The actions of the former Minister for Sport (the minister), the Hon Senator Bridget McKenzie, in determining the outcomes of the CSIG program lie at the heart of this inquiry. They raise important questions about the extent to which political objectives overrode the merit assessment process conducted by Sport Australia, and the role played by the Prime Minister and others in the context of the 2019 federal election.
This chapter examines these matters, including representations to the minister made by members of the Coalition in the lead up to the election; changes made to a decision brief by ministerial staff without the minister's knowledge; a documented approach of focusing on marginal and targeted electorates; the practice of pork-barrelling in Australia; and implications for Australia's integrity framework.
Were political objectives the primary driver of grant decisions?
During the first round of the CSIG program, Sport Australia told the committee that the minister's office requested a list of all grant applications in a format which included electorate information. Sport Australia provided the minister’s office with a spreadsheet called 'Electoral Division of Applications'.
Subsequently, multiple colour-coded versions of the spreadsheet were prepared within the minister’s office over the course of the three rounds of the program, and informed discussions between that office and the Prime Minister's office in relation to funding decisions, including the proposal to increase funding for the CSIG program.
According to the ANAO, the minister's office amended the spreadsheet to identify the total number and value of approved projects; the distribution of funding by state/territory; the distribution of funding by political party; the three electorates in which no applications had been received; and the distribution of funding for each electorate in which one or more applications had been received.
The committee heard that, during the three rounds of the CSIG program, the minister's office updated the spreadsheet as applications were added and removed from the approved list. Overall, the minister's office developed at least 28 versions of the colour-coded spreadsheet as the basis for the minister to decide which applications should be funded.
The ANAO noted that whilst the spreadsheets reflected changing priorities within the minister's office, no records were made as to why certain applications were approved and others rejected.
Mr Brian Boyd, Executive Director, Performance Audit Services Group, ANAO, explained to the committee that:
Essentially, a substantive change is between a version—sometimes the versions will be within hours on the same day—a project would go from being approved to not approved or not approved to approved without any record as to what has changed.
Representations from Coalition members
According to the ANAO, decision-making for the CSIG program was an iterative process involving ‘the minister’s office and the minister in charge of that process receiving input from various sources, including the Prime Minister's Office’.
Representations were made directly to the minister’s office, and via the Prime Minister’s office, from the Deputy Prime Minister, Coalition members and candidates for the 2019 federal election, and members of the state based Liberal National party.
The ANAO also told the committee that the Queensland Liberal National Party also pulled together a list of projects:
Well, they were pulling together a list of 'projects we'd like to support in this electorate' to provide into the minister's office as a process saying, 'Here are the ones we're looking for in this electorate. Which ones can be supported through this program?'
The committee was told that, during the minister’s ‘parallel assessment process’, the minister’s office recorded that it had considered representations from several senators and members in addition to having ‘spoken directly to other Members and Duty-Senators and some cross-bench on key priorities with a priority on marginal and targeted seats’.
The ANAO provided details of 18 instances where the minister received a representation from a Coalition member on behalf of a grant application. There were 11 grant applications on that list that were ultimately funded through the CSIG program.
The ANAO told the committee that it could find no ‘clear and direct relationship’ between representations from a local member of parliament and the funding outcomes. Although the ANAO noted that it did not have access to all representations, and that there may have been others, including representations made directly to the Prime Minister’s office.
Senator McKenzie acknowledged that local representations were sought to address the ‘varied capacity’ between applicants:
In particular, it was recognised that volunteer-run clubs would have to compete against Local Governments, National Sporting Organisations and professional sporting bodies, which had professional grant writers.
She added that her aim was to ensure ‘a fair and broad distribution of grants given the overall objective of Sport 2030’.
Later in the inquiry, when she gave oral evidence to the committee, Senator McKenzie further explained that inputs into her decision-making came from a range of sources:
Local MPs, local governments, sporting organisations, community members, the geographic spread and obviously other ministers' officers, including the Prime Minister's office.
The ANAO’s report, however, suggests that some of the minister’s decisions resulted in fewer projects being funded than recommended by Sport Australia. For example, it notes that 245 applications were recommended for funding by Sport Australia in Round 3. Subsequently, Sport Australia’s recommendations were replaced by a list of 184 approved applications from the minister, and only 61 of those applications were recommended by Sport Australia.
Involvement of the Prime Minister’s office
The ANAO provided details of a series of 136 email exchanges between the Prime Minister's Office and minister's office between 17 October 2018 and 11 April 2019. These exchanges included 15 instances where colour-coded spreadsheets of potential recipients were provided.
Once applications closed for Round 1, the minister started to advocate the Prime Minister for an increase in the program’s funding. During this time, the minister formally wrote to the Prime Minister, and her staff provided the Prime Minister’s office with information about the electorates that projects were located in. The first time that electorate information went from the minister’s office to the Prime Minister’s office, it was as an attachment to a formal letter from the minister to the Prime Minister, prior to their subsequent meeting in relation to expanding funding.
The minister met with the Prime Minister on 28 November 2018 in relation to the proposal to increase funding for the CSIG program. The ANAO told the committee that, in preparation for the meeting, after a meeting between the minister, her Chief of Staff and her senior advisor, the minister’s staff prepared talking points outlining what could be achieved by increasing the size of the program from $30 million to $100 million, and compared the number of applications in marginal and targeted seats that could be funded with those respective figures. Those figures matched the numbers in spreadsheets provided by the minister’s office to the Prime Minister’s office. An increase in program funding was later confirmed.
Senator McKenzie told the committee that she has never seen the ‘talking points’ memo prepared by one of her staff members and that the memo was not used to advocate further funding with the Prime Minister at the meeting and concluded:
As for my discussion with the Prime Minister, the meeting was focused on obtaining as much increased funding for the program as I could, commensurate with the immense demand. […] The Prime Minister agreed and determined to give the program more funding, which I thought was fantastic news.
In relation to Rounds 2 and 3, the minister’s office again advised the Prime Minister’s office of the list of approved projects. In one email, the Prime Minister's office advised the minister's office that 'the Prime Minister had not had a chance to look at the list' for Round 2. The list of Round 2 recipients was approved a short time later.
During Round 3, in the lead up to the election, the Prime Minister advised the minister's office that it was expected that the minister would write to the Prime Minister to seek 'authority' on the approved projects, and to inform the Prime Minister of the 'roll out plan'. The Prime Minister’s office also requested that the roll out plan be ‘coordinated in conjunction with CHQ’ (campaign headquarters).
The committee heard that, before arriving at the final list of approved Round 3 projects, the Prime Minister’s office passed on to the minister’s office a representation from another minister, and requested revisions to the list of approved projects due to certain projects being funded (or not) through other grant programs.
The ANAO told the inquiry that it had not previously seen this level of interaction between the Prime Minister's office and the relevant minister's office in relation to a grants program.
However, when asked about the volume of email exchanges between her office and the Prime Minister's office, Senator McKenzie expressed the view that it is 'not an unusual level of communication between a minister's office and a prime minister's office'. The Senator also denied on several occasions during the hearing held on 12 February 2021 that the Prime Minister or his office had had any role in the selection of projects and decision making process.
Ministerial staff acting as agents for the minister
Evidence before the committee suggests that staff within the minister’s office made changes to the list of approved projects for Round 3 after the date the minister indicated she had signed the decision brief.
The Auditor-General noted that the changes followed a series of exchanges between staff in the minister’s office and the Prime Minister’s office, in which staff were ‘sorting out what the final list of approved projects would look like’ for Round 3 funding.
According to the Auditor-General, a total of 11 changes were made to the list of approved projects after the minister had signed the decision brief, amounting to a net increase of $2, 767, 071 in grant funding.
In response to the Auditor-General’s evidence, Senator McKenzie issued a public statement on 5 March 2020, denying any knowledge of the changes made to her signed ministerial decision brief for Round 3 funding. She stated that:
I did not make any changes or annotations to this brief or its attachments after 4 April 2019. My expectation was that the brief would be processed in a timely and appropriate manner. Nevertheless, changes were made and administrative errors occurred in processing the brief. I have always taken responsibility for my actions and decisions as a minister, and this includes actions by my office. I was the Minister for Sport and therefore ultimately and entirely responsible for funding decisions that were signed off under my name, including and regrettably, any changes that were made unbeknown to me.
At a public hearing held on 12 February 2021, Senator McKenzie confirmed to the committee she was unaware of the changes made to her ministerial decision brief attachment until Senate Estimates held during the week of 2 March 2020. The Senator further explained that she does not know who made the changes as both the chief of staff and the senior adviser are no longer employed in her office and 'no longer work for government'.
Timing of decisions and caretaker period
Witnesses were critical of the timing of the minister’s grant decisions for Round 3 of the CSIG program and suggested it represented a contravention of caretaker conventions, a widely recognised and accepted practice in Australia, and a breach of the Prime Minister’s own guidelines concerning caretaker conventions.
According to the guidelines, major policy decisions should be avoided during a caretaker period that would be likely to commit an incoming government:
Whether a particular policy decision qualifies as ‘major’ is a matter for judgment. Relevant considerations include not only the significance of the decision in terms of policy and resources, but also whether the decision is a matter of contention between the Government and Opposition in the election campaign.
The 2019 federal election was called on 11 April 2019 and Parliament was prorogued at 8:29am by the Governor-General. As discussed above, changes were made to the list of approved applications for Round 3 of the CSIG program after the minister signed the decision brief on 4 April 2019, including throughout the day of 11 April 2019.
Sport Australia told the committee that it sought advice from the Department of Health regarding the application of caretaker conventions. The department recommended that advice be sought from the Executive level as to whether Sport Australia should go ahead and contact successful applicants.
The committee heard that successful applicants were subsequently contacted by Sport Australia on 23 April 2019 and that public announcements started from 26 April 2019. The Auditor-General’s report notes that it is unclear when non-government sitting members were advised of the outcomes, if at all. On 18 May 2019, voters went to the polls, and the result of the election was a return of the Coalition to Government.
A focus on marginal and ‘targeted’ electorates
The ANAO told the committee that it reached the conclusion that the minister’s decisions to award grants reflected an approach, adopted within the minister's office, of focusing on 'marginal' and 'target' electorates in the context of the 2019 federal election.
The ANAO found that the minister's decision-making showed a shift away from applications located in ‘safe’ and ‘fairly safe’ coalition electorates to applications located in marginal coalition electorates and targeted electorates held by ALP and Independent members.
As a result, nine of the ten electorates that received the most funding were 'marginal' or 'target' seats while seats held by minor parties and Independents and not classified as 'marginal' or 'targeted' received about half of the funding than if the grants had been awarded on merit.
In the absence of any recorded reasons for the minister’s decisions, the ANAO told the committee that:
The only thing that we could see was that there was a documented approach saying that there was going to be priority given to projects located in a marginal and targeted electorate.
In her written submission to the committee, Senator McKenzie rejected the suggestion that the decision-making process, for which she was responsible, was 'negatively politicised'. She stated that 'no rules were broken' and that her aim was to ensure ‘a fair and broad distribution of grants'.
Senator McKenzie reaffirmed her views when she gave oral evidence to the committee:
I completely reject that the exercise of my ministerial discretion resulted in the negative politicisation of the program. Indeed, the facts refute it. […] My responsibility when exercising my ministerial authority was to see more communities benefit across a wide range of sports and local clubs to ensure that funding resulted in a fairer overall outcome, with more clubs funded across more regions than otherwise would have been the case.
According to Senator McKenzie, the lack of geographical distribution of projects in Sport Australia's recommendations for the initial round of the CSIG program demonstrated 'why ministerial discretion is so fundamentally important'.
In her written submission, she concluded that her decisions had resulted in a fairer geographical distribution of grants than that recommended by Sport Australia, whilst acknowledging that unsuccessful applicants would have benefited from greater transparency about those decisions.
Secretary of the Department of the Prime Minister and Cabinet, Mr Philip Gaetjens, told the committee that the evidence he reviewed in considering whether Senator McKenzie breached Ministerial Standards did not 'support the suggestion that political considerations were the primary determining factor in the Minister's decisions'.
The committee heard that Mr Gaetjens had only considered the number of grants awarded, and not their dollar value. The ANAO explained that the dollar value was a key consideration in analysing the distribution of grants in the Auditor-General’s report:
… one of the things being tracked by the minister's office was the dollars going into each individual electorate, the dollars by state and territory, and the dollars by political party. So you can actually see that the decision-making process wasn't focused solely on application numbers; it also had very direct regard to the dollars and where they were going.
The committee also heard that Mr Gaetjens was aware of the ‘talking points’ memo prepared in the minister’s office, which outlined the number of applications in marginal and targeted seats that could be funded, however did not raise this issue during his meeting with the Prime Minister the day before submitting his final report.
An exercise in pork-barrelling?
Some submitters and witnesses described the award of grant funding under the CSIG program as 'pork-barrelling', a term used to describe governments using discretionary grant programs as a means of promoting their prospects for re-election in Australia's 'relatively short federal election cycle'.
The committee heard evidence about how it has become common practice in Australian elections for political parties to analyse voting data and fund election commitments in order to optimise their electoral chances.
Professor Graeme Orr and Ms Susanna Connolly of the University of Queensland submitted that, whilst pork barrelling is 'considered an ordinary aspect of electioneering in Australia', it can be difficult to distinguish from 'the improper use of public funds for partisan purposes which deserve sanction’.
They told the committee that the boundary between what is an acceptable exercise of ministerial discretion and improper and unacceptable pork-barrelling will depend on a range of relevant factors. Accordingly:
Although there is no set criteria for when this occurs, relevant factors tend to include unjustified inconsistency with merit-based advice, excessiveness, brazenness, timing and appearances.
Professor Orr and Ms Connolly added that there is a ‘clear limit’ to the type of conduct that would be considered acceptable:
… a judgement of impropriety may be more likely when a minister disregards department advice on the merits of applications and unjustifiably favours applicants in marginal or targeted electorates, particularly when the distortion is excessive and a federal election is proximate. Such a judgement is made easier by the presence of an apparent smoking gun, such an erased whiteboard or a colour-coded spreadsheet.
Risks to other discretionary grant programs
The committee heard that grant programs, like the CSIG program, are particularly vulnerable to pork-barrelling because they tend to be regionally based, discretionary and involve billions of dollars of public funds.
Several witnesses noted that the selection of successful applicants for funding in discretionary grant programs is notoriously vulnerable to 'maladministration or improper practice', yet it remains the least protected area of grants administration.
The committee heard evidence about other Commonwealth ad hoc grants funded under the Community Development Grants Program (CDGP). Of particular relevance to this inquiry was the community sport infrastructure grant program known as the Female Facilities and Water Safety Stream (FFWSS), for which the Australian Government committed $150 million over four years in the 2019−20 federal Budget.
The committee heard that the funding for the FFWSS was transferred from the Department of Infrastructure to the Department of Health via a letter from the Prime Minister to the Department of Health on 21 August 2019. FFWSS projects were transferred as 'fully selected and were treated as ad hoc grants'. There were no guidelines in place and no public calls for applications.
The Department of Health, told the committee that the CDGP is regularly used as a vehicle for funding 'infrastructure election commitments' across a range of portfolios. The committee heard concerns that the FFWSS program 'funded the building of swimming pools, rather than female facilities', and represented another example of a grant program where funding was allocated to marginal electorates for political advantage.
Implications for Australia's integrity framework
Office of the Auditor-General for Australia
Witnesses and submitters were overwhelmingly supportive of the work of the Auditor-General.
However, the committee heard that the position had been undermined by the Prime Minister when he commissioned his own review of the minister's actions.
The committee heard a proposal from one witness that, given the critical role of the Auditor-General in reporting to Parliament on expenditure of money appropriated by it, the appointment of the Auditor-General should ‘be subject to a bi-partisan process.
Role of the public service
The former NSW Auditor-General, Mr Tony Harris, expressed concern about the reluctance of the public service to advise ministers about the limits of their powers, saying that 'our standards seem to have slipped over time, so that any behaviour by a minister at any time is legitimate'.
Emeritus Professor Richard Mulgan of the Crawford School of Economics and Government at the Australian National University argued that the Australian Government should 'recommit to upholding' the Commonwealth Grant Rules and Guidelines 2017 (CGRGs), and stressed the need for the Australian Public Service to actively defend the integrity of the CGRGs and to not allow ministers and their advisers to 'override' procedural constraints on their powers, as occurred in the CSIG program.
Professor Mulgan proposed that the role of the Australian Public Service Commissioner be enhanced in order to uphold procedural and administrative integrity and address the prevailing 'culture of oversubmissiveness and deference within the bureaucracy' towards ministers.
With respect to Ministerial Standards, the committee heard criticism of the review of the minister’s conduct by Mr Gaetjens. One witness commented that the failure to publish the report and its full terms of reference has made it ‘impossible to assess’.
Several witnesses noted that the report did not address other standards that may have been breached, including:
Clause 1.3 (lawful and disinterested exercise of powers);
Clause 2.8 (providing advice or assistance to any enterprise in a disinterested manner);
Clause 3.2 (ministerial decisions unaffected by bias or irrelevant considerations); and
Clause 5.2 (must not encourage or induce other public officials to breach the law).
Former NSW Auditor-General Mr Tony Harris argued that the review omitted to look at a fundamental potential breach:
I think the worst part of the summary document was the fact that Mr Gaetjens, having been asked by the Prime Minister to look at the ministerial standards of conduct, didn't look at the very first one, which asks whether ministers have the power to do what they purported to do.
Accountability Round Table noted that relying on the Prime Minister to enforce the Ministerial standards is fraught. It told the committee that:
We are faced with yet another example of the difficulties that prime ministers have in upholding and enforcing their own ministerial standards. Such failures repeatedly undermine the reputation of prime ministers and their governments. The standards that should be subject to investigation and enforcement independently of the prime minister and his/her public servants.
Witnesses felt that ministerial staff had overreached their authority and that there was insufficient accountability for their actions.
One legal expert told the committee that, while there may be circumstances where ministerial staff do undertake matters on a minister's behalf, it is clear in this instance that they had no legal powers to act in that particular way:
… it appears to be the case that [the minister] did not know that staff were changing decisions about the expenditure of public money without her knowledge. I think any minister would want to make sure that they were aware of such things and sign the final document which allocated those kinds of grants.
The former Auditor-General of NSW, Mr Tony Harris, told the committee that ministers, including the Prime Minister, were accountable for their staff, 'because those staff are not accountable in any other way under the Commonwealth's practices'.
National integrity commission
Legal experts noted that the lack of enforcement mechanisms limits the effectiveness of the current integrity framework, and suggested that reforms must prioritise the establishment of a national integrity commission.
The committee heard significant support for an integrity commission at the federal level, with one witness commenting that the Commonwealth is currently the 'odd jurisdiction out' in Australia because it does not have a standing integrity commission.
The committee heard concerns that the current model proposed by the government would be ineffective in addressing matters being examined in this inquiry.
One witness outlined elements of the proposed federal model that would work to undermine its effectiveness:
As I understand it, from what the Attorney-General has said, it was only able to look at criminal matters, unlike integrity commissions elsewhere. It was not able to go back into history and look at matters because he didn't want ministers to be found guilty of something they might not have been guilty of before, which I think is a bit spurious. It can't have its undertakings in public, and the lack of a public hearing gives you little faith in it. The government appoints the commissioner. The government determines the funding of the commission. There are several matters that, I think, would fundamentally undermine the effectiveness of the government's model.
Another witness commented that there could be a ‘sensible middle ground’ between the proposed model for an integrity commission and the model proposed in the National Integrity Commission Bill 2018 (No. 2) passed by the Senate.
The evidence examined by the committee clearly shows that the minister deviated from the merit-based assessment process adopted by Sport Australia’s program administrators and assessment panel. Given the minister has not been able to provide any credible or documented rationale for her decision making the committee can only conclude that she applied considerations that were politically motivated and inconsistent with the published guidelines.
Whilst the committee has been denied access to the unredacted versions of the colour-coded spreadsheets prepared by the minister’s office, enough evidence is available to assert that the colour-coded spreadsheets were developed using vastly different assessment criteria than those published in the guidelines. The committee is of the view that the parallel assessment undertaken by the minister’s office drew upon considerations of electorate status, and whether a project was in a marginal or targeted seat for the Liberal and National party election campaigns. In other words, the CSIG program was turned into a $100 million pre-election slush fund.
In the course of this inquiry there has been broad recognition by the Senate that grant decisions were made for political purposes. The Senate agreed that evidence shows the Prime Minister and his office were intimately involved in and aware of decision making. The Senate also agreed that ‘many deserving clubs, including in regional Australia, missed out on new community sport facilities, because they were not in marginal or targeted electorates’.
The evidence available to the committee indicates clearly that the Prime Minister’s office, and likely the Prime Minister, were aware of the use of electorate information to identify projects in marginal and targeted electorates well before the first grant recipient was announced.
Who was involved beyond the Minister for Sport
Following revelations in the media and the publication of the ANAO report, Senator McKenzie took the fall. Whilst the Prime Minister has insisted that the minister was the decision-maker all along, it has been established that there was a plethora of emails between the minister’s office and the Prime Minister’s Office (PMO) from October 2018 to April 2019 in relation to the CSIG program. This points to the direct involvement of the PMO in the selection process. The interactions were so significant that the ANAO told the committee that they had never before seen that level of communication between a minister’s office and the PMO in relation to a grants program. The refusal to provide information about the emails to the committee speaks volumes.
It appears that other MPs and the broader Liberal party also made requests and suggestions for funding. For example, the committee heard that the Deputy Prime Minister’s office made representations in support of funding for projects in the electorate of Indi. The significant ongoing interest and involvement in the CSIG program by the PMO is clear from the evidence available to the committee, including the large number of emails exchanged between the offices, and the requests for information and lists of grant applications. However the full extent of the PMO’s involvement and the potential involvement of other senior ministers remains unknown. The sheer fact that they interfered is deeply troubling and raises serious questions about the lack of mechanisms to hold ministers to account.
The committee recommends that the Prime Minister provide a full explanation to the Parliament of the role he, his office, and if applicable, Liberal and/or National Campaign Headquarters played in the allocation of grants under the CSIG program.
Government accountability and integrity
The committee is of the view that the mechanisms for ministerial accountability were insufficient to deter or penalise the minister (or ministers) from acting out of political interest. The committee considers that the process by which the minister’s conduct under the Ministerial Standards was examined and dealt with fell short. Whilst the Gaetjens report has not been made public on the grounds of cabinet confidentiality, the report seems to have conveniently not addressed the key issues at stake. The committee is of the view that the Gaetjens report did not fully address breaches of the Ministerial Standards by Senator McKenzie, and did not address any potential breaches of the Ministerial Standards by the Prime Minister. The committee considers that the Gaetjens report relies upon limited evidence, and has drawn conclusions based on inadequate analysis, for example, by only considering the number of grants and not their dollar value. This highlights the importance and the need for independent integrity bodies such as the ANAO. The committee is concerned about the ongoing budgetary cuts to the ANAO and the impact on its work program.
The committee recommends that the Australian Government ensure the ANAO has the requisite level of resourcing it needs to properly scrutinise government expenditure and activities.
Ultimately the committee considers that there remains a significant and unacceptable integrity risk with respect to Commonwealth-funded local grants programs such as the CSIG program. Grants programs should be fair, ethical and transparent, and managed according to clear guidelines. Effective mechanisms should be in place to investigate any allegations of misuse or mismanagement of these funds by the executive power. As the CSIG program has demonstrated, there is an urgent and clear need for a federal integrity commission with the power to investigate the issues before this inquiry.
The committee recommends that the Australian Government establish a national integrity commission with the standing powers of a Royal Commission as a matter of urgency.
The committee is concerned with the level of involvement of ministerial staff in the last-minute changes to the list of approved projects for Round 3 after the minister had signed the decision brief. It is unknown who made the changes in the minister’s office and who directed the changes. The role of the Prime Minister and the former minister in directing these actions may never be known, but the committee considers that this highlights the importance of ministerial responsibility for the failings of staff within their offices.
The New South Wales model sets out clear guidelines on the roles and responsibilities of ministerial staff and clarify the circumstances in which a staff member can legally act as an agent for a minister. Responsibility for enforcing such a code of conduct, as with the Department of the Prime Minister and Cabinet's Statement of Ministerial Standards, would ultimately rest with the executive.