The decision to fund the Foundation Partnership
This chapter considers the decision-making processes in relation to
funding the Foundation Partnership. The last chapter suggested that there was
no consultation with the Foundation itself, before this measure was proposed to
it by members of the executive on 9 April 2018. Evidence considered
in this chapter also indicates that the Commonwealth undertook no consultation
with important stakeholders in the Reef sector, particularly its partner in the
Reef 2050 Plan, the Queensland Government, and government agencies that are
funded by the public to maintain expertise and good management practice in Reef
research and programs.
Lastly, this chapter examines other irregularities in the probity of the
decision, looking at the limited evidence for due diligence being undertaken on
the Foundation before the decision was made to award it an unprecedented
Commonwealth grant of $444 million.
The committee notes that many of the issues canvassed in this chapter
were canvassed by the Australian National Audit Office audit. The findings of
that audit largely concur with this committee's findings, as is discussed
elsewhere in this report.
Initial consideration of funding for the Reef
The department provided a summary of the initial consideration and
approval of the Partnership Grant. This suggested that the Government had been
looking to develop Reef-related proposals for consideration from 2017:
There was extensive engagement with Commonwealth agencies in
the development of the options by the [Interdepartmental Taskforce led by the
department that was established on 15 May 2017].
The Government first considered Reef-related proposals as
part of the 2017–18 Mid-Year Economic and Fiscal Outlook process. The
Government's decisions were announced by the then Prime Minister, the Hon
Malcolm Turnbull MP, on 22 January 2018.
Minister Frydenberg took two submissions to the Expenditure
Review Committee in March 2018, as part of the 2018–19 Budget process, to
address the pressures facing the Great Barrier Reef.
The Hon Malcolm Turnbull, then Prime Minister, told the committee that
these proposals were rejected by the Expenditure Review Committee (ERC) on
6 March 2018, and that the then Minister for the Environment was charged
with developing a new approach:
On 6 March 2018 the Expenditure Review Committee of Cabinet
considered a Portfolio Budget Submission from the then Minister for Energy
& Environment proposing two options for additional funding to support the
health of the Reef. One was partially offset and over 6 years, the other was
smaller and fully offset over two years.
The ERC resolved that an alternative proposal be brought
forward to create a tied reef fund, with a partner outside the general
government sector, to be funded in 2017/18 for activities to be agreed with the
Commonwealth, with appropriate governance arrangements.
Mr Turnbull noted that this approach was favoured by the then Treasurer,
the Hon Scott Morrison MP, and the Minister for Finance, Senator the
Hon Mathias Cormann:
This approach was taken because the Treasurer and Finance
Minister were open to funding a substantial package for the Reef so long as
it was expensed in 2017/18. This was because Government revenues were
promisingly strong in 2017/18 and they believed the Budget in that year could
accommodate the substantial investment proposed for the Reef. However, that may
not be so in subsequent years. This was the reason why a partner outside
the Commonwealth Government sector was sought; it also brought with it the
possibility of leveraging the Commonwealth's contribution with private sector
The arrangement allowed the Government to book the grant
expenditure in one year, 2017/18, notwithstanding that the investment of the
funds in the various reef projects by the GBRF would take place over a period
of six years.
Mr Turnbull stated that Mr Frydenberg brought a new proposal for the
Foundation Partnership to an ERC meeting on 28 March 2018:
Following that decision a new submission prepared by the
Department of Environment and Energy recommending a grant of $443 million to
the Great Barrier Reef Foundation was circulated and presented by the (then)
Minister to the ERC on 28 March 2018 in the usual way.
The timeline of the decision to fund the Foundation Partnership provided
by Mr Frydenberg to the House of Representatives illustrates the speed at which
the measure was developed by the department and Foundation, and approved by the
ERC agreement [on 28 March 2018], an interdepartmental committee was
established to progress this proposal, and I was given authority to approach
the foundation, which occurred on 9 April, to determine whether they were
interested in entering into a partnership for the benefit of the reef...subject
to the successful negotiation of a partnership agreement and final phase of due
The department submitted that it led the establishment of an
interdepartmental committee (IDC) in April 2018 'to provide advice on the
assessment and approval of the grant to the Foundation'. The IDC held five meetings
between April and July 2018, which were not formally minuted. These meetings,
the department stated:
...included staff from the Department, the Department of the
Prime Minister and Cabinet, the Department of Finance and Treasury.
The IDC used a short standing agenda covering the status of
grant agreement negotiations, ministerial approvals and communications. The
Department provided verbal updates at these meetings as a basis for discussion.
No formal minutes were taken.
The committee sought further evidence from the department, as well as from
the Department of Finance and the Treasury, as to whether they had been
consulted on early proposals for $444 million in funding delivered through the
Foundation Partnership. All departments declined to provide evidence on the
initial development of the Partnership, citing cabinet-in-confidence
In giving this evidence, a Treasury official suggested that, whereas the
Foundation Partnership had gone through the cabinet process, smaller grants
such as the $5 million awarded to the Foundation were not necessarily
submitted to cabinet:
...often the administration of grants don't go through cabinet,
they're part of the administration of a program. They typically don't go
The choice of the Foundation
The Partnership has been described by the Government as 'the largest
ever single investment' in protecting the Reef.
Given the level of funding involved, one of the key areas of focus for this
inquiry is why a charity has been selected to administer funding rather than a
Commonwealth entity, such as the department, CSIRO or one of the Commonwealth
agencies dedicated to the Reef (Great Barrier Reef Marine Park Authority (GBRMPA)
and Australian Institute of Marine Science (AIMS)).
Regarding the choice of the Foundation, Mr Turnbull commented to the
As to why the GBRF was recommended by the Department of the
Environment and Energy (as opposed to another organisation) you should inquire
of the Department. But it was plainly a reputable organisation with a track
record in Reef research and support with whom the Department had previously
worked and in which it had confidence.
On why GBRMPA was not selected to administer the funding, the Minister
representing the Minister for the Environment and Energy in the Senate
explained that this is because the Partnership goes beyond GBRMPA's
Mr Dean Knudson, a Deputy Secretary at the department, added that
GBRMPA has 'a very specific role' as a park manager and AIMS 'is a science entity',
whereas the Partnership is 'about on-the-ground project delivery, in which the
Great Barrier Reef Foundation has extensive experience'.
The department set out some of the qualities of the Foundation that led
to the establishment of the Partnership:
- its track
record in leveraging philanthropic support as Australia's leading
- its decade
of experience in working effectively with the Department and a diverse range of
Reef stakeholders to manage Commonwealth and State funding to develop, manage
and deliver projects to support the Reef.
- the first
phase of due diligence conducted by the Department which considered the
Foundation's governance, structure, constitution, project management,
fundraising history, capacity for growth, board composition and scientific
In other documentation supporting the Partnership measure, the
department has highlighted further reasons for the Foundation being chosen to
administer such a sizeable Commonwealth grant, including because it:
is a not-for-profit organisation
established in 2000 to raise funds to protect and preserve the Great Barrier
has a strong track record of
works effectively with the diverse
range of relevant stakeholders to deliver actions to support the Reef 2050 Plan
has a well-established track
record of efficiently developing and managing projects for a range of funding
bodies to deliver outcomes for the Great Barrier Reef
has sound corporate governance,
with its board having a number of current and former CEOs, Chairs and executive
officers of some of Australia's largest companies
is familiar with government
requirements and expectations, and has a solid track record in managing funding
from Commonwealth and state government sources.
The Foundation also put forward reasons as to why it had been chosen to
receive the grant. Ms Marsden stated:
In my opinion, there are two key reasons why we are uniquely
placed to turn this money into real outcomes for the reef. The first is that we
have the demonstrated ability to leverage money and to drive collaboration at a
global level. The second is that, through projects like Raine Island and the
many others we've delivered over the years, we have a proven and global
reputation for carefully targeting problems, designing solutions and working
with the right people to get results. What we have been asked to do with this
grant is exactly what we have been doing for the last 17 years. I'm very
confident that the Great Barrier Reef Foundation can turn this funding into
action in time for it to make a difference.
There have been some reports that early advice to government advocated
for the grant to be awarded to an established Commonwealth agency. In hearings,
relevant departments were unable to comment on this assertion.
A lack of consultation with Reef stakeholders
The previous chapter established that the Foundation was unaware of the
proposal for a $444 million Partnership before it was approached on 9 April
2018. This section sets out the evidence showing a lack of consultation with
other key stakeholders, including the Queensland Government, the Commonwealth's
partner in the Reef 2050 Plan. It also appears that the Government's own
agencies with policy, program delivery and research expertise in the Reef were
not aware of the proposal until it had already been decided by the Government.
This appears to have created a degree of uncertainty in their planning and
The Queensland Government
The Queensland Government expressed disappointment that a Commonwealth
agency had not been given the responsibility of disbursing new funding for the
Reef. It advised that it was not consulted on the Partnership and 'was only
advised on the day of the announcement'.
Great Barrier Reef Marine Park
The Chairman of GBRMPA at the time of the 2018–19 Budget,
Dr Russell Reichelt (also a Director on the Foundation's Board),
advised the committee in Estimates that he became aware of the Government's
decision only a 'few weeks before' the Prime Minister's announcement of the
Partnership on 29 April 2018.
At a later hearing, Dr Reichelt told the committee that:
By the time that amount was known and the direction of those
funds was known, the decision had already been made—it was well into the
planning for the announcement. In other words, there wasn't a period where I
knew about it before the decision was taken to do it.
Dr Reichelt indicated that the Foundation was approached by the
Government about the potential Partnership 'within a couple of days' of him
being made aware of the measure in his GBRMPA capacity.
The committee notes that this lack of awareness is despite the involvement of
GBRMPA in the departmental taskforce that was responsible for developing proposals
for consideration by the Government from mid-2017.
The committee also notes that a request to GBRMPA made under FOI legislation
produced no documents relating to Commonwealth consultation prior to the
Partnership being announced on 29 April 2018.
The Chief Executive of CSIRO, Dr Larry Marshall, who is a member of the
Foundation's Chairman's Panel and had attended all of its meetings from 2015
onwards, explained that he became aware of the Partnership 'probably the
weekend before the announcement' following 'a rumour that I heard'.
Emails provided by CSIRO pursuant to the order for production of
documents the Senate agreed to on 20 June 2018 (notice of motion no. 857) do
not discuss any aspect of the Foundation, until the morning of
29 April 2018, the day the partnership was announced.
A series of emails from Monday 30 April 2018, the day after the measure
was announced, include comments indicating that CSIRO executives were
unprepared for the Foundation Partnership. For example, an email written by the
Chief Operating Officer, Ms Hazel Bennett, to CSIRO executives, including
Dr Peter Mayfield, the Executive Director for Environment, Energy and
Resources, stated that:
Early call between Peter and I–we didn't have
visibility....seems to have involved the PM's office....funding went to the Great
Barrier Reef Foundation...team will make calls this morning to see what else they
Similarly, an early morning email sent on 30 April 2018, from Dr
Mayfield to Dr Christian Roth, Senior Principal Research Scientist with CSIRO, describes
a 'mad scramble' for information for the Board about the Foundation
Partnership, a degree of uncertainty about existing connections between the
Foundation and CSIRO, and a suggestion that CSIRO's Chief Executive 'may not
have known' about the measure before it was announced.
An email sent the evening of 30 April 2018 from the Chief Executive of
CSIRO, Dr Marshall, gives some information for the Board. This suggests that
the CSIRO has an 'excellent relationship' with the Foundation, both through Dr
Marshall's membership at the 'Chairman's level' and the eReef's program, as
well as Dr Roth's membership of the Foundation's International Science Advisory
Committee (ISAC). Dr Marshall also hinted at the speed with which this proposal
was put together, and the lack of consultation that occurred with AIMS:
It appears AIMS was not anticipating the development, which
only emerged over the last 4–6 weeks, as the budgetary windfall became evident
to the Govt, and the full-scale [new policy proposal] developed last year by
the [department] was brought forward to the coming [financial year].
Australian Institute of Marine
Dr Paul Hardisty, Chief Executive Officer, Australian Institute of
Marine Science, was informed by the department about the Foundation Partnership
on 24 April 2018, just a few days before the policy was announced.
Apart from this contact with the Chief Executive Officer, it seems that
prior to the announcement of the Foundation Partnership on 29 April 2018,
senior AIMS officials had no awareness that a funding mechanism was being
considered that would see Commonwealth funds being disbursed by a private
It is clear in evidence received by the committee that the lack of prior
consultation introduced substantial uncertainty for AIMS. For example, an internal
AIMS email from 30 April, the day after the announcement was made, indicates a
degree of confusion about implications for AIMS funding, as well as to why AIMS
had no visibility of such a significant announcement:
Hoping we can get a briefing today on what the funding means
and so we can have a Comms plan if/when we are approached by media...It seems
GBRMPA, GBRF and JCU were aware of the announcement, but I notice that AIMS was
not named in the ministerial release. It would be good for the Comms team to
have an understanding of whether this is part of a strategy ie; we want to lead
the project quietly in the background or, if it was out of our hands ie:
political. I hate to think we were not in the loop on it.
At the AIMS council meeting held over 4 and 5 June 2018, an item on the
agenda outlined the ongoing uncertainty this announcement had for AIMS at a
senior level, even well after the announcement of the grant:
We have been told that this is funding for the next phase of
our current RRAP project, although we have no guarantees that GBRF will honour
the results and guidance of the feasibility study and the current RRAP
consortium. We are working hard with the DoEE, DIIS, and the GBRF to ensure
that the foundation does not try to 'reinvent the wheel', or apply another
level of management and decision-making to the process, but we have no clarity
at the moment of where this will land. At the most recent GBRF Chairman's
weekend (which I attended) it was clear that the reef restoration area will be
the focus of the foundation's fundraising efforts. We understand, verbally,
that the idea is to leverage the government's $100m with $100m from
philanthropists and industry, and another $100m from research providers. Funds
are to be spent over 6 years at most. The good news is that the money is there.
The bad news is that there is no certainty that AIMS sill get any of it. We are
working hard to position ourselves and to ensure the current RRAP offers the
strongest R&D strategy.
Lack of evidence of due
diligence in the Government's decision
department indicated that as part of the grant evaluation process, a due
diligence review was undertaken, to ascertain whether there were any issues
that would preclude the Foundation from receiving the grant.
While the department described the due diligence process both before and
after the announcement of the grant as 'extensive',
there is in fact very little available evidence to establish whether or not
appropriate due diligence was undertaken by the Commonwealth to grant the
Foundation a much larger amount of funding—nearly half a billion dollars—before
the decision to do so was made on 9 April 2018.
diligence prior to the award of the $444 million grant
Mr Finn Pratt AO PSM, Secretary of the department, outlined the process
that had been undertaken in approving the Foundation for funding under the
Partnership. He commented that this process had been undertaken without the
knowledge of the Foundation itself–—at least until it had accepted the Government's
proposal for the Partnership Agreement following the 9 April meeting. Mr Pratt
much interest in due diligence. The former minister explained to the House that
the department did a first phase of due diligence as part of the cabinet
process. This included looking at the foundation's constitution, structure,
governance, board composition, project management, scientific expertise,
fundraising history and capacity for growth. It is incorrect to assume that
because the foundation was unaware of the department's due diligence work that
no due diligence took place before the offer to the foundation was made...Indeed,
it would have been inappropriate for the department to tell the foundation
about the due diligence work, as this was part of the budget process.
The department indicated that documents it released under FOI requests
support the suggestion that the 'first phase of due diligence' was being
undertaken in early March. These documents include a note outlining some high
level observations of a meeting on 8 March 2018 between departmental officials
and Ms Marsden of the Foundation.
Ms Marsden commented that the Foundation also supplied due diligence documents
to the department on 28 May 2018 to support their application for this
smaller grant, including two years of financial records.
The department stated that Ms Marsden assumed that the meeting and
requirement for documentation had been solely related to Foundation's
application for the smaller $5 million grant. Indeed, Ms Marsden echoed
this perception to the committee, suggesting the department had conducted due
diligence on the Foundation for the $444 million grant 'without our knowledge,
in March '.
In relation to the 8 March 2018 meeting, the department commented:
What we've said is that we've been involved with the
foundation for quite some time to make sure that they have appropriate
governance on project delivery...The note that you're referring to is from
early discussions with the foundation where, quite frankly, we were very much
trying to get a sense of how they operated at that time, and it does not
necessarily reflect on how they will be managing these grants going forward.
Due diligence after the award of
the $444 million grant
Mr Pratt outlined the full due diligence process carried out following
the award and announcement of the Foundation Partnership. He noted that the
department developed grant guidelines consistent with the Commonwealth Grant
Rules and Guidelines. Following the submission of the Foundation's proposal
responding to these guidelines on 29 May 2018, the department evaluated the
proposal, including whether it adequately addressed the guidelines, whether it
represented value for money, whether the Foundation had the capacity to upscale
in order to deliver on time and on budget, the risks associated with
successfully delivering the grant and the proposed mitigations. Mr Pratt added
that the Australian Government Solicitor undertook a detailed due diligence
review, which was provided on 8 June 2018. Mr Pratt concluded:
The department sought approval from the former minister in
accordance with section 71 of the [Public Governance, Performance and
Accountability Act 2013 (PGPA Act)] based on its evaluation that the grant
to the foundation represented an efficient, effective and ethical use of
Commonwealth funds on 15 June. A comprehensive grant agreement was developed
with the support of the Australian Government Solicitor and executed on 27
Pursuant to the order for the production of documents agreed to by the
Senate on 21 August 2018 (notice of motion no. 978), the department provided
documents to demonstrate the due diligence processes that it undertook in
relation to the award of the Partnership grant 'that were considered by the
Minister in approving the grant'.
These documents include:
an information statement explaining the assessment and awarding
of the grant;
a compliance table;
a Proposal Evaluation; and
an index to the due diligence report prepared by the Australian
The Compliance Table sets out the mandatory requirements that the grant
was subject to, including the PGPA Act, the PGPA Rule, and the Commonwealth
Grant Rules and Guidelines, as well as the conditions of the Partnership Grant
In the Proposal Evaluation, the department noted that the Foundation had
identified 'potential risks and constraints to Partnership delivery', but
'demonstrated it has the capacity to manage these in an effective and adaptive
These included a number of areas for work, including that:
Foundation has recognised the need to expand its organisational capacity in
order to deliver all five components of the Partnership and is progressing
measures to address this';
Foundation is also seeking expert advice to inform transition requirements'
including engaging consultants to evaluate its capacity, program design,
innovation support, key stakeholder markets, and 'a Leadership Coach and Human
however a need for the organisation to expand experience/skills relevant to
four out of the five partnership outcomes' including water quality improvement,
[Crown of Thorn Starfish] COTS control, Indigenous and Community Reef
Protection Actions and Integrated Monitoring and Reporting;
Foundation has not delivered a grant of this scale before', although noting its
ability to leverage support in upscaling its operations; and
'perceived' conflict of interest identified by the Foundation is that
Dr Russell Reichelt, a Director of the Foundation, is the Chairman and
Chief Executive of [GBRMPA], which is a potential recipient of grant funding',
which will be managed through the Foundation's existing procedures.
The Compliance Table notes that the department's risk assessment found
that the grant 'Proposal is adequate for this stage of planning'. It also found
that the Foundation had identified appropriate 'controls and treatments' for
the following risks:
to quickly scale up the Foundation's delivery capacity; loss of local delivery
capacity and momentum; work health and safety compliance; misinformation
occurring due to inadequate communication from the Foundation; managing
stakeholder expectations; legal and regulatory risk; break-down of partnerships;
and inadequate delivery.
The Department of Finance confirmed that these documents provided
evidence that the department had undertaken appropriate risk assessment and due
diligence on the Foundation Partnership:
obligation of all agencies, grant-giving or otherwise, to assess risks in the
activity they undertake. I note that the Department of the Environment has
provided a supplementary submission, dated 10 September, where they actually
provide some of the processes and steps that they went through, including how
they have gone through and assessed risk. So, yes, there are obligations on all
departments to assess and manage risk, and the Department of the Environment
has provided that information in this case.
The committee notes that all these checks on the Foundation were carried
out following the announcement of the $444 million grant.
The use of a grant
mechanism to award funding
The Grant Agreement executed on 27 June 2018 between the Commonwealth
and the Foundation is available in full on the department's website. The
introduction to the Agreement on the departmental website includes a statement
about the Commonwealth's grants process:
Grants are widely used to achieve government policy
objectives, involving the payment of billions of dollars each year to the
non-government sector. Grants provide significant benefits to many Australians,
through the Government working in partnership with individuals and
organisations to deliver outcomes for the Australian public.
The Commonwealth Grants Rules and Guidelines 2017
(CGRGs) establish the Commonwealth grants policy framework. The CGRGs contain
the key legislative and policy requirements, and explain the better practice
principles of grants administration.
In accordance with the CGRGs, a tailored grant agreement has
been developed and executed between the Department of the Environment and
Energy and the Foundation. It establishes the grounds for an effective working
relationship based on collaboration and respect and a shared understanding of objectives
The department informed the committee that the development of the Grant
Agreement had adhered to all appropriate Commonwealth requirements:
In establishing the grant, the department undertook a grant
assessment process, in line with the Commonwealth Grants Rules and Guidelines.
This included: developing grant guidelines specifying the intended outcomes and
requirements; secondly, assessing the foundation's proposal, responding to the
grant guidelines, to ensure that it represented value for money; thirdly, a due
diligence review, to ascertain whether there were any issues that would
preclude the foundation from receiving the grant; and then, finally, seeking
the approval of the Minister for the Environment and Energy that the funding
proposals represented an efficient, effective, economic and ethical use of
Commonwealth funds. I would note that the funding agreement was developed with
the full support of the Australian Government Solicitor.
The department went on to describe the Grant Agreement as 'robust and
comprehensive' and provided a brief overview of the Grant's conditions and
It specifies the delivery, which must be consistent with the
goals of the Reef 2050 Plan...mentioned earlier, and that close consultation is
required with the department but also our 2050 partners. That includes the
Great Barrier Reef Marine Park Authority and the Queensland government, as well
as the reef advisory bodies, which include the independent expert panel and the
Reef 2050 Advisory Committee. The agreement includes a detailed planning and
design process in the early stages, to ensure the foundation is able to build
its resources, manage risk and attract co-investment, and also to engage with
stakeholders and to monitor and evaluate outcomes, and you've just had some
testimony to that effect. An annual investment strategy and annual work plan
will be developed in consultation with those key agencies and advisory bodies,
and you've heard that that will all be made public.
There are also oversight mechanisms in the Agreement. This includes
six-monthly reporting, as well as a Commonwealth observer position on the
Foundation's Board, and a departmental representative on the partnership
management committee established by the Foundation.
The use of a grant mechanism rather
than an open tender process
The committee received evidence that raised concerns about the
categorisation of the Foundation Partnership as a grant, rather than being
awarded subject to the Commonwealth's more stringent procurement framework. Some stakeholders argued that
adherence to the Commonwealth Procurement Rules and Guidelines—rather than
grant processes—would have ensured that greater due diligence was undertaken in
awarding Reef-related funding, and much more transparency in Commonwealth
decision making processes.
The Queensland Government suggested that going to tender would have
ensured transparency and accountability in the Government's decision making
process. It stated that it was:
...concerned at the unprecedented approach of providing such a
level of funding to a single private organisation without going to the open
market to ensure a transparent and accountable procurement process.
350.org Australia submitted that this process could have ensured
transparency in the Commonwealth's decision making:
believe the means through which the GBR Foundation was chosen as the
organisation to be given the nearly $500 million dollar taxpayer grant, raises
questions around transparency and the public interest. We believe an Inquiry is
required to understand why such a large sum of public funds was given to a
corporate organisation without a competitive tender process. This decision
effectively leaves authorities such as the Great Barrier Reef Marine Park
Authority and other scientific organizations in the dark and raises questions
about the delivery of the 2050 Great Barrier Reef Partnership Program.
Environmental Justice Australia (EJA) highlighted that information about
the Commonwealth Grant Rules and Guidelines suggest that:
it can be difficult to distinguish between a grant and a procurement,
particularly where a procurement is on behalf of a third party. With a grant,
the recipient receives financial assistance from the Commonwealth to help
achieve its own goals (consistent with Commonwealth goals), whereas in a
procurement, the Commonwealth is usually purchasing goods and/or services that
assist the Commonwealth in achieving its own goals.
EJA suggested that the way the Partnership had been framed by the Government
clearly showed it was awarded to achieve 'Commonwealth goals' and should be
considered as a procurement. It cited a number of Government comments,
including comments made by Senator the Hon Simon Birmingham in Senate Estimates:
government made a budget decision to make a record investment into the reef,
informed by advice from a range of sources, including the [GBRMPA], as we
usually would, in relation to the budget bids that ministers make about their
portfolio priorities. The government then considered the foundation to be an
appropriate vehicle to deliver that investment in the reef and rightly
commenced negotiations with the foundation about how that might occur. As you
have heard before, those negotiations are ongoing.
Greenpeace Australia Pacific agreed that the Partnership should have
been awarded as a procurement, rather than a grant, and so:
comply with the Commonwealth Procurement Guidelines, which require open tender,
due diligence and transparency. There are criminal offences for failure to
adhere to these guidelines. The partnership is a critical component of the Reef
2050 plan, and therefore a core function of government. Provision of government
services such as the Reef 2050 plan should either be delivered by government or
by third parties through an open tender.
In responding to concerns about the use of a grant process, the
Department of Finance informed the committee that it was up to departments to
determine whether funding could be delivered as procurement or grant
framework that operates within government is a devolved financial framework. In
that framework, people have different responsibilities. In particular, what are
called accountable authorities, which are secretaries in the case of a
department and boards in the case of a corporate entity, have responsibilities
and obligations. Those responsibilities and obligations particularly fit under
the Public Governance, Performance and Accountability Act, and that set of obligations
then flows through a number of other documents. So there are rules that are
made under that act, some that relate to grants, some that relate to
procurement. One of the obligations that apply to any agency in a grant-giving
context is to satisfy itself, by reference to the guidelines and the rules,
whether something is a procurement or whether something is a grant. If it's one
thing, then there's one set of requirements that apply to it. If it's the other
thing, then a different set of requirements apply to it.
obligation on the part of a department is to satisfy itself about what it is.
There are extensive materials published and made available by Finance to
departments to help them do that. To start with, there are the grant rules and
guidelines, which are really the top level of things, and they specify things
that people must do and things that people should do. Sitting underneath that,
there are other arrangements. In particular, there is what we call a resource
management guide, which is, if you like, an explication in greater depth of
some of the issues in particular cases.
The Department of Finance also noted that the Department of the
Environment and Energy had fulfilled all relevant obligations:
draw the committee's attention to a document which called Grants,
procurements and other financial arrangements: resource management guide No.
411. It is publicly available and it makes clear some of the things that
really would lead an organisation or an accountable authority to make a
judgement about whether something fits clearly in one camp or clearly in the
other. As the department of the environment have shown in their submission
dated 10 September, they did go through that process, and they went through it
rigorously and they reached a view, which they have explained, that this was a
grant rather than a procurement.
The delivery of funds
in the 2017–18 year as a single payment
Despite being announced in the lead up to the 2018–19 Budget, being included
in the 2018–19 Budget papers, and the Foundation not being ready to develop and
administer the program until 2018–19, the appropriations required for the
Partnership were made for the 2017–18 financial year. In addition, although the
Partnership is a six-year program, the $444 million in funding for the
Partnership was appropriated in its entirety in 2017–18, rather than being
spread over the forward years.
During a Senate Budget Estimates hearing in May 2018, the Minister for
Finance argued that appropriating the entire funds needed for the Partnership
in one year provided certainty, and would ensure the Foundation has 'the
necessary resources...on an ongoing basis for what is a very high policy
priority'. He continued that it also sent a strong signal to potential donors
to the Foundation, which would help it leverage philanthropic funds:
This is a
reflection of the government's policy decision that doing it this way provides
certainty of funding for on-ground Reef protection activities, and it sends a
very strong signal to potential investors that the government is committed to
long-term protection of the Reef.
The committee notes that Mr Turnbull's evidence also suggested that the
decision was made regarding the appearance of future budgets, as the
expenditure of Commonwealth money in the 2017–18 year would not affect forward
estimates and future Budgets.
Officers of the department provided further justification for the
provision of the grant in one payment during Budget Estimates in May 2018:
number of different areas where we have tried to set up partnerships and, in
particular, focused on trying to increase leveraging from other sources,
whether it is states and territories or private sector, the department's
experience has been that one of the key things external funders will look for
is solid and firm commitment by the Commonwealth government behind that. With
the scale of this investment being the largest investment ever in the history
of any Australian government in the reef, that is a pretty strong signal to the
market. For the Great Barrier Reef Foundation, which over the last more than a
decade has managed to raise $80 million, that will take them into a very
different space in terms of their ability to raise additional funding.
The Department of Finance also commented that it was not unusual for
grants to be awarded as a single payment:
includes, for example, the ability to provide financial assistance through a
co-contribution or to build capacity. It's provided in order to, amongst other
things, support the purposes, or enable both government's policy purposes and
the purposes of the relevant organisation to be met. I don't think it's
right to characterise grants as being structured in exactly the way your
question was implying [as being delivered over a number of years and subject to
performance indicators being met]. They can be structured many different ways
and they can be made, and often are made, as one-off payments. That's, in
itself, not a definition of a grant.
Some evidence received by the committee raised concerns about the
delivery of the grant as a single lump sum, rather than being staggered over
the six years of the grant. For example, the Australian Conservation Foundation
(ACF) argued that this single payment meant there was 'obvious disconnect
between tangible spending through Reef 2050 Plan actions and the accounting of
overall Reef investment in the Federal budget'.
Mr Matt Rose, a former Treasury official now an economist for the ACF,
outlined governance and oversight risks associated with such an unprecedented
single payment, as well as noting its irregularity:
small foundation being given this much money in one hit, there are obviously
governance risks. If you genuinely wanted to build the capacity of the
foundation, surely you would get into some kind of grant arrangement that
helped them build the capacity and then accelerated the funding in the out
years...I can't remember in my time [at Treasury] seeing any arrangements quite
like this, where you front-load all the money and then the foundation comes out
later and says, 'Oh we're going to spend it over six years.' It was put in last
year's budget, two weeks before the next year's budget. So clearly they wanted
money out the door.
In relation to the arguments about ensuring continuity of funding, Mr
of certainty, certainty is not granted like this to government departments,
NGOs and the legal aid sector in the work they do. They don't get a chunk of
money and six years to spend it. They get money over the forward estimates, and
every year they worry about whether the money's going to be taken off them in
the budget process.
It has also been noted that the transfer of this sum as a single
payment, rather than as a Budget line working over the forward estimates, will
mean that the grant accrues considerable interest benefitting the Foundation,
rather than the Commonwealth Budget. Under the funding agreement, the
Foundation can use up to $22.5 million of the interest accrued from this
payment to supplement its administrative costs.
As a result of the full grant being advanced as a single payment, it has been
estimated that the loss to the Commonwealth will be around $11 million in
public debt interest.
Size of other Commonwealth grants awarded in 2018
The committee understands that the $444 million Partnership is an
unprecedentedly large grant made by the Commonwealth. Since it became
compulsory for all Commonwealth entity grants to be listed on the online
database Grant Connect in December 2017, the Partnership is the single largest
grant awarded, almost twice the size of the next-largest Commonwealth grant
made in 2018.
From December 2017, five other Commonwealth grants have exceeded
$100 million. Only one exceeded $200 million, to the Australian Rail Track
Corporation, a Government statutory corporation for an infrastructure upgrade
of $235 million on the North East Rail Line in Victoria. In announcing the
grant it was noted that:
review and endorsement processes were undertaken by agencies including
Transport for Victoria, Rail Projects Victoria, Public Transport Victoria,
V/Line, the Federal Department of Infrastructure, Regional Development and
Cities as well as the Australian Rail Track Corporation.
Four other grants exceeded $100 million, two in aged care services ($127
and $136 million) and two for services for people with disabilities ($157 and
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