested in knowing is: what training has been put in place? Is that mandatory training? Has that training occurred to ensure that people understand what those new programs and procedures are? Is there an ongoing program to ensure that those skills are kept up to date?

Mr Jaggers : The program managers toolkit is available to all staff on our intranet. It has been highlighted by the secretary of the department, the deputy secretary of the department and the management structure as the place that officers are expected to go to get information. We have also run information sessions for staff in relation to elements of the toolkit and are ensuring that we continue to train new staff in how the toolkit is to be used so that we have an increasing knowledge throughout the department, particularly through my division, about how to manage new programs. New programs are being developed. That includes the Managed Motorways program, which is one that my division is using. We have actually used the toolkit every step of the way in the development of that program, and we have had review-ready workshops to ensure that we are not just accepting that the program is developed by one section within my division but that there is a critique across the division and across the department, involving our corporate services people as well. We believe we have a toolkit that is very useful. From the secretary down it has been highlighted as the place to go, and we are training staff in using it. Of course, practically, for new programs it is the cornerstone of how we develop policy advice and program advice on implementation.

Mrs D'ATH: I follow on from that. I am pleased to hear that it is going across all of the areas, as far as knowledge of the toolkit is concerned. You say the toolkit is useful. Is it clear across the department that the toolkit is not just there as a guide but that there is an expectation that it is followed?

Mr Jaggers : I believe that is very clear.

Mrs D'ATH: In the department, do you have a dedicated unit that looks after grants and the grant programs, or is it dependent on the type of grant program that is being administered by the department?

Ms O'Connell : The areas that Andrew spoke about that produce the advice, guidance, tools et cetera are within a unit that is focused on our program delivery and our major projects. The actual administration of the various grants has in the past—in particular when we were under regional development and infrastructure—been in the subject-specific area. The majority of our grant handling is now in the nation building, infrastructure and investment area, which Andrew manages.

Mrs D'ATH: Is there a dedicated unit within that stream to oversee the administration of that grants program?

Mr Jaggers : There is a unit that is providing the advice across my teams that manage different programs. That is a dedicated team within our major infrastructure projects office that is looking constantly at strengthening not just our practices but also sharing information across the division around those practices. A couple of the branches within my division have different programs, but we have a process where our major infrastructure projects office, through this dedicated team, is driving better practice.

Mrs D'ATH: I do have some questions for Finance and Deregulation, but it goes to the recent report that was handed down in January only a couple of weeks ago on the administration of grant reporting obligations. Considering our time frame, I might hold off on those. If we do not get to them we may have the department back on a different occasion, because I am mindful the Department of Infrastructure and Transport is here in relation to report No. 7.

Mr FRYDENBERG: I thank the department for being here, and I particularly thank the ANAO for what I think is a very helpful report. Reading through it and hearing you today, it seems the objective of creating jobs is all very noble, but this program has a litany of problems both in its implementation and transparency, and we should ensure this never happens again. This is a very poorly administered program, and I state that for the record.

I want to take you first to paragraph 20 in this executive summary and drill down to your engagement with the minister's office. It says:

… when assessing candidate projects referred to it by the Infrastructure Minister’s Office, Infrastructure did not analyse each proposal’s overall quality in contributing to the stated program objectives so as to provide advice to the decision-maker on the merits of candidate projects.

My question is: why didn't the department advise or assist the minister with the early identification and targeting of promising projects?

Ms O'Connell : Firstly, can I address the question of the merit of the projects and the way in which they were delivered. I would like to point out a few references in the report where it is recognised, and one of those is paragraph 5.53 on page 204, which says that once the relevant agreements were in place, the department implemented effective procedures to monitor project commencement and progress as reported to it by the funding recipient. In addition, the funding arrangements and agreements adopted by the department reflected the importance of balancing both the economic stimulus and job creation with that of protecting the Commonwealth’s interest in ensuring that the infrastructure is delivered.

Mr FRYDENBERG: I am talking here about the identification of the project; that is a different issue. Let us talk about that.

Ms O'Connell : And the advice that we provided.

Mr FRYDENBERG: Yes, and your engagement with the minister's office in this.

Mr Jaggers : When projects were identified, the department assessed those projects against the four target areas to see if the project was consistent with the targets that had been set under the guidelines, which were around creating jobs or retaining people in jobs which were at risk due to a downturn; building skills for the future; building community infrastructure or improving community amenity, which generates local jobs; or providing seed funding for social enterprises. So the department provided advice to the minister in relation to how the candidate projects fitted within those target areas. We also provided advice with respect to the gateway criteria that were contained in the guidelines and whether the project met one of those gateway criteria. In the case of all 12 projects that were approved by the minister, the department advised that they did meet that criteria and provided implementation advice to the minister.

Mr FRYDENBERG: But the ANAO report says:

… the department limited itself to being satisfied that each of the threshold criteria could be viewed as having been met to a minimum standard … This reflected the department’s quite narrow view of its role in the administration of this program, and does not sit comfortably with the requirements of the enhanced grants administration framework.

So my question to you is: why have you taken a minimalist approach here? Why did you not see it as the department's role to engage with the minister in a more proactive manner? Why is the minister's office well placed, or better placed than you are, to identify projects?

Ms O'Connell : Senator, this goes to the—

Mr FRYDENBERG: I am not a senator; I am a member of the House of Representatives.

Ms O'Connell : My apologies. This goes to the overall design of the programs, and that is the context with which I started in my initial opening statement and explanation. There were three streams in the Jobs Fund. Two of those were designed as competitive application based streams. This one was designed not to be based on competitive application, to allow the government some flexibility around decisions on projects that it would fund. Equally, at the same time, there was a community infrastructure program that was also part of the stimulus that was an application based competitive round process, or parts of it were an application based competitive round process. So there were a range of different streams of funding and programs in response to the GFC. This one was designed in such a way that it was not competitive application based and it would also allow proponents who were not perhaps local councils—for example, the Wayside Chapel et cetera—to have their projects considered and funded.

Mr FRYDENBERG: Did you ever give advice to the minister that you should play a more proactive role in the identification and selection of targets?

Ms O'Connell : No, I—

Mr Jaggers : Not to my knowledge.

Mr FRYDENBERG: If you had your time again, would you do that?

Ms O'Connell : Part of the audit findings—and we have accepted this finding and indeed the recommendation—is that we should have developed an implementation strategy that identified how projects would be selected, nominated and brought forward. We have accepted that and will do so in the future.

Mr FRYDENBERG: Do you accept that that should be on the initiation of the department as opposed to the minister's office—that it should be identifying projects as a rule?

Ms O'Connell : We are saying that we accept that we should have developed an implementation strategy which would make it clear how projects would be identified.

Mr FRYDENBERG: But does that involve a more proactive role from the department, a bottom-up approach, as opposed to the department instructing you, 'These are the projects we want you to go out and adhere to'?

Ms O'Connell : We have said that for any future programs we would have an implementation strategy and that would make it clear as to whether we were doing a bottom-up approach or we were not—

Mr FRYDENBERG: But I am asking specifically: do you think—I want your opinion here—it is better for the department to be playing a proactive role in the identification, selection and targeting of these projects?

Ms O'Connell : We certainly could have and should have and accept that we could have played a more proactive role in identifying projects and bringing them forward.

Mr FRYDENBERG: Thank you. On to the next one: the local employment coordinators. These are people with firsthand knowledge of the priority areas, so why weren't they engaged with in terms of this project?

Mr Jaggers : It was not a requirement under our guidelines to engage with local employment coordinators.

Mr FRYDENBERG: But isn't that the issue here—guidelines? You are the department. You are the ones with a knowledge of what is happening on the ground. As I understand it—and you are the experts, not me—local employment coordinators are located in these prior priority employment areas. This is a jobs creation program. Why didn't you consult with them?

Mr Jaggers : There were a range of programs that local employment coordinators were engaging with government on. In relation to this particular program, the government wanted the flexibility to be able to identify projects, and that is how the guidelines were written, which we followed.

Ms O'Connell : It is important that the design of this program was not restricted to the priority employment areas. It certainly had employment criteria which we applied and on which we provided advice to the minister in terms of the projects that were put forward. So we certainly had regard to the criteria related to employment, but it was not restricted to priority employment areas, so we saw it as—

Mr FRYDENBERG: It just seems to me that you are spending a lot of money here. You have some expert advice on the ground. There should be a more consultative approach with groups like the local employment coordinators. I just have two other quick questions. In terms of other projects that have unsuccessfully applied to oversubscribed stimulus programs, did you make any attempt to reach out to them to get them to seek support under this program? It is something else that the ANAO have referred to here.

Mr Jaggers : No we did not. As explained, in terms of implementing the program the projects were identified by the government. They wanted to flexibility to—

Mr FRYDENBERG: By the minister's office?

Mr Jaggers : For instance, one of the projects funded under the program was the Fitzgerald River National Park road upgrade and walking trail. That was a project that was identified by the government after being approached by the Western Australian government, after a nickel mine closure in Ravensthorpe in Western Australia. The government wanted the flexibility to respond to those opportunities, and that is how projects were selected through this particular program.

CHAIR: Let me jump in there. There are competing principles in all these things. In this particular program, am I right in inferring, from listening to you, that the flexibility in the program objectives was of higher importance than a jobs outcome?

Ms O'Connell : No, flexibility is not part of the criteria.

CHAIR: No, but the answer I just heard seemed to indicate that an objective of this program was flexibility in decision making.

Ms O'Connell : In establishing the program within the suite of all of the programs—you have two other jobs fund programs, community infrastructure competitive rounds, and community infrastructure direct-to-local-government rounds—the intent of this program was to retain the flexibility to be able to fund projects such as the one that Andrew just mentioned. It was put forward by the Western Australia government when a nickel mine was closing at Ravensthorpe and 200 people were unemployed. It was an opportunity to do a project in response to those representations.

CHAIR: Am I verballing you guys? I am being left with the impression—as I think the committee is—that in setting up this particular program, flexibility was more important than maximising a jobs outcome in consideration of program objectives?

Ms O'Connell : No, not in terms of program objectives. I am saying that in the whole suite of programs that were established the jobs objective is there. It is there in terms of the target areas, the gateway criteria et cetera. The jobs objective is there. When those programs were 'conceived', if you like—decided upon—there were those that were competitive; they had more emphasis on infrastructure and community infrastructure. There were those that were directly about jobs—again competitive and application based. And the concept behind the Infrastructure Employment Projects Program was to be able to fund projects such as the Wayside Chapel. That is not a community infrastructure project that is sponsored by the local government; it was directly sponsored from the Wayside Chapel.

CHAIR: Sure. And as good as the Wayside Chapel is, your evidence to us is that the Wayside Chapel wins over other projects based on maximising a jobs outcome.

Ms O'Connell : This was a non-competitive process, so it needed to meet the gateway criteria. It met that gateway criteria, which includes criteria in relation to jobs.

Mr FRYDENBERG: Finally, it says here that no jobs were reported as created or retained until over a year into the program, and none of the approved and contracted projects have been located in a priority employment area. Is that correct?

Ms O'Connell : I have provided, in my statement, the jobs figure in terms of people employed directly as a result of the 12 projects that were—

Mr FRYDENBERG: Within the first year?

Ms O'Connell : Within the first year it is my understand that we did not ask for immediate job numbers to be reported to us.

Mr FRYDENBERG: I am being told here that no jobs were reported as created or retained in the first year of the program. So here is a program that the government, with much fanfare and expense, is engaging for job creation but for the first 12 months you have not created one job.

Ms O'Connell : That is not what I believe it is saying. We did not ask job numbers to be reported.

Mr FRYDENBERG: I see. So you are saying that jobs were created but not reported. Is that a statement of fact?

Mr Jaggers : The report is saying that 950 jobs had been reported under the program but there had not been any reports to us until 12 months afterwards—

Mr FRYDENBERG: I understand that.

Mr Jaggers : so we had not received reports of positions. There would have been some work commencing as projects were announced, and of course there would have been in those areas a creation of confidence around the project going ahead.

Mr FRYDENBERG: But in terms of specific jobs, do you know as a matter of fact—and this is for the Hansard—that jobs were created? Outside the parliament I am talking about now—on the ground—do you know that jobs were created and retained in the first year of the program?

Mr Jaggers : It was not reported.

Mr FRYDENBERG: I am not asking that. I understand 'reported'; we have had that debate. I am just asking as a matter of fact. You have told me that you were not asked to report in the first year, and that is why you do not know. I am asking you, from your opinion; you are managing this program: in the first year were there jobs created or retained?

Ms O'Connell : As one example, we can take the Hobart Tennis Centre project. Hobart was about to lose one of the international tennis events held there regularly. Had the project not been announced and not proceeded with, they would have lost that event and that would have resulted in unemployment obviously.

Mr FRYDENBERG: That is different. I am actually talking about job creation. I am asking about what has actually being created. You have announced something and as a consequence further decisions may or may not be taken, but outside of that you cannot be definite about that. But I am talking about job creation particularly.

Ms O'Connell : I am saying that that project allowed jobs to be retained.

Mr FRYDENBERG: That was subsequently; I am asking you about the first year.

Mr Jaggers : A number of projects were announced in 2009. We did not get reports from proponents about whether they created jobs during that period, as the ANAO has reported.

CHAIR: So you define saving jobs as job creation?

Ms O'Connell : No.

CHAIR: I just want clarify this, because then there is a process attached to that. I have got projects in my electorate, as would every member of parliament, where there are campaigns to build something to save an event. But are you defining that as job creation?

Ms O'Connell : No. One of the four target areas was to create jobs or retain people in jobs that were at risk due to the downturn. That was one of the four target areas. So I am saying, consistent with that, that you have the ability from whatever the infrastructure investment is, to retain jobs. So there are direct jobs, and, as I said for the 12 projects, there were 2,749 people directly employed during construction. That is not a number that considers jobs that were retained as a result, say, of losing an event.

Mr FRYDENBERG: That did not take place in the first year though.

Mr Jaggers : We do not have data to say when those people were working. It is something that we might be able to take notice but we do not have it.

Mr FRYDENBERG: Sure.

Senator SHERRY: Did you ask?

Ms O'Connell : For the job numbers?

Senator SHERRY: Yes.

Mr Jaggers : I would have to check when we did ask. We will take that on notice.

Mr Boyd : As part of the program administrative arrangements, once the project is approved it proceeds to having a funding agreement signed. One of the points we make in the audit report is that because, if you like, of the underdeveloped nature of some of the projects, they might have been announced and approved but they were not yet ready to proceed to construction. So then there was considerable delay in having funding agreements signed. There is a chart on page 35 which starts to illustrate that in a jobs' perspective.

Once a funding agreement is signed, under the funding agreement the project proponent has to provide regular progress reports which, amongst other things, say how much money has been spent, but also how many jobs have been created or retained. Up until August 2010 the department had received a number of progress reports from the quite small number of projects which had actually proceeded to have a funding agreement signed, which is one issue from our perspective for a stimulus program to be 12 months into a two-year time frame and have very few projects contracted and proceeding to construction. Secondly, there were no progress reports which identified any jobs created for any project until August 2010. There were a number of progress reports received under a number of projects, which reported no jobs created or retained up to that point in time.

Senator SHERRY: I understand all that, but it does not answer my question. Did the department ask?

Mr Boyd : I guess that was my long way of saying, 'Yes, they did,' and the answer was no.

Senator SHERRY: Whether it was the long way or whatever way it was, I was not asking you. I would like to hear from the department. Did you ask? It is a pretty simple, straightforward question.

Ms O'Connell : We will take on notice to come back on exactly when we asked for the job numbers to be reported.

Mr FRYDENBERG: The second part of my question was: were none of the improved and contracted projects located in the priority employment area?

Mr Jaggers : Of the 12 that were identified in the ANAO audit report, that is correct.

Mr FRYDENBERG: That is very strange.

Ms O'Connell : I point out that the priority employment area is not the criterion for these projects; the criteria are 'experiencing high unemployment', 'a significant rise in unemployment' or 'vulnerability'. All of the projects which were funded have met those criteria.

Mr FRYDENBERG: I was going to finish, but, because you just mentioned that, I have to ask you what the definition is of a priority employment area.

CHAIR: I can answer that. It is very similar.

Mr FRYDENBERG: It would make sense, then, for you to target priority employment areas. It is quite bizarre that not one of the 12 projects you just mentioned was in a priority employment area.

Ms O'Connell : In terms of employment and the correlation with the projects, clearly places such as Hobart and Ravensthorpe in Western Australia—which we have mentioned—are both areas with high unemployment.

Mr FRYDENBERG: How many priority employment areas are there?

Ms O'Connell : The ANAO might be able to answer that.

Mr Boyd : There are 20.

Mr FRYDENBERG: So there are only 20 in the country, and this is a job creation project for which—as the chair has indicated—your criteria are very similar to those for the priority employment areas, and you have managed to avoid all of them.

Ms O'Connell : This element was not just a job creation program. The other two elements—the local job stream and the Get Communities Working stream—are very strongly oriented to job creation. They had a balance of delivering community infrastructure and providing and retaining jobs as part of that.

CHAIR: I thank all the witnesses who have given evidence at the public hearing today. There were a couple of questions on notice at the end there, so, if you could please provide some additional information to the secretariat, that would be appreciated. If the committee has any additional questions, they will send those in writing through the secretariat. We will deliberate on the evidence provided, the audit report and the reporting. Is it the wish of the committee that the opening statement from the Auditor-General be tabled? There being no objection, it is so ordered.

Resolved (on motion by Mr Frydenbe rg ):

That this committee authorises publication, including publication on the parliamentary database, of the transcript of the evidence given before it at public hearing this day.

Committee adjourned at 13:03