Chapter 3 Audit Report No. 03 2010-11 The Establishment, Implementation and
Administration of the Strategic Projects Component of the Regional and Local
Community Infrastructure Program
The onset of the global financial crisis in 2008 caused a severe loss of
confidence, not only in the financial sector, but also in households and
businesses around the world. The result was a period of global economic
downturn and a prospect of rising unemployment in many countries.
In response, many governments around the world have adopted fiscal
measures to support employment and economic recovery. Domestically, the
Australian Government announced a series of stimulus measures in late 2008 and
early 2009. Included in these was the Regional and Local Community
Infrastructure Program (RLCIP).
The RLCIP is administered by the Department of Infrastructure,
Transport, Regional Development and Local Government (DITRDLG). Its
establishment had been announced in the May 2008 Budget, to replace from
2009-10 the Regional Partnerships Program, which had been subject to a report
by the ANAO in November 2007.
Also in May 2008, the Minister for Infrastructure, Transport, Regional
Development and Local Government asked the House of Representatives Standing
Committee on Infrastructure, Transport, Regional Development and Local
Government (the House Standing Committee) to investigate and report on options
for the new regional funding program. On 5 November 2008, the House Standing
Committee tabled an Interim Report on its inquiry into a new regional
development funding program. The Committee’s decision to issue an interim
report stemmed from the Government accelerating its nation building agenda in
response to the global financial crisis. The Committee’s intention was for the
recommendations of the Interim Report to help inform government decision-making
as the Government considered the manner in which it would distribute funds for
regional infrastructure projects.
On 12 November 2008, one week after the House Standing Committee tabled
its Interim Report, the Government decided to establish a $300 million RLCIP
- $250 million
allocated amongst all councils (referred to as the Council Allocation component);
- $50 million to fund
high priority infrastructure projects with a value of greater than $2 million
that would be selected through a competitive, application-based process
(referred to as the Strategic Projects component).
The Strategic Projects component is the subject of this audit report. A
separate performance audit of the Council Allocation component was tabled in May
Conduct of the 2009 application round
Initial call for applications
The initial call for applications for the first round
of the Strategic Projects component was made on 21 November 2008, three days
after the Program was announced. On that date, the Minister for Infrastructure,
Transport, Regional Development and Local Government:
- released the Program
- released the official
timetable, which was intended to encourage local councils and shires to
identify local projects as soon as possible so as to have funding released
- announced that
application forms for the $50 million Strategic Projects component would be
available (on the Department’s website) later that day for projects seeking a
minimum Commonwealth contribution of $2 million or more; and
- announced that
complete applications must reach the Department by 23 December 2008.
By 23 December 2008, DITRDLG had received 344 applications that sought
some $1.2 billion of Commonwealth funds for projects with an overall value of
Program funding increased from $50 million to $550 million
In the context of the impact in Australia of the evolving global
financial crisis, at its meeting on 28 January 2009, the Strategic Priorities
and Budget Committee of Cabinet considered options to provide further economic
stimulus through the Infrastructure, Transport, Regional Development and Local
Government portfolio. Further discussion occurred after the Committee meeting
between the Office of the then Prime Minister and the Office of the Minister
for Infrastructure, Transport, Regional Development and Local Government.
Subsequently, on 2 February 2009, the then Prime Minister wrote to the Minister
for Infrastructure, Transport, Regional Development and Local Government:
- confirming the
allocation of an extra $500 million over two years to the Strategic Projects
component of the RLCIP, with $250 million to be allocated in 2008-09 and $250
million in 2009-10; and
- reiterating the 28
January 2009 decision that priority was to be given to projects that could
proceed quickly and for which co-investment from councils and other partners,
such as State and Territory governments, was proposed.
On 13 February 2009, the Minister for Infrastructure, Transport,
Regional Development and Local Government announced that the Government had
secured the passage of the $42 billion Nation Building and Jobs Plan legislation,
which included the additional $500 million for the Strategic Projects component
of the RLCIP. The Minister’s announcement also outlined that:
The Government will give local councils and shires the
opportunity to submit new or revised applications for the Regional and Local
Community Infrastructure Program – Strategic Projects.
In the context of the Strategic Projects component having been increased
from $50 million in available funding to $550 million, the Minister’s
announcement advised that councils had until 4pm Australian Eastern Daylight
Saving Time, Friday 6 March 2009 to submit new or revised applications. It was
further announced that the existing Program Guidelines would continue to apply.
By the revised closing date, a total of 484 applications were received
seeking $2.05 billion in Commonwealth funding compared with the $550 million
that was available.
The decision about which applications were to receive Program funding
was made by Cabinet, in a meeting on 22 April 2009. Cabinet agreed to the
recommendations of the Minister for Infrastructure, Transport, Regional
Development and Local Government that a total of $549.672 million be approved
for 137 projects. The successful projects
were publicly announced over the course of April and May 2009. Funding
Agreements for 136 of the projects were signed during June 2009, with a total
of nearly $230 million in program funds paid before 30 June 2009. The final
Funding Agreement was signed in late July 2009.
In respect to the program context and way in which it was delivered, in
June 2010 the Department advised ANAO that:
The program was implemented during the global economic crisis
and the Government’s response to the emerging crisis. Between September 2008
and the 2009 Budget, the government dealt with an unfolding global and economic
crisis which required senior Ministers to re-consider and adjust policy and
program settings as the impacts of the crisis became clearer. This included
considering projects which would not only provide an immediate economic
stimulus but also provide community infrastructure investment for the recovery
post 2010-11. The program changed significantly as the Government, through
successive consideration of stimulus measures, expanded the program from $50
million to $550 million and adapted the timeframes and approach to assessment
and delivery of the program.
The Strategic Projects component of the RLCIP is a discretionary grants
program. Commonwealth grant programs involve the expenditure of public money
and are thus subject to applicable financial management legislation.
Specifically, the Financial Management and Accountability Act 1997 (FMA
Act) provides a framework for the proper management of public money and public
property. This framework includes requirements governing the process by which
decisions are made about whether public money should be spent on individual
grants, including those made under the Strategic Projects component.
While not affecting a Minister’s right to decide on the allocation of
grants, since December 2007, the financial framework applying to grants
decision-making has been progressively enhanced. Two of the significant changes
made on 14 December 2007 were to require that guidelines for any new grants
program be considered by the Expenditure Review Committee of Cabinet; and
Ministers were not to make any decisions on grants without first receiving
departmental advice on the merits of each grant application relative to the
guidelines for the program. These requirements remain in place.
In December 2008, prior to the re-opening of applications to the
Strategic Projects component, the Government agreed to a range of measures to
reform the administration of grants, including the development of an improved
framework for grants administration. These decisions were made in response to
the 31 July 2008 report of the Strategic Review of the Administration of
Australian Government Grant Programs (Strategic Review of Grants). The
Government’s December 2008 decisions have now been reflected in the new policy
framework for the administration of grant programs by agencies subject to the
FMA Act that took effect from 1 July 2009.
Whilst the enhancements to the grants administration framework made in
December 2007 applied to the design and implementation of the Strategic
Projects component, the changes to the FMA Regulations and introduction of the
Commonwealth Grant Guidelines (CGGs) occurred after projects had been approved
The ANAO Audit
The audit was undertaken under section 18 of the Auditor-General Act
1997. The objective of the audit was to assess whether the Strategic
Projects component of the RLCIP has been effectively designed and administered.
Amongst other things, the audit examined the design of the Strategic Projects
component; the processes by which applications were sought, assessed and
successful projects approved for funding; and the extent to which timely
economic stimulus has been provided through the funded projects.
Overall audit conclusion
In its overall audit conclusion the ANAO defined the objective of the
Strategic Projects program:
The Strategic Projects component of the RLCIP was one of a
number of programs introduced by the Australian government in response to the
global financial crisis. Initially announced with funding of $50 million, this
was increased in January 2009 by a further $500 million so as to increase
stimulus spending in local communities as part of the Government’s response to
the global financial crisis. In addition to the intention of providing timely
economic stimulus, the Program is also expected to provide longer term
community infrastructure investment by funding additional projects not already
underway, or additional stages of projects that were already underway.
The objectives of the RLCIP were to create local jobs and
stimulate local economies in the short term and medium term. The Strategic
Projects component was intended to contribute to this objective by directing
funding towards a limited number of large strategic projects that were ready to
proceed. Projects were to be allocated funding on a nationally competitive
basis through an application process open to all local councils.
The ANAO noted that despite a number of reports and reviews that have
emphasised that ‘potential applicants and other stakeholders have a right to
expect that program funding decisions will be made in a manner, and on a basis,
consistent with the published program guidelines and selection documentation’
the Department failed to implement prioritisation and shortlisting criteria.
Further the ANAO found that the Department failed to outline the assessment
criteria that would be used to select the successful applicants.
The ANAO found that the Department had undertaken a risk assessment of
the shortlisted projects but had failed to advise the Minister on which
projects met the program guidelines:
While the risk assessment results were provided to its
Minister, the department did not provide recommendations to the Minister about
which projects should be approved within the available funding of $550 million.
This was a significant failing on the part of the Department given that, since
December 2007, the enhanced grants administration framework has required
departments to provide advice to Ministers on the merits of each grant
application relative to the guidelines for the program.
The ANAO found that on 21 April 2009, the Minister’s Office advised the
Department of a list of 137 projects, which with small variations was
consequently endorsed by Cabinet, that had been arrived at on the basis of one
or more of the following criteria:
distribution of projects;
- likely economic
stimulus and community impact, drawing on population sizes, capacity within
local government authorities, percentage of partnership funding, and nature of
- whether alternative
funding sources are available or have been provided.
The ANAO found that applicants were not made aware of these selection
criteria and that the process had not been adequately documented:
Whilst not inconsistent with the Program objectives and the
published Guidelines, these criteria had not been published or otherwise
advised to councils and other stakeholders. Further, there was no documented
assessment of each application against the three criteria outlining: the extent
to which each application had been assessed as satisfying each criterion; the
information relied upon in making the assessment; or an overall assessment and
ranking of each competing application.
With regard to the geographical distribution of the recommended
projects, the ANAO concluded:
... whilst the total amount of funding provided a reasonable
geographic spread and was largely consistent with the proportion of electorates
held by the major parties and Independent members, in terms of the number of
applications, projects located in electorates held by the Australian Labor
Party (ALP) and Independent Members were more successful at being awarded
funding than those located in electorates held by the Coalition parties.
Overall the ANAO concluded:
The Strategic Projects component was publicised as being a
nationally competitive discretionary grants program to which all councils were
eligible to apply. In this light, the distribution of grants in respect to
those councils who had applied for funding, combined with the absence of a
documented assessment of each application in terms of the three criteria [see
paragraph 3.23], means that the basis on which decisions were made to include,
or exclude, particular applications to fit within the budget allocation was not
clear. In particular, the reasons for the selection of 131
of the 188 shortlisted applications, and non-selection of 57, shortlisted
applications, were not apparent from the program documentation or subsequent
advice. The reasons for the selection of the additional six projects were documented,
although in each case the documented reasons either involved the waiving of
Program eligibility criteria (two applications) or were based on indications of
considerations that were not included in the Program Guidelines as being
relevant to the selection of projects (four applications).
To improve the transparency of grants approval processes,
the financial framework applying to funding decisions for grants was
subsequently enhanced by the Government with effect from 1 July 2009 to require
decision-makers to record the substantive reasons for their approval, having
regard for the relevant statutory obligations that regulate the approval of
spending proposals, in addition to the factual terms of the approval. This
reinforces the obligation, first introduced in December 2007, for departments
to provide advice on the merits of each grant application in order to allow
projects to be selected for funding having regard to the best outcomes from the
expenditure of public moneys, relevant legislation and government policies.
Following approval of each of the projects, the Department
worked expeditiously to develop and sign Funding Agreements, and make the
initial upfront payments. These steps were necessary to allow projects to
commence and thus generate economic stimulus. Subsequently, the department
implemented procedures to monitor project commencement and progress as reported
to it by councils.
With regard to the provision of timely economic stimulus, the ANAO found
that the RLCIP ‘had not provided the planned level of stimulus in the timeframe
that had been budgeted at the time it was introduced’
as indicated by the following:
- the program timetable
involved Funding Agreements being signed in June 2009 with a requirement that
construction commence within six months of Funding Agreement execution. On the
basis of the reporting to the Department by councils, 75 per cent of the 137
projects approved for funding in April 2009 had commenced construction within
six months of the Funding Agreement being signed but ANAO analysis is that this
reporting is not sufficiently reliable. Rather, the best available indicator of
project commencement and progress relates to expenditure by councils on the
- to enable
construction work to commence as soon as possible, significant upfront payments
(between 25 per cent and 50 per cent of the grant amount) were paid to councils
upon signing of Funding Agreements. However, there have been significant delays
in these payments being used together with delays in projects progressing such
that further payments have been delayed. By 31 March 2010, total
grant payments made had risen to some $277 million but these payments remained nearly
$130 million (32 per cent) below the level that should have been paid had
projects commenced and been progressing in accordance with the milestones
specified in the respective Funding Agreements; and
- the reported use of
Program funding was minimal in the first six months of 2009-10. There has been
no marked improvement in this situation in the period to 30 June 2010 such that
councils had reported to the Department that they had spent some $142 million
of the $438.5 million that had been paid to them (some 68 per cent of funds had
yet to be reported as spent). In April 2010 the Department changed its payment
practices so as to increase the amount of funds being paid to councils, but
this has not meant that there has been any acceleration in the rate at which
funding is being spent by councils.
In summary the ANAO concluded:
The relatively low level of program expenditure to date
reflects the situation that a large proportion of the projects approved for
funding were not ready to proceed; were planned to be delivered over a longer
timeframe than that necessary to provide timely stimulus; and/or involved high
project delivery risks which have been realised. The consequence has been that,
whereas the Strategic Projects component was budgeted to have paid out $300
million in 2008-09 and the remaining $250 million in 2009-10 and each of the
137 Funding Agreements (as originally signed) required that projects would have
proceeded sufficiently so as to allow all Commonwealth funding be paid on or
before 30 June 2010, a significant rephrasing of funds ($112 million) from
2009-10 to 2010-11 has been necessary.
Table 3.1 ANAO recommendations, Audit Report No. 03
ANAO recommends that the Department of
Infrastructure, Transport, Regional Development and Local Government improve
the effectiveness of its risk management practices in assessing applications
to grant programs by clearly discriminating between those risks that should
be addressed before the application is considered for approval, those that
require appropriate treatment prior to a Funding Agreement being executed and
those that can be managed through a Funding Agreement.
DITRDLG response: Agreed.
ANAO recommends that, in the design of future
grants programs, the Department of Infrastructure, Transport, Regional
Development and Local Government develop for Ministerial consideration
clearly defined selection criteria that will be published in the program
guidelines and applied in the assessment of grant applications.
DITRDLG response: Agreed.
ANAO recommends that, in the design of future grant
programs, the Department of Infrastructure, Transport, Regional Development
and Local Government give more consistent support to the achievement of key
program objectives by:
information from project proponents on the extent to which their proposal is
expected to contribute to program objectives;
(b) analysing the
outcomes information submitted by proponents so that funding decisions can be
informed by a robust assessment of the merits of competing proposals; and
(c) through the Funding
Agreement, requiring funding recipients to report on progress toward, and the
final achievement of, the anticipated project outcomes that informed the
decision to award funding.
DITRDLG response: Agreed.
ANAO recommends that, in the interests of having
program expenditure better reflect its substantive economic effect, the
Department of Infrastructure, Transport, Regional Development and Local
Government identify opportunities in future grant programs to tie payments to
proponents more closely to the cash flow needs of approved projects.
DITRDLG response: Agreed.
ANAO recommends that, given the importance to
economic stimulus outcomes of minimising lags between Program payments to
councils and use of these funds by councils, the Department of
Infrastructure, Transport, Regional Development and Local Government publicly
report against key performance indicators for the Strategic Projects
component of the Regional and Local Community Infrastructure Program,
including the extent to which program funds paid to councils have been spent.
DITRDLG response: Agreed.
The Committee’s review
The Committee held a public hearing on Monday 21 March 2011, with the
- Australian National
Audit Office (ANAO);
- Department of Infrastructure
and Transport (DIT); and
- Department of
Regional Australia, Regional Development and Local Government (DRARDLG).
The Committee took evidence on the following issues:
- assessment criteria;
- Regional Development
Australia Fund (RDAF) Guidelines;
- value for money;
- ongoing controversy
with regional grant programs;
- lessons learnt;
- support to councils
during the application process;
- completion dates;
- local government
asset maintenance programs;
- risk management
- monitoring program
The ANAO found that, contrary to best practice, the published Program
Guidelines for the Strategic Projects component of the RLCIP, did not ‘advise
councils of the criteria that would be used to develop a ranked list of
eligible applications’. The Committee asked the
DRARDLG why it had failed to provide clear, published assessment criteria for
DRARDLG told the Committee that the pressure of implementing the program
during the global financial crisis had contributed significantly to the
Department’s inability to follow established guidelines in this regard. DRARDLG
explained that the expansion of the program to provide stimulus measures to the
Australian economy created a tight timeframe and difficult operating
environment. The Department felt
In the circumstances, guidelines were established and, in
effect, the best possible job was done.
The ANAO acknowledged the context of the global financial crisis but
maintained that it did not negate the need for clear assessment criteria to
inform the Department’s decisions. Rather than saving time,
the ANAO explained that a lack of assessment criteria can significantly add to
the time required to identify eligible applications.
The ANAO told the Committee that the absence of clear criteria forces the
Department to create the process as a program progresses:
That can be a more difficult exercise and a more time
consuming exercise than having upfront, very clear criteria which, amongst
other things, has been shown over time to make it less likely you will get
applications for projects you do not want. Therefore, if you are focusing the
applications down it can make it less work for you which, if you are in a hurry
to get projects approved to stimulate the economy, is actually a benefit rather
than a disbenefit.
Further, the ANAO told the Committee that a lack of published assessment
criteria wastes the time of stakeholders, many of whom have limited resources.
By way of example, the ANAO explained to the Committee that with regard to the
RLCIP Strategic Projects program, the unpublished short-listing criteria excluded
local government authorities with a population of less than 5000 people. Councils
with between five and 10000 people were only eligible for eight of the funding
categories. The ANAO reiterated that
the lack of published assessment criteria led to smaller, ineligible councils
wasting their resources on unsuccessful applications:
If that was said to people upfront, these councils would not
have wasted their time and energy applying for money – for which they could
never be successful – if they were told, ‘If you are less than 5000 people, you
will not get any money’. To us that is an important lesson for any stimulus
program and, if fact, any grants program. By being up front, (a) you will not
waste the stakeholders’ money and (b) you will narrow down your amount of work
for how many applications you need to assess if you do not want these ones.
The ANAO noted that in April 2009, the Minister approved 131 of the 188
applications shortlisted for the Strategic Projects component of the RLCIP by the
Department. However, the ANAO found
that the reasons for the selection were not apparent and that there was no
documentation or records either with the Minister’s office or the Department.
The Committee expressed concern at the lack of transparency suggested by this
finding and asked ANAO to comment on the apparent lack of process.
The ANAO reiterated the importance of assessment criteria, not only to
assist stakeholders to submit targeted applications, but to assist departments to
assess applications and provide advice to ministers.
The Audit Office emphasised that a ‘record of the factors which have influenced
the department’s recommendations to government for particular projects’ is
essential for transparency.
The Committee asked DRARDLG to comment on the same issue. The Department
admitted that it had been ‘remiss’ in not applying the assessment criteria but
was adamant that the oversight was due to time constraints rather than a
deliberate flouting of best practice. Further DRARDLG told the
Committee that the Department has taken steps to ensure the failure will not
occur in the future by implementing all of the ANAO recommendations in the new
Regional Development Australia Fund Guidelines.
Regional Development Australia Fund (RDAF) Guidelines
The Committee asked the ANAO if it had assessed the new Regional
Development Australia Fund Guidelines released by DRARDLG in March 2011,
particularly whether or not the Guidelines addressed the issue of clearly
defined assessment criteria. The ANAO told the Committee that the new
Guidelines satisfactorily addressed the issue, providing ‘good guidance to
applicants’ regarding the program’s requirements.
The ANAO added that ‘if well implemented’ the new Guidelines would provide a
‘much better outcome, from our perspective, for a grants program’.
The Committee inquired if existing projects were now operating under the
new Guidelines. DRARDLG told the Committee that these projects were ‘still
operating under the current guidelines’. Asked if there had been
any change in the implementation phase of the existing projects, the Department
told the Committee that the projects were largely implemented by the time the
audit report was produced and improvements could not be applied
Value for money
The ANAO found that, with regard to the provision of economic stimulus,
there was a marked discrepancy between the scheduled payment to local
government authorities, the actual payments made to the authorities and the
expenditure payments reported by authorities. The ANAO noted that
releasing funds to local government authorities before milestones had been met
or previous funds spent, was detrimental to the stimulus response of the
program. The Committee is
concerned that this departure from accepted practice implies that local
communities have not received the full benefit of the grants funding and asked
DRARDLG for evidence that the Australian taxpayer is receiving value for money
on these projects.
The Department acknowledged the issue identified by the audit report and
assured the Committee that the new RDAF Guidelines ensure that, in future,
payments will only be made when previous payments have been fully expended or
committed. DRARDLG explained that
in departing from normal practice, the Department had been mindful that local
government authorities often have difficulty with cash flow and that DRARDLG
was attempting to circumvent the problem by providing payments ahead of time.
DRARDLG also informed the Committee that the new RDAF Guidelines clearly
define value for money and set out the measurement criteria by which value for
money will be assessed for future projects.
Ongoing controversy with regional grants programs
The Committee recognises the benefits of regional grants programs and
asked DRARDLG to comment on the ongoing controversy and apparent difficulties
with delivery experienced by these programs. The Department identified the
problems associated with demand and supply, with demand always outstripping
supply, as a major contributor to the difficulties.
Assessing the variety of projects across local government authorities also
presents a challenge for the Department:
When you are measuring one rural local government’s projects
often the projects are very different projects, so it is not comparing one hospital
to another hospital but comparing a swimming pool to an arts centre to a road.
So there is comparison of these projects and then the depth in terms of how you
measure the value of something to one community versus another community.
The ANAO also identified the discrepancy between demand and supply as
the source of most contention and reiterated the need for clearly defined
assessment criteria to alleviate the problem:
It is not unusual to see a program oversubscribed by four,
five, or 10 times. That is where, from our perspective, the real issue then
becomes: if the program funding is such that it cannot meet all of the demand,
the process that is adopted by the government is important in actually working
through an open, transparent, accountable process of narrowing down which are
the most meritorious applications for this program to deliver on its intended
outcomes to the communities which are being targeted.
The Committee asked if the lessons learnt from the implementation of
this program as a stimulus measure have helped to improve any future government
response to a similar situation. DRARDLG told the Committee that the relevant
guidelines had been improved by successive audit reports, including the latest
one, and that the Department was better prepared to implement such a program
If there was to be a very quick program picked up to
distribute funds in the same way, then I think the Department is in a much
better position, from lessons learnt, to be able to apply that funding.
DRARDLG also indicated the improvements by the implementation of the
Regional Development Advisory Committees (RDACs).
These Committees have substantially improved communication between the
Department and local government authorities fostering a better understanding of
both the Department’s requirements and regional priorities. The direct result
has been a more effective and efficient implementation of the grants process.
Support to councils during application process
The Committee recognises the difficulties faced by smaller local
government authorities negotiating the grants application process, particularly
the lack of access to relevant expertise. The Committee asked DRARDLG what
steps government agencies could take to assist local government authorities to
DRARDLG acknowledged the difficulties faced by local government
authorities in this regard and told the Committee the Department has
implemented measures to address the issue. DRARDLG advised that, acting on
probity advice, it has developed two separate areas in the Department: one
section administers the RDAF program and the other, based in the regions,
provides advice to local government authorities.
The Department emphasised that the field staff are not involved in the
assessment of projects and so are free to provide assistance and advice as
DRARDLG told the Committee that the field staff will complement the
RDACs in providing assistance to local government authorities.
However, the Committee noted that without operational support and funding the
role of the RDACs would not be effective.
The ANAO also noted that local government authorities would benefit from
more detailed feedback on their unsuccessful applications. The ANAO pointed out
that the standard letter sent to unsuccessful applicants did not provide
sufficient information and suggested a more comprehensive process would be
If there is something significantly wrong with their
application, they do not get told unless they work through the difficult
process of finally getting someone to give them telephone feedback and so
The ANAO found that there had been a considerable lag in the expected
completion date of projects and that there were significant discrepancies
between the amount of funds paid to recipients and the amount expended by the
recipients. The ANAO reiterated that
failure to tie payments to the cash flow needs of projects was detrimental to
the proposed economic stimulus objective of the program.
The Committee asked DRARDLG what had been done to redress the lag and to
provide an update on the expected completion date of projects. The Department told
the Committee that it had been working with local government authorities to
address the issue:
In the development of these projects, we have been working
closely with councils to identify practical completion dates and where there
have been instances where they had to be varied we have sought approval and
varied the funding agreements to reflect the practical dates.
DRARDLG provided the Committee with the following graph which indicates
that project completion and grant expenditure is expected to meet the due date
of July 2012.
Figure 3.1 RLCIP-SP $550m Anticipated Activity
Completion Date as at 19 April 2011
The Committee asked DRARDLG what impact the recent natural disasters,
particularly the cyclone and floods in Queensland, may have had on projects.
The Department told the Committee that it had not received any information
suggesting major delays to projects:
Councils have informed the Department that there have been
some minor delays to RLCIP Strategic Projects as a result of the floods, or as
a result of a redistribution of resources to flood relief efforts, but no major
variations have been requested as at 21 April 2011.
Local government asset maintenance programs
The Committee raised the issue of local government asset maintenance
programs, particularly with regard to local roads and timber bridge programs,
and asked DRARDLG what planning, if any, is in hand to deal with this problem.
The Committee expressed concern that local government authorities have to focus
all of their available resources on the maintenance of these assets and cannot
consider participating in such programs as the RLCIP Strategic Projects
The Department assured the Committee that the new RDAF Guidelines
include the ‘capacity for local governments to apply for bridge funding’.
DRARDLG explained that the quality of asset management planning differed
considerably across local government authorities and the primary focus of the
Department was to promote better planning by councils and the implementation of
satisfactory asset management strategies. To this end, the
Department encourages local government authorities to not only identify
eligible infrastructure projects but determine the broader importance of those
... what we would be testing for is if we simply get 50
applications from a municipality to replace their timber bridges, have they
actually thought through which of them are critical social infrastructure or
economic infrastructure and those other assessments. It is trying to tackle not
just the end product but also to get the thinking and the strategy right so
there was good science sitting behind those.
Additional, DRARDLG provided the Committee with the following
information regarding projects funded under the Local Government Reform Fund
(LGRF) to assist local government authorities with asset management:
Table 3.2 LGRF – Phase one projects – Treasury
South Wales Government
government asset management and financial management project
Territory Government and the Local Government Association of the NT
government capacity building project
Government and Local Government Association of Qld
asset management in local government
Australian Government and Local Government Association of SA
SA councils’ asset and financial management practices
Australian Government and local government bodies
integrated design strategy
Government Association of Tasmania
term asset and financial management planning for all Tasmanian councils
Tasmanian Councils Authority
review of structures for local governance and service delivery in southern
Government and Southern Tasmanian Councils Authority
Tasmania’s councils: a regional and land use based approach to climate change
Government and Municipal Association of Victoria
government sustainability project
Government and Municipal Association of Victoria
Local government regional asset management
strategic planning, financial management and asset management in local
Development of an asset and financial
management planning framework
Risk management practices
The ANAO was critical of DRARDLG’s attempt to manage project risk
through Funding Agreements and recommended that the Department improve the
effectiveness of its risk management practices.
The Committee asked DRARDLG what steps had been taken to implement this
The Department informed the Committee that, consistent with the
Commonwealth Grant Guidelines, under the current RDAF, DRARDLG has:
- established an
assessment process clearly related to program objectives. Assessments will be
carried out by the Department and an Independent Advisory Panel; and
- made project risk a
specific element to be managed through the life of the project from
pre-contract conditions through Funding Agreement establishment to project
Monitoring program objectives
The ANAO found that DRARDLG had not specified the need to meet the
program objectives in the selection criteria and had not included provisions in
Funding Agreements to collect data to monitor and evaluate whether or not
program objectives were being met. The ANAO recommended
that the Department improve these areas in future grants program.
The Committee asked DRARDLG what steps had been taken to implement this
The Department informed the Committee that this issue had been addressed
in the new RDAF Guidelines:
- the program
guidelines identify program objectives and frame specific eligibility and
selection criteria against these;
- all projects will be
assessed for alignment with program objectives, for viability and for risk; and
- project reporting
will occur at least bi-monthly against agreed milestones. The available data
will enable timely monitoring of overall program progress against objectives.
While the Committee acknowledges the time pressures exerted as a result
of the global financial crisis on the implementation of the RLCIP Strategic
Projects program, it does not concede that these pressures excused the
Department from adhering to a minimum standard of practice that would ensure
transparency throughout the grants administration process. On the contrary, the
Committee would have expected the Department to adhere to basic grants
administration processes particularly in light of the lessons learnt from
previous Parliamentary and ANAO scrutiny. This suggests to the Committee that
the Department has not taken its previous assurances to implement and adhere to
improved grants administration seriously.
In this regard, the Committee wishes to register its dissatisfaction
with the Department’s failure to provide clear, published assessment criteria
for the program. The consequences in terms of wasted time and resources cannot
The Committee understands that the lack of published assessment criteria
contributed directly to the oversubscription of the program. The processes put
in place to rectify the situation do not appear to have provided the Minister
with clear recommendations regarding the eligibility or otherwise of
applications. The Committee is concerned that DRARDLG did not provide the
Minister with clear, documented advice on which to base their decisions.
Overall, it is the lack of documentation surrounding the final selection
of successful applications that is of greatest concern to the Committee as it
signals a lack of accountability and transparency. The Committee draws
attention to the financial framework requirements, in place since December
2007, regarding the need for Ministers to obtain agency advice on the merits of
each proposed grant before making decisions. If this advice is not documented
there is no way for the Parliament or the public to be sure that due process
has been followed.
The Committee is also concerned with the ANAO finding that the Strategic
Projects program did not provide the expected economic stimulus. In particular,
the Committee is critical of the fact that DRARDLG went against its own better
practice standards and did not align payments with proponent’s expenditure or
outcomes and achievement. Although the Committee accepts the Department’s
assurance that it has responded to the ANAO concerns and that in future
payments will only be made when previous funding has been fully expended, it
warns DRARDLG that the JCPAA will take particular note of this issue when
examining future programs.
The Committee welcomes DRARDLG’s assurances that it is now better placed
to deal with any future event that produced similar pressures on grants
administration to those experienced during the global financial crisis pressures.
The Committee accepts the Department’s assurance that it has implemented
relevant processes and practices to improve its performance through addressing
the ANAO’s recommendations.
The Committee also welcomes the new RDAF Guidelines and accepts the ANAO’s
assurance that the Guidelines address the issues identified in this audit.
However, if the Committee finds similar failings in grants administration in
the future, either in this Department or across the APS more broadly, it will
not look on the findings favourably.
The Committee recognises the difficulties faced by some local government
authorities in complying with stringent application requirements due to lack of
access to necessary expertise. Consequently, the Committee supports any
attempts to ensure assistance is provided to local government authorities in
this regard, including the provision of adequate operational funding for RDACs.
The Committee stresses the need for adequate feedback to unsuccessful
applicants and encourages the Department to put in place processes to ensure
that applicants have easy access to such feedback.
The Committee accepts the reassurance from the ANAO that the
recommendations from this audit have been largely implemented but reiterates
its ongoing concern with the recurring difficulties identified by the ANAO in
grants administration more broadly. The Committee urges relevant departments across
the APS to observe best practice in this area and to consult the ANAO wherever
possible to ensure more effective implementation, monitoring and evaluation.