Referral
1.1
On 10 August 2021, the following matters were referred to the Finance and Public Administration References Committee (the committee) for inquiry and report by 2 December 2021:
The administration and expenditure of funding under the Urban Congestion Fund (UCF), with particular reference to:
(a)
the allocation of funding under the National Commuter Car Park Fund;
(b)
whether the administration of the UCF meets the highest standards of governance, performance and accountability in the expenditure of public funds;
(c)
the role of the offices of the Minister(s), the Prime Minister and Deputy Prime Minister(s), and any external parties, in determining which projects to allocate funding to and who would announce these projects;
(d)
the extent to which the management of the fund respected the caretaker conventions;
(e)
the fund’s impact in reducing congestion, including whether the allocation of funding under the program was appropriately targeted to meet the stated objective of the UCF; and
(f)
any related programs or matters.
Conduct of the inquiry
1.2
Details of the inquiry were made available on the committee’s website and the committee invited a number of organisations and individuals to lodge submissions.
1.3
The committee received 17 submissions, which are listed at Appendix 2 of this report. The committee also held a public hearing for the inquiry on 11 November 2021, in Canberra and via videoconference. A list of witnesses who gave evidence at the hearing is available at Appendix 3 of this report.
Acknowledgment
1.4
The committee thanks all those who contributed to the inquiry by making submissions, providing additional information, and appearing at the public hearing.
Infrastructure Investment Program
1.5
The Infrastructure Investment Program (IIP) is a ‘$110 billion rolling investment program designed to address current infrastructure requirements while also planning to ensure that future transport needs are met’. The Department of Infrastructure, Transport, Regional Development and Communications (the Department) advised the committee that it:
… works with states and territories, as well as undertakes research and analysis to identify and deliver projects that align with Commonwealth priorities and take account of all inter-related factors impacting infrastructure needs. Investment decisions consider population growth, geographic density changes, growth and dispersion of employment, existing transport networks as well as existing and historical investments.
1.6
The Department confirmed that projects funded under the IIP ‘are decisions of Government’ and are ‘typically negotiated outcomes between the Australian Government and state and territory governments and are not subject to competitive funding rounds’.
Administrative framework
1.7
Projects selected for investment under the IIP are governed by the National Land Transport Act 2014 (NLT Act), the National Partnership Agreement (NPA) and Notes on Administration (NOA). The Department submitted that these documents set out the ‘framework for effective delivery’ of IIP projects.
1.8
The NLT Act provides for the ‘funding of projects related to land transport matters, and for related purposes’. The NLT Act, at Part 3, section 9, provides that the Minister may, in writing, approve a project as an Investment Project if, and only if:
(a)
the Minister is satisfied that the project is eligible for approval, and
(b)
the Minister considers that it is appropriate to approve the project.
1.9
Eligible projects are then defined under sections 10 and 11 of the NLT Act.
1.10
Projects are eligible for approval if they are for, among other things, the construction of inter-modal transfer facilities in a state or relevant external territory (s 10 of the NLT Act). Section 11 of the NLT Act then provides the matters to which the Minister must have regard in deciding whether it is appropriate to approve a project as an Investment Project, including, but not limited to:
the results of any assessment of the economic, environmental or social costs or benefits of the project;
the extent to which the project is likely to improve access for communities to services and employment;
any transport or land use plans that might be relevant to the project; and
the extent to which persons other than the Commonwealth propose to contribute funding to the project.
1.11
The Australian National Audit Office (ANAO) explained the process as it related to the National Commuter Car Park Fund (CCPF), noting that:
The project approval stage follows the funding commitment stage. The Minister was the funding decision-maker for the commuter car park projects. The Minister may approve a commuter car park project as an ‘Investment Project’ under Part 3 of the National Land Transport Act 2014 (NLT Act) if the Minister is satisfied that the project is eligible for approval (in accordance with section 10) and considers that it is appropriate to approve the project (in accordance with section 11).
Public Governance, Performance and Accountability Act 2013
1.12
Section 71 of the Public Governance, Performance and Accountability Act 2013 (PGPA Act) provides that a Minister must not approve a proposed expenditure of relevant money unless the Minister is satisfied, after making reasonable inquiries, that the expenditure would be a proper use of relevant money. If the expenditure is approved, the Minister must—as soon as practicable—record the terms of that approval in writing and comply with any other requirements prescribed by the rules.
Governance arrangements
1.13
Urban Congestion Fund (UCF) projects are funded under Part 3 of the NLT Act, with the UCF established as a sub-program of the IIP.
1.14
Projects funded under the NLT Act are governed by the NPA on Land Transport Infrastructure Projects, with the most recent NPA agreed to by the Australian, state and territory governments on 1 July 2019. The Department advised that the NPA ‘sets out how the Governments will work together to deliver projects administered under the Act’. Further:
… each state and territory has agreed to an individual schedule to the NPA which indicates Australian Government funding levels for land transport investments.
1.15
The ANAO also explained the NPA Schedules, noting that they detail the levels of funding the Australian Government ‘intends to provide to the states/territories…for land transport infrastructure projects, including for each UCF project’.
1.16
The Department advised that decisions included in NPAs are decisions of government, ‘subject to agreement by implementing partners, relevant states and territories and provisions in the terms of the NPA’. The Department continued that:
These arrangements are longstanding, having their genesis in the establishment of NPA models with consolidated appropriations management through respective treasuries over 10 years ago.
1.17
However, the ANAO noted that these Schedules were no guarantee for funding for the projects specified within them, as funding must be approved by the Minister in accordance with the NLT Act and the PGPA Act.
1.18
The Schedules also provide the NOAs, which give administrative guidance for managing projects with an Australian Government commitment, to be funded under the NPA. The NOA may include:
the process for consideration of approving design and delivery steps for committed Projects;
administrative requirements relating to funding recipients;
administrative requirements for project completion; and
administrative requirements for public recognition, media and signage.
1.19
The ANAO explained that neither the NPA nor the NOA ‘describe the arrangements and processes associated with the selection of projects to be included in the Schedules’ to the NPA. The ANAO concluded that:
There were also no published guidelines, eligibility criteria or merit criteria for the UCF. Funding was allocated using a non-competitive, non-application based process. The selection of projects were decisions of the Australian Government.
1.20
This was confirmed by the Department’s submission, which noted that:
In October 2018, the Australian Government agreed to governance arrangements for the UCF which included project identification by the Minister for Urban Infrastructure. The Australian Government, as outlined in the audit report, then identified and selected all the projects.
1.21
The ANAO observed that only state agencies are eligible for payments under the NPA, ‘and, therefore, of the UCF funding’. The ANAO explained the funding process:
In respect to both the approved projects that they are to deliver and that councils in their state are to deliver, the state agency is the funding recipient and is subject to the mandatory conditions of funding set out in Part 3 of the NLT Act. State agencies are to pass on payments to council project proponents.
Commonwealth Grants Rules and Guidelines
1.22
The Commonwealth Grants Rules and Guidelines 2017 (CGRGs) are established under the PGPA Act and issued by the Minister for Finance. The CGRGs establish ‘the overarching Commonwealth grants policy framework and articulate the expectations for all non-corporate Commonwealth entities in relation to grants administration’.
1.23
Under the CGRGs, a grant can ‘take a variety of forms’, including as a result of a competitive or non‑competitive selection process, or on an ad hoc/one off basis. A ‘grant’ is ‘an arrangement for the provision of financial assistance by the Commonwealth’ or on its behalf:
under which relevant money or other Consolidated Revenue Fund money is to be paid to a grantee other than the Commonwealth; and
which is intended to help address one or more of the Australian Government’s policy outcomes while assisting the grantee achieve its objectives.
1.24
However, the CGRGs specifically note that any financial assistance provided to a state in accordance with section 96 of the Constitution is not a grant, nor is any payment to a state or territory that is made for the purposes of the Federal Financial Relations Act 2009.
1.25
The CGRGs also contain ‘a small number of requirements that apply to Ministers’, in relation to decision-making and reporting requirements which are in addition to ‘legislative requirements that apply where a Minister approves proposed expenditure’.
1.26
Specific requirements in the CGRGs include that a Minister must write to the Finance Minister advising of the details of any approved grants in his or her own electorate. Further, before approving any grant, the Minister:
(a)
must not approve the grant without first receiving written advice from officials on the merits of the proposed grant or group of grants. That advice must meet the requirements of the CGRGs; and
(b)
must record, in writing, the basis of the approval relative to the grant opportunity guidelines and the key principle of achieving value with relevant money.
1.27
Under the CGRGs it does remain open to a minister to approve grants which are not recommended by officials, but all instances of this must be reported annually (by 31 March) to the Finance Minister and must include a brief statement of reasons for approval.
1.28
The ANAO found that the UCF does not meet the definition of a grant program, and therefore it is not subject to the CGRGs. The ANAO stated that:
National Partnership payments, including the UCF payments, are made to the states for the purposes of the Federal Financial Relations Act 2009. Such payments are not subject to the Commonwealth Grant Rules and Guidelines (CGRGs) and, as a result, the UCF does not meet the definition of a grant program and is not subject to the CGRGs.
Establishment of the UCF
1.29
The UCF was established as part of the 2018-19 Budget. The Budget Papers advised that $1 billion of initial funding would be allocated to:
… establish the Urban Congestion Fund which will support projects to remediate pinch points, improve traffic safety and increase network efficiency for commuter and freight movements in urban areas.
1.30
In announcing the UCF, the Minister for Urban Infrastructure, the Hon Paul Fletcher MP, advised that the Fund would:
… support projects that bust congestion, with a focus on last mile access to export ports, airports, employment and freight hubs.
Due to the types of projects that will be supported through the Fund, the states and territories will be asked to match funding for projects on a 50:50 basis.
The use of innovative funding and financing opportunities will also be encouraged.
The Fund will help to drive better productivity outcomes, improved efficiency and job creation.
It will also complement the support provided to regional corridors through the $3.5 billion Roads of Strategic Importance (ROSI) initiative by assisting freight operators and commuters experiencing congestion when they reach urban areas.
1.31
The Department also explained the purpose of the UCF, saying that funding under the project was to support:
… upgrades to the urban road network [that] ensure commuters get home sooner and safer by reducing travel times and vehicle operating costs, delivering a more reliable road network for commuters and freight, and reducing congestion by addressing local bottlenecks.
1.32
The Department detailed its process for providing advice to the Minister as part of the UCF project assessment and approval process, saying that:
Advice provided to the Minister is consistent with the [NLT] Act and with authority provided by the Cabinet. Providing advice to the Minister on their authority to approval [sic] the project, eligibility of the project under section 10 and 11 of the [NLT] Act and assessment of the proper use of funds under the Public Governance, Performance and Accountability Act 2013 is a necessary part of the Departments approvals process.
2019-20 Budget
1.33
Following its establishment in 2018-19, subsequent budgets have increased funding for the UCF program as projects have been announced, ‘including a number of project commitments made during the 2019 election’.
1.34
The 2019-20 Budget provided an additional $3 billion to the UCF for ‘next priorities’, and in order to ‘remediate congestion bottlenecks in urban areas’. The 2019-20 Budget therefore saw the total funding allocation to the UCF increase to $4 billion. The funding was to support projects, improve traffic safety and flow, while increasing ‘network efficiency for commuter and freight movements in major urban areas’.
1.35
At the 2019-20 Mid-Year Economic and Fiscal Outlook, the UCF was increased to $4.8 billion through ‘the addition of $210 million committed through the 2019 election as well as the consolidation of certain projects in Melbourne and Perth being administratively rolled into the UCF’. This included 18 projects totalling $640 million, which were ‘announced and funded earlier that also targeted urban congestion’.
2021-22 Budget
1.36
In the 2021-22 Budget, additional funding allocations were made to participating jurisdictions, as shown in Table 1.1 below (the ACT and Northern Territory do not receive funding through the UCF).
Table 1.1: Urban Congestion Fund: 2021-22 Budget
|
|
|
|
|
|
|
|
|
|
2020-21
|
35.4
|
60.5
|
38.4
|
137.1
|
98.6
|
8.4
|
378.3
|
|
2021-22
|
141.4
|
184.3
|
153.5
|
178.9
|
104.9
|
12.6
|
775.6
|
|
2022-23
|
128.1
|
503.7
|
211.1
|
391.2
|
118.8
|
8.0
|
1,360.9
|
|
2023-24
|
150.7
|
327.3
|
187.4
|
71.3
|
52.0
|
9.0
|
797.8
|
|
2024-25
|
124.8
|
108.3
|
23.3
|
-
|
-
|
-
|
256.4
|
|
TOTAL
|
580.4
|
1,184.1
|
613.8
|
778.5
|
374.2
|
38.0
|
3,568.9
|
Source: Budget Paper No. 3 2021-22, Part 2: Payments for Specific Purposes, p. 59.
1.37
The Department advised in September 2021, that since 2019-20, $607.7 million of the committed UCF funding had been spent, with $774.9 million forecast to be spent in 2021-22. The UCF contained 182 separately identifiable packages of works, with:
35 completed construction;
40 to commence in 2022; and
39 to commence ‘in 2023 or TBD’.
1.38
These projects included road extensions and upgrades, level-crossing removals and commuter car park upgrades.
National Commuter Car Park Fund
1.39
The CCPF is a subset of the UCF. The 2019-20 Budget allocation to the UCF included $500 million for a National Commuter Car Park Fund (CCPF). The Department advised that the Australian Government has increased the commitment to the CCPF over time ‘through the addition of projects and additional funding for existing projects’.
1.40
As of the 2021-22 Budget, $711.1 million of the $4.8 billion UCF had been committed to the CCPF. According to the Department, the CCPF provides for investment in ‘commuter car park upgrades to encourage greater use of public transport’.
1.41
It was established during the inquiry that canvassing for CCPF project participants began around September 2018.
1.42
The Department explained how the CCPF and the NPA interact, together with the role of the Department, following decisions of government:
… once the government's decisions are taken the department's role has been to work with implementation partners, namely states and territories and local governments, to identify feasible project locations, scope development options and consider whether the project is within the scope of the agreed policy and/or to provide further advice into cabinet decision-making processes. We've been undertaking this role and we will continue to do so.
What makes this different to implementation of most projects under the NPA for the department is that the projects were identified by the Commonwealth, not by the state or territory partner. Final assessment of value for money is relevantly undertaken once the department has reasonably accurate information on the scope, costs and benefits of a project.
1.43
The proponents of the CCPF are a mix of state agencies and local councils, which submit project proposals to the Department. If the proposal is approved by the Minister, the proponents ‘deliver the project, certify that milestones have been met and claim payment’.
1.44
In its September 2021 submission, the Department advised that there were ‘currently 48 commuter car parks being progressed’, with construction at the following stages:
14 to commence in 2022; and
17 to commence ‘in 2023 or TBD’.
1.45
The Department pointed out that before construction can commence, all projects need to ‘progress through the necessary design, planning approval and environmental processes’, which can create long lead times ‘between Government commitment and construction commencement’.
Minister for Urban Infrastructure
1.46
There were several Ministers with responsibility for the Urban Infrastructure portfolio during the period of administration of the CCPF, as summarised by the ANAO:
the Hon Paul Fletcher MP – Minister for Urban Infrastructure and Cities until 28 August 2018;
the Hon Alan Tudge MP – Minister for Cities, Urban Infrastructure and Population from 28 August 2018 to 22 December 2020; and
the Hon Paul Fletcher MP – Minister for Communications, Urban Infrastructure, Cities and the Arts from 22 December 2020 to present.
Australian National Audit Office
1.47
On 28 June 2021, the ANAO presented its 47th Report of 2020-21 to the Parliament, reporting on the administration of the CCPF under the UCF. The performance audit report, titled Administration of Commuter Car Park Projects within the Urban Congestion Fund, made findings around the administration of the UCF by the Department.
1.48
In conducting its audit, the ANAO applied the following criteria:
Was the UCF well designed?
Was an appropriate approach taken to identifying and selecting commuter car park projects?
Were funding decisions on commuter car park projects informed by appropriate advice?
Are approved commuter car park projects being delivered?
Summary of findings
1.49
The second chapter of the ANAO report relates to the design of the UCF, while the remainder of the ANAO report focusses its attentions specifically on the CCPF program (and not the UCF more broadly). In its submission to the committee, the ANAO summarised its audit findings, including that:
the Department’s administration of the CCPF was not effective;
the design and implementation of the UCF relied on existing arrangements generic to infrastructure investment projects, because—despite the UCF being a $4.8 billion initiative—the Department did not develop a program‑specific implementation plan, performance indicators or evaluation plan;
the Department’s approach to identifying and selecting commuter car park projects for funding commitment was not appropriate, was not designed to be open and transparent, and state governments and councils were not engaged;
the underlying assessment work conducted by the Department was not appropriate, with insufficient assessment work by the Department to satisfy itself that projects were meritorious, would provide value for money, or would be eligible for funding under the National Land Transport Act 2014 (NLT Act); and
the Department did not have sufficiently strong controls in place to establish clear delivery timelines and links between payments and milestones for each approved project.
1.50
These findings are explored further throughout the following chapters, under specific topic areas.
Content and structure of report
Engagement of the Department with the inquiry
1.51
The committee wishes to express its disappointment with the level of engagement the Department has shown throughout this inquiry.
1.52
The Department sought, and received from the committee, an extension to the time in which to make a submission, and was advised that further extensions were unlikely to be granted. In the end, the Department did not make a submission until 5 October 2021, nearly a month after the closing date for submissions. The committee suggests that the content and the quality of this submission does not reflect the extra time the Department took to provide it.
1.53
The Department also took a number of verbal and written questions on notice, further to the committee’s public hearing on 11 November 2021. After again asking for an extension to the date by which to respond, and again being granted an extension by the committee, the Department did not meet these deadlines. The Department showed no urgency in responding to the committee or adhering to the dates it had set.
1.54
In the absence of any acceptable explanation for the Department’s failure to meet reasonable deadlines, it is open to the committee to conclude that the Department has either taken a deliberately uncooperative approach to this inquiry, or is prone to serial administrative failures in relation to its obligations to be accountable to the Parliament.
1.55
Either way, its conduct is contrary to its obligations to the Senate. The committee draws the Senate’s attention to the Department’s conduct and leaves it to the Senate to determine whether the Department should be required to provide it with an explanation of its conduct.
Evidence considered
1.56
As noted earlier in this chapter, the ANAO report into the CCPF made numerous and significant findings about the administration of the CCPF. These findings will be detailed throughout the report, in each relevant section or chapter.
1.57
In addition, while the committee received evidence specifically related to the inquiry’s terms of reference, it has also had the benefit of evidence received in other forums—in particular, evidence given to the Senate Rural and Regional Affairs and Transport Legislation Committee at various estimates hearings, and through Orders for the Production of Documents as agreed to by the Senate. This evidence is included in the report where appropriate.
Chapter structure
1.58
This chapter provides background information about the establishment of the UCF and the CCPF, budget decisions made in relation to both Funds from 2018-19 onwards, and the findings of the ANAO audit into the CCPF.
1.59
Chapter 2 examines the CCPF site selection process, including the findings of the ANAO in relation to the majority of sites being in Victorian, Coalition-held electorates. This chapter also considers how the selection process has resulted in abandoned and delayed CCPF projects.
1.60
The third chapter details the guidelines of the caretaker conventions and provides information about when decisions and announcements relating to the CCPF were made during 2019, particularly once the Government entered the caretaker period on 11 April 2019.
1.61
Chapter 4 details the consultation process undertaken by the Department and the Government regarding CCPF site selection processes, and the impacts of inadequate consultation on the rollout of the program.
1.62
Chapter 5 considers the evidence as to whether the UCF, and the CCPF as one of its subprograms, will achieve the intended aims of reducing congestion in urban areas. This chapter concludes with the findings and recommendations of the ANAO and the response of the Department in relation to how the UCF has been administered.
1.63
The final chapter, Chapter 6, looks at the administration and allocation of government funding more broadly, including the ongoing issues with grant funding allocation and administration. The chapter puts forward the views received in evidence regarding the important role of the ANAO, enforcement of ministerial and other standards, and the need for a federal integrity commission.