Government Senators' Minority Report

Government Senators welcome scrutiny of the Green Loans Program. We note that a number of reviews and audits of various aspects of the program have already been undertaken, including the Faulkner review of procurement processes and contractual arrangements, a performance audit by the Auditor-General, the Protiviti review of procurement practices, a review of the program’s implementation and design by Resolution Consulting, an audit by PricewaterhouseCoopers of ABSA's accreditation processes, and this Senate inquiry.

Government Senators note that significant changes have been made to the Green Loans Program reflecting the recommendations of earlier reviews and audits of the program, and in particular the Faulkner review of procurement processes. Substantial changes have also been made to the management structures of the departments of Climate Change and Energy Efficiency (DCCEE) and Sustainability, Environment, Water, Population and Communities (DSEWPC, formerly the Department of Environment, Water, Heritage and the Arts) in response to the findings of the various reviews and audits.[1]

Changes to existing Green Loans Program

In her statement to the Senate on 10 March 2010, the former Minister for Climate Change and Energy Efficiency, Senator the Hon Penny Wong, spoke frankly about the problems with the Green Loans Program and stated that 'since assuming responsibility for this program, I have put in place an immediate process to fully identify and get to the bottom of these problems'.[2]

Since March 2010, the delivery of the existing Green Loans Program has been substantially improved, with:

• more than 170 000 home sustainability report having been distributed between May and July 2010 and DCCEE now aiming to deliver reports within 10 business days.[3]
• reduced call wait times for booking appointments: 'since March 2010 average wait times for the booking centre and the inquiries line have not exceeded 35 seconds';[4]
• correctly rendered invoices from assessors now being paid within 30 days;[5]
• the commencement of an audit program;[6] and
• arrangements being made for the delivery of the $50 Green Rewards.[7]

Government Senators note that none of these important improvements have been mentioned in the majority report, yet they have made significant improvements in the delivery of the program.

Government Senators also note that all of the issues that arose with the Green Loans Program were dealt with by both Minister Wong and the former Minister for Environment, Heritage and the Arts, the Hon Peter Garrett MP, quickly and transparently as soon as the relevant minister became aware of them. For example, upon learning of the problems with over-demand for assessments and assessor numbers, Minister Garrett quickly made changes to the program to address these problems.[8] And upon assuming responsibility for the program, Minister Wong indicated an intention to address and solve the problems with it as soon as possible.[9]

The ministers responsible for the Green Loans Program have at all times acted appropriately based on the knowledge and information available to them. Both ministers, once aware of the problems with the program acted decisively to resolve them, and did so in an upfront and transparent manner. Minister Wong instigated reviews, audits and inquiries into every aspect of the Green Loans Program and has acted thoroughly and promptly on the recommendations and findings of those reviews.

The government has now re-fashioned the Green Loans Program, and expects over coming months that it will transition into the Green Start Program. In doing so, the Government intends to continue to support the most important element of the original program—the household energy assessments. The new program is being designed to deliver high quality assessments in a format which overcomes the problems with the previous program. The government has taken into account the findings of the several completed reviews into the Green Loans Program in the design of the new Green Start Program.

Improving legacy issues within government departments

The Faulkner and ANAO reviews in particular highlighted several serious issues within DCCEE and DSEWPC that contributed to the problems with the Green Loans Program. Specifically, the ANAO found that Minister Garrett 'was not well served by his Department when it came to the quality of briefing provided'.[10]

The government has demonstrated its commitment to addressing the issues within DCCEE and DSEWPC that were identified in the various reports on the Green Loans Program. Both departments responded to the Auditor-General's report and outlined the processes that have been put in place to prevent a recurrence of the problems that occurred during the Green Loans Program.

DSEWPC indicated that it is making changes 'to improve its business and project management' including in the areas of:

...an executive governance framework, organisational reform; procurement arrangements; training; and internal audit arrangements.[11]

DSEWPC similarly stated that it 'has been working continuously to address the suite of legacy issues associated with the Program'.[12] That department detailed some of the key changes that it has made to address these legacy issues, which include:

• new governance arrangements throughout the agency;
• establishment of a contract register to capture contracts and procurement plans;
• improved documentation of new procurements and contract variations;
• delivery of contract and procurement training to staff;
• investing in significant improvements to business systems; and
• implementing formal complaints handling mechanisms.[13]

At Senate Estimates recently, the Secretary of DCCEE, Dr Martin Parkinson, elaborated on the measures being undertaken by the department:

I have spent the vast bulk of my time since 8 March [2010] working on these issues directly around HIP and Green Loans but more generally around ensuring that the department has in place the proper processes, governance arrangements and appropriate training levels for people so that under our watch these risks are minimised and that we deliver on the rectification tasks that we have been charged with...

[DCCEE] have just had Tony Blunn, a very experienced former secretary, come in and look at what we are doing. He also said that if we are able to deliver on what we have started on, we are doing very well in terms of the risk management. I publicly committed in the past that in 12 months time I am going to have an independent assessment of the department to see how much progress we have made.[14]

Furthermore, the Minister for Climate Change and Energy Efficiency, the Hon Greg Combet AM MP, in his response to the Auditor-General's report announced that:

Given the serious nature of the report's findings, I am asking Mr Dreyfus, Parliamentary Secretary for Energy Efficiency, to assume responsibility for overseeing all existing and future energy efficiency programs to ensure we prevent any future failings.[15]

The government is strongly committed to addressing the systemic issues identified in the various reports on the Green Loans Program.

The importance of household sustainability assessments

Government Senators feel that it is essential to highlight the importance of household audits in contributing to a greener future for Australia. Despite many of the problems with the Green Loans Program, stakeholders continue to overwhelmingly support the objectives of that program.

Assessors,[16] the banking industry,[17] ABSA[18] and Fieldforce[19] all spoke in very positive terms about the objectives of Green Loans, and the benefits of household energy audits. For example, Mr Timothy Ryerson, Executive General Manager of Fieldforce Services commented:

We want to be clear that we believe that the Green Loans Program was a great idea in principle. It offered a concrete way for people in Australia to reduce their rising energy use and rising energy bills, now and into the future, reduced demand on network infrastructure and cost-effectively tackled climate change.[20]

Household energy audits, conducted by trained and experienced assessors, have provided Australians with information about how to improve the energy performance of their home. Many of the recommendations made in the assessments conducted under Green Loans can be implemented at no or minimal financial cost, and are capable of saving significant amounts of greenhouse gases, as well as reducing householders' power bills.

This information is empowering to householders who want to be more sustainable, but simply do not know where to start, as emphasised by Ms Alison Carmichael, CEO, ABSA:

I think deep inside most of us is a wish to be more sustainable. How do we do that? You just look at your house and think: 'Where do I start? Where do I start in my life?' By having a green loans assessment, you got a lovely little list of priorities as somewhere you could start, and even a method. The loans were there, so even some funding towards that. That is the sense I got. And also how sustainable am I? How do I rate?[21]

The significant benefit to householders of the Green Loans assessments is proven by the sheer popularity of that aspect of the program. As was identified in the independent review of the program by Resolution Consulting, the unprecedented demand for assessments was a key reason for DEWHA's difficulties in delivering the program.[22] DEWHA's program management systems and expertise simply were not capable of handling the popularity of the assessments: of booking new assessments; sending out reports for completed assessments; and paying assessors for completed assessments. Green Loans demonstrated the huge community appetite for knowledge about what action can be taken to reduce household carbon footprints.

Furthermore, as part of its performance audit of the Green Loans Program, the Auditor-General surveyed householders who received assessments under the program, finding an almost 80 per cent satisfaction rate with the conduct of assessments. According to the survey, around 75 per cent of householders were provided with practical and helpful advice.[23] The high rate of householder satisfaction with assessments is corroborated by PricewaterhouseCoopers' review of the program.[24]

The household assessments conducted under the program have equipped hundreds of thousands of Australian households with important knowledge about the sustainability of their homes, and tips to improve efficiency. The government has recognised the importance of continuing these household energy audits in order to provide Australians with that information.

Government Senators would now like to address some of the specific recommendations contained in the majority report.

Recommendation 1—Ombudsman investigation

Government Senators reject Recommendation 1 of the majority report.

Given the high level of scrutiny already being applied to the Green Loans Program through numerous inquiries into every aspect of the program, we do not believe further investigation by the Ombudsman is warranted.

Furthermore, we note that the government has already identified and responded to the matters raised in the Faulkner review relating to systemic issues within DEWHA.

Rather than recommending further reviews and inquiries, government Senators believe Recommendation 1 should be rephrased to say:

New Recommendation 1

The committee welcomes the high level of scrutiny being applied to the Green Loans Program.

The committee urges the government to continue to respond in full to the findings of completed inquiries, and to address systemic issues identified in those inquiries.

Recommendation 2—evaluation of all environmental programs

Government Senators reject Recommendation 2 of the majority report.

This recommendation is the Coalition's recipe to do nothing to improve Australia's environmental performance. It would force unnecessary delays and impose unwarranted costs and red-tape on the roll out of many important environmental measures.

Cost-benefit analyses inevitably rely on a range of assumptions and simplifications. They typically involve the expression of all benefits and costs in a common scale or denominator, so that they can be compared with each other, even when some benefits and costs are not traded on markets and hence have no established dollar values.

In some policy areas these calculations can be robust and reliable. However, environmental values are notoriously difficult to monetise, subjecting analyses in this area to a high degree of uncertainty and inaccuracies. This would potentially undermine, or expose to criticism, any results that flow from the analysis.

Government Senators acknowledge that there may be occasions when a cost-benefit or triple bottom line analysis is warranted. However to do so for all proposed environmental programs is patently ludicrous.

Recommendation 3—cancellation of Green Start

Government Senators reject Recommendation 3 of the majority report.

As discussed by the Auditor-General, the government and agencies involved in Green Loans have demonstrated a commitment to making the improvements necessary to ensure that systemic issues are addressed and mistakes are not repeated.[25]

Furthermore, as outlined above, the delivery arrangements for the Green Start Program are being designed to alleviate the key difficulties experienced by the government in the delivery of Green Loans including:

• removing managerial pressure from the department;
• addressing the issue of conflicts of interest amongst assessors;
• strong audit controls; and
• assessor quality.

Accordingly, government Senators see no basis for Recommendation 3. The Government has stated repeatedly that it has drawn upon the lessons identified in other inquiries in shaping the Green Start program. This includes the support of an appropriate mechanism to identify risks. Should risks be identified in any stage of the process, they will be dealt with immediately. We propose, therefore, that the recommendation should read:

New Recommendation 3

The committee recommends that due to the:

• benefits that household assessments under the Green Loans Program have been shown to have provided householders;
• the government's demonstrated commitment to addressing the issues identified in the various reviews of the Green Loans Program; and
• the delivery mode of the proposed Green Start Program;

the Green Start Program proceed, subject to implementation of appropriate policies and procedures to address issues that have been identified in the completed reviews of the Green Loans Program.

Recommendation 4—budgetary evaluation of Green Start

Government Senators note the comments of Mr Thompson, Deputy Secretary, DCCEE, that it is not unusual for cost-benefit or triple-bottom-line analyses not to be undertaken, particularly of election commitments.[26]

Furthermore it would be pointless for the government to undertake a cost-benefit or triple-bottom-line analysis of a program to be delivered through grants which are yet to be determined. We believe that by asking grant applicants to undertake full budget costings and outline their plans for delivering assessments, that the government undertaking an additional analysis of costs and benefits would simply repeat this work.

Accordingly, we suggest that the recommendation be amended as follows:

New Recommendation 4

The committee recommends that, in processing grant applications under Green Start, the Department of Climate Change and Energy Efficiency ensure that each successful application properly demonstrates the benefits to be delivered and the budget breakdown.

Recommendations 5 through 15

Government Senators believe that the committee is not in a position to make these recommendations. These proposed recommendations go to the design, administration and implementation of the Green Start program that are the responsibility of the Department. The Department will need to make decisions relating to the implementation of Green Start based on its respective risk management and assessment processes and other advice it receives.

In this context, Government Senators note that the Auditor-General elected against making any recommendations in his report, observing instead that the Government was acting appropriately in responding to the reviews already conducted, particularly the review undertaken by Ms Patricia Faulkner:

The audit has not made any recommendations to the departments as DEWHA and DCCEE announced changes to improve corporate and program governance, enhance internal control mechanisms and systems, and strengthen accountability frameworks. Better engagement of centrally‑maintained subject matter expertise, such as risk management, procurement, ICT, compliance and communications, by program areas is also being encouraged to provide greater support for program managers.[27]

Government Senators also note that DCCEE has engaged Mr Anthony Blunn AO to examine and report on the adequacy of the response of the Department to the Hawke Report into the Home Insulation Program and the Faulkner Inquiry into the Green Loans Program. Mr Blunn, the former Secretary of the Attorney-General’s Department, has extensive knowledge of, and experience in legal, financial, commercial and consumer issues acquired during his career in the Public Service.

 

Senator Doug Cameron Deputy Chair		Senator Dana Wortley
Senator Anne McEwen

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