Chapter 5

Changes to the program from February 2010

5.1        On 19 February 2010, Minister Garrett announced a range of changes to the Green Loans Program including:

• an additional 600 000 assessments to be funded by government, making a total of 960 000 assessments under the program;
• the discontinuation of the loans component of the program;
• a cap of 5000 assessors;
• a weekly cap of 15 000 assessment bookings, and individual caps for assessors of three per day and five per week; and
• changed booking arrangements to allow only individual assessors to make bookings.[1]

5.2        Mr Malcolm Thompson, Deputy Secretary, DCCEE explained the rationale for the various caps to the committee:

I think the figure of 5,000 [assessors] emerged in advice to the government prior to the decision on 19 February [2010] because we were trying to manage a significant spike in demand under the program through January and February of that year...

...the number of assessors contracted under the program was helping to drive demand for assessments and therefore steps had to be taken to try to manage the program within its budgetary limitations.[2]

5.3        Mr Thompson also commented:

In terms of managing demand and leading to a more orderly operation of the program...the caps have been successful.[3]

Impact of changes on assessors

5.4        Ms Alison Carmichael, CEO, ABSA, informed the committee that assessors had mixed reactions to the changes to the Green Loans Program announced in February 2010:

...some were quite pleased, feeling that it had slowed down the program and was making it manageable, and others were worried that they could not make a living from it.[4]

5.5        However, those assessors that submitted to the committee were generally unhappy with the changes to the program announced in February 2010. One assessor submitted that:

The changes that came into effect on 19^th of February had a huge impact on the sector. Most disappointing of all, was the fact that there was no prior consultation with the Assessor industry. The ongoing uncertainty and continued lack of communication has been incredibly stressful for Assessors and their families. I have personally considered seeking compensation.[5]

5.6        Assessors argued that the cap of five assessments per week per assessor means that assessing is no longer viable full-time employment. For example, Mr Robert Gelok AM, an assessor from Western Australia submitted:

With the five assessments per week cap there is little incentive to pursue the assessor role as a business venture – two per day – ten per week would be more realistic and would still only provide an average income after the expense of running a small business. The cap of five was obviously a bureaucratic decision made by a bureaucrat with no experience of small business and the daily fight for financial survival.[6]

5.7        Similarly, Ms Larissa Nicholls, an assessor from Victoria stated:

I support a limit on assessor bookings to help ensure quality of assessments and longevity of the program. However the limit of 5 assessments per week does not equate to sufficient income to justify business set up and administrative costs. With the 5 assessments per week limit I am earning less than in my previous full time job, have significant costs, and severe financial insecurity. I support a limit of 10 assessments per week.[7]

5.8        The proposed limit of 5000 assessors contracted to the government also raises questions regarding which of the approximately 5500 assessors who have undertaken training will be awarded the approximately 1000 remaining contracts. (See discussion at paragraph 3.50 ff in chapter 3).

5.9        Furthermore, assessors have submitted that the cancellation of the green loans portion of the program has undermined the program, and removed the major incentives for householders to book assessments. For example, Ms Nicholls submitted:

The program has not been renamed and to this date (April) approved marketing and assessment documents are still labelled as 'Green Loans'. It is exceedingly difficult for an assessor to promote a program that is publicly perceived as finished. Additionally the 'Green Loans' assessments promise a benefit to householders which is unavailable. Householders are put off by attempted explanations by an assessor. Householder reluctance to participate in the program is often linked to their perception that the insulation rebate scheme was poorly administered and wasted public money.[8]

5.10      Other assessors corroborated Ms Nicholls' statements regarding householders now being reluctant to book assessments.[9]

5.11      Assessors submitted that they had spent significant amounts of money to establish businesses which are no longer viable. Most assessors submitted that their costs were between $2000 and $5000.[10]

5.12      However, some assessors claim to have spent significantly more on establishing assessment businesses and training a number of employees. For example, Mr Rob Brook, Manager of Newcastle Home Sustainability Assessments, submitted that he spent a total of $68 610 to establish his assessment business, including on marketing, office premises, equipment and training.[11] Mr Phil Press submitted that he spent $42 000;[12] Mr Jim Chua $10 000;[13] and Mr Mohamed Hawli $30 000.[14]

5.13      Other assessors submitted that they resigned from other employment on the understanding that performing assessments under the program would be a viable form of income for at least three years.[15]

5.14      Assessors submitted that the changes made in February 2010 have significantly impacted their lives, affecting their ability to make mortgage repayments and conduct businesses. For example, Mr Matthew Dowd, an assessor, explained:

Assessors can only book 5 assessments per week. At best this is 10 hours work each week (less than a part time position). Often assessments are cancelled by householders, thus reducing the income an assessor can earn for that week. At times I have had three cancellations in one week, reducing my families weekly income to $400 Gross (tax and petrol costs to get to each assessment must come out of this). No family can pay a mortgage, bills and petrol costs on this income.[16]

5.15      Mr Aaron Nielsen, an uncontracted assessor told the committee:

Many of us, uncontracted or not, are struggling financially if not always emotionally... All of this happened, simply because of a government which changed its mind and took its time doing so.[17]

5.16      Another uncontracted assessor, Mr Chris Hutton similarly submitted:

The retrospective decision by the previous Minister Peter Garrett to cap assessor numbers to 5000 has caught many people including the managing body ABSA. This decision has caused me family distress, financial hardship, loss of job security, anxiety and anger.[18]

Impact of changes on GLACO Assessors

5.17      The changes to the program on 19 February 2010 appear to have had a particularly detrimental impact on assessors who had contracts with the Green Loans Assessors Co-operative Pty Ltd (GLACO).

5.18      GLACO was a company which provided assessment booking and administration services to independently registered assessors. Each assessor paid for training and ABSA membership themselves, and entered into a contract with GLACO (in addition to the assessors contract they had with DEWHA). Each GLACO assessor had their own assessor number and could continue to book assessments outside of their arrangement with GLACO.

5.19      GLACO would market the program to householders and book assessments for assessors. It would then invoice DEWHA on the assessor's behalf and pay the assessor their fee minus GLACO's $47.50 booking fee. Under the contract between GLACO and its assessors, the remaining amount ($152.50) was to be transferred electronically to the assessor within 24 hours of receipt by GLACO.[19]

5.20      Assessors paid $200 to GLACO as a 'joining fee'. The contract between GLACO and assessors states that this entitled assessors to 2000 shares in the co-operative, and a proportional share of 20 per cent of GLACO's net annual profit.[20]

5.21      At its peak, GLACO was contracted with 73 assessors.[21]

5.22      The principal complaint by GLACO assessors was in relation to GLACO's conduct following the changes to the program announced by Minister Garrett on 19 February 2010. Following Minister Garrett's announcement, on 9 March 2010, GLACO emailed its assessors informing them that the changes 'make the GLACO blueprint unworkable'. Assessors were told in the same email that they would receive payment for assessments conducted in February on 1 April 2010.[22]

5.23      Assessors were given the option of joining the new company 'Green Australia Marketing Pty Ltd', or having their $200 joining fee returned along with their February payments on 1 April 2010. Based on this information, assessors submitted invoices for the assessments they had conducted in February.

5.24      However, on 1 April, Mr McTaggart, the Director of GLACO, emailed assessors informing them that GLACO had been paid by DEWHA for assessments conducted in February, but did not have sufficient funds to pay assessors. Ms Leanne McIntosh, a GLACO assessor who states that she acts on behalf of all GLACO assessors in a group named the 'GLACO Assessors Group' (GAG), estimated that GLACO assessors are owed a total of $511 000 for assessments that they conducted between December 2009 and March 2010 for which they have not been paid.[23]

5.25      Some GLACO assessors attempted to stop DEWHA from paying GLACO as early as March 2010, as a result of not having received full payment from GLACO for earlier assessments.[24] According to Ms McIntosh, these assessors voiced their concerns regarding GLACO not paying them, or not paying in full, and requested that they be paid directly. However, Ms McIntosh submitted that the assessors were told by call centre staff that they could only be paid through GLACO.[25]

5.26      Mr McTaggart was given the opportunity by the committee to respond to the allegations made about him and GLACO by assessors. In his response, Mr McTaggart stated that 'GLACO failed as a result of the Government announcement of 19 February 2010 where they changed the maximum number of appointments from 5 per day to 5 per week'.[26]

5.27      In his email to assessors on 1 April 2010, Mr McTaggart cited the problems with the green loans call centre as a major reason for GLACO's failure. He argued that the delays resulted in significantly increased costs for GLACO, which meant that the model on which it was based was not viable.[27] Mr McTaggart stated in his submission to the committee that this led to GLACO's costs for booking each appointment to increase from $10 to $600.[28]

5.28      Mr McTaggart submitted that as a result of the 19 February 2010 decision, GLACO lost around 3000 appointments.[29]

5.29      Mr McTaggart also stated in his email to assessors on 1 April 2010 that GLACO was owed $700 000 by DEWHA as a result of 'missing AN numbers'. These relate to assessments conducted during January 2010 over the period in which assessors were asked to email assessments to DEWHA after they had been completed. Apparently many were never assigned numbers and so cannot be claimed.[30] The government has denied this claim.[31]

5.30      Ms Leanne McIntosh, who also appeared before the committee, agreed with Mr McTaggart regarding the fact that a key reason for the situation of GLACO assessors was the government's decision to end the program:

[O]n 19 February 2010 the government made overnight changes to the program to solve the political problem they had of too many assessors and too much demand. A program that was supposed to last for four years was almost out of money at the eight-month mark. The new five-per-week cap effectively pulled the rug out from every assessor's business model and destroyed GLACO's viability.[32]

5.31      Ms McIntosh argued:

If they [the government] had not made the changes in the program, I believe GLACO could probably have traded out of difficulty. They were under significant cash-flow problems because of the problems within the government system; that is what caused it.[33]

5.32      Ms McIntosh explained that 'having destroyed the viability of Green Loans businesses', the government:

...then failed to heed all the warnings given to them by various GLACO assessors about the security of their upcoming payments through GLACO.[34]

5.33      Ms McIntosh went on to explain the content of these warnings which occurred when GLACO assessors were informed [on 9 March 2010] that GLACO was adopting a new company structure:

Numerous assessors...immediately started phoning and emailing the department and ABSA to alert them to the situation and demanding, very clearly, that the department needed to hold back the February payments to GLACO and pay us directly. GLACO were never entitled to all our money, just a booking fee. ABSA also asked the department to withhold payment on our behalf. We never received any response from the department. They paid all our money to GLACO over the top of our warnings and objections and our money was lost.[35]

5.34      However, Ms Anne Leo, Acting Assistant Secretary, Sustainability Assessment Programs Branch, DCCEE, claimed in evidence that she had not become aware of GLACO's situation until 2 April, when she was notified by ABSA. Ms Leo stated that the more junior members of her team with whom GLACO assessors had been communicating their concerns had not passed those issues on to her.[36]

5.35      According to Ms McIntosh, while most GLACO assessors were told that they could only be paid through GLACO, and that the department would not consider paying them directly, one assessor was able to receive direct payment.[37]

5.36      Ms McIntosh further argued that by insisting that GLACO assessors invoiced through GLACO rather than directly, the government breached its duty of care to assessors:

The Commonwealth's duty if care was to us [assessors] because we had the contract direct with the government. We told them that the contracts we had with GLACO were no longer in place, yet they still paid them.[38]

5.37      According to Ms McIntosh:

The members of GAG (GLACO Assessors Group) are collectively now owed at today's date [29 June 2010] approximately $511,000 for work done in good faith on behalf of the federal government under the Green Loans Program. The sole reason for these moneys being outstanding is because the government mismanaged the design and implementation of this program and failed to act prudently and reasonably in response to our warnings and alarms about GLACO operations in February and March 2010.[39]

Impact of changes on financial partners

5.38      In its submission, the Australian Bankers Association (ABA) informed the committee of the impact of the changes to the program on participating financial institutions. These impacts included:

• direct and indirect costs of cancellation being carried by the financial institutions;
• customers part way through the loan process being uncertain as to whether or not they would gain access to a loan; and
• uncertainty for business customers who were provided with credit as a result of being 'engaged to provide goods and services as part of the Government’s various environmental and home sustainability programs'.[40]

5.39      The ABA highlighted the importance of business certainty in its members' future interactions with the Commonwealth Government, and stressed that:

Early consultation and ongoing dialogue with the banking industry is vital if market-based initiatives are to be successfully designed, especially programs which are to be delivered through the banking system. A lack of consultation leads to sub-optimal outcomes, which in this case has lead to business disruption and inconvenience to bank staff that are subsequently required to deal with disgruntled customers.[41]

5.40      Mr Steven Münchenberg, Chief Executive Officer, ABA, was critical of the unexpected termination of the program stating:

The abrupt cancellation of the program, without notice to those banks that offered Green Loans, left many loan applicants dissatisfied and, unfortunately, some of this reaction was directed at banks and their staff. We were also very surprised by the decision given the investment made by banks at the behest of the government to develop and offer a green loan product.[42]

5.41      According to Mr Münchenberg, as a result of the abrupt cancellation of the green loans component, the banks involved in the program are 'probably out of pocket'.[43] Similarly, Mr Mark Degotardi, Head of Public Affairs, Abacus, explained:

Significant resources go into developing a new financial product, including staff training and development, additional HR, systems development implementation, legal and compliance works, and marketing and promotion...

The investment by Abacus members in the Green Loans Program is now lost and it seems unlikely that they will be given an opportunity to recoup those costs.[44]

Other groups impacted by the changes

5.42      The implications of the government's changes to the Green Loans Program extend beyond assessors and financial institutions.

5.43      For example, longstanding and successful businesses which became involved in the program in good faith told the committee that they had suffered damage to their reputation and financial viability by being involved in the program. Fieldforce, in particular, argued that:

[I]t is our considered assessment that the Green Loans Program has been damaging to our business, damaging to our reputation and damaging to our employees and subcontractors. We entered into the program and invested in good faith and we have not been able to recoup that investment. The abrupt changes to the program announced without consultation, the current lack of certainty around the program, the caps on the number of assessments, the pulling of the loans and all the other operational issues are now making it very difficult to continue operating in the program.[45]

5.44      In addition, it seems that other businesses that provided goods and services to assessors were negatively impacted by the changes as assessors were no longer able to pay for their goods and services. For example, Mr Walter Dobrowolski, from Budget Colour Printers submitted to the committee that his business has lost $380 on an unfulfilled printing contract with an assessor.[46]

5.45      Some householders who did not receive their assessments prior to the 22 March 2010 cut-off for the loans expressed their anger and disappointment that they had undergone assessments in vain. For example, Mr Brian Peters, a householder from NSW who received an assessment in January 2010, but whose assessment report was delayed by DEWHA and so was not received prior to the cancellation of the loans, expressed the view that he now sees the assessment as a waste of time and money and an invasion of his privacy. Mr Peters submitted:

Pay the assessor for the assessment, waste my time in having it completed (whilst it may not have seemed onerous at first it actually took four hours to complete!), invade my privacy by going through my house and recording all the information from my various bills, make me sign a form giving the Government ongoing access to my information and then cancel the Green Loans Programme. Not only do I feel annoyed at being duped but also I am HIGHLY offended at the invasion of my privacy. This is morally wrong to collect this data and not even provide me with a report never mind the opportunity to apply for a Green Loan. At the time I regarded the assessment as a necessary evil but, in light of the cancellation of the Programme, I now regard it as a total invasion of my privacy.[47]

Committee comment

5.46      The impact of the changes to the Green Loans Program, announced by the government on 19 February 2010, were significant for many of the stakeholders involved in the program—in particular assessors and financial partners. Yet, as noted by a range of stakeholders and industry partners involved in the program, including Fieldforce,[48] the ABA,[49] Abacus,[50] as well as assessors[51] and ABSA,[52] there was no discussion or consultation with those that would be affected prior to the government's announcement.

5.47      Thousands of assessors who invested substantial savings into training, based on information from the government that the program would run for five years, have found themselves without their anticipated income, or with no income at all, from the program. Furthermore, for more than five months,[53] the government refused to give assessors any certainty or information about their financial future in the industry. The committee is appalled by the government's disregard for the situation of thousands Australians who were prepared to engage in this government program in the hope that they might be able to contribute to a more sustainable future.

5.48      The government's decisions have also detrimentally affected dozens of Australian companies, including companies in the industry whose reputations have been damaged and which have suffered financial losses as a result their involvement,[54] and financial partners which have lost the money they invested into the program.[55] The flow-on effects have also damaged related Australian businesses.[56]

5.49      A number of those detrimentally affected by the government's decisions have made compensation claims against the government. DCCEE informed the committee that a total of thirteen claims for compensation had been made as at 29 June 2010, including by:

...various groups of assessors, and there are a few non-contracted assessors in there; GLACO has made a claim, which I think is in the public domain; financial institutions; and other individual assessors.[57]

5.50      The GLACO Assessors Group submitted a copy of their claim made under the Scheme for Compensation for Detriment Caused by Defective Administration (CDDA) to this inquiry. The claim (which was made to DCCEE which currently has responsibility for the program, although it predominantly relates to the actions of DEWHA), argues the following factors, among other things, resulted in GLACO assessors suffering detriment as a result of DEWHA's defective administration:

• an absence of effective program leadership;
• a lack of sufficient resourcing within DEWHA;
• poor program design and management;
• a failure to establish the adequate information technology systems required for proper implementation and management of the program;
• improper favourable treatment of Fieldforce;
• inadequate communication within DEWHA;
• misrepresentations made to assessors by DEWHA; and
• a lack of reasonable and prudent due diligence by DEWHA with respect to GLACO.[58]

5.51      The committee gave DEWHA and DCCEE the opportunity to respond these claims which were placed on the public record by the GLACO Assessors Group. The Secretary of DEWHA, Ms Robyn Kruk responded:

As the submission in question relates to another department [DCCEE]...I believe it is not appropriate for me to respond to the issues raised.[59]

5.52      Ms Kruk also noted that many of the arguments made in the claim relate to findings of the Faulkner Report, to which the DEWHA has responded.[60]

5.53      The Deputy Secretary of DCCEE, Mr Malcolm Thompson, similarly directed the committee to its responses to the Faulkner Report, on which many of the GLACO Assessors Group's claims are based.[61] Mr Thompson also commented that:

The Department has made a significant effort to support the Green Loans Home Sustainability Assessors impacted by the cessation of GLACO. The Department's approach has included establishing a dedicated unit to support the GLACO assessors in regards to addressing their enquiries and any issues or concerns raised, as well as working through on an individual basis outstanding payment issues.[62]

5.54      With respect to the GLACO Assessors Group's claim under the CDDA, Mr Thompson submitted that DCCEE 'is involved in discussions with representatives of the GLACO Assessors Group regarding those claims',[63] and 'does not necessarily accept the various assertions and claims' made by the Group.[64]

5.55      In addition to the various compensation claims that have been made, the committee questions whether individuals and businesses which have suffered financial and reputational damage from their involvement in the program are likely to be willing to become involved in similar government programs in the future. The government's poor management and poor decision-making in the Green Loans Program may well have driven away many of the best and brightest in the industry, or at least made them wary of partnering with government in the future.

5.56      Mr Timothy Ryerson, Fieldforce's Executive General Manager, effectively summed up the disastrous impact of the program when he told the committee:

In a nutshell, the changes to the Green Loans Program have effectively killed a fledgling industry which was meant to be good for Australians, good for business and good for the environment.[65]

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