Chapter 11 - Conclusions and Recommendations
Summary
11.1
The Committee's
inquiry into the regional programs has served as a general study of the importance
and benefits of compliance with robust guidelines and the pitfalls of bypassing
proper checks and oversight measures. Evidence
to the inquiry shows that the main processes by which projects are proposed,
considered and approved for funding under the Regional Partnerships Program are
reasonably sound, although there is scope for building more rigour into the governance
framework. However, the case studies in this report are telling. In instances
where the usual processes for developing and assessing applications have been
bypassed or truncated, or the department employed the (then) unpublished SONA
procedures in order to allow projects to become eligible for RPP funding, projects
have stalled, collapsed or attracted controversy.
11.2
The Committee considers that administration of the RP program
can be improved by requiring adherence to the usual application development and
assessment processes and tightening these measures. Guidelines and procedures
which deliberately create flexibility or ambiguity and thus allow projects to avoid
the program's usual criteria and
administrative processes should be removed.
11.3
The processes and procedures of the Sustainable Regions
Program would also appear to be broadly sound. However, the Committee's
examination of SR projects in the Atherton Tablelands region highlighted
problems arising from an insufficiently representative SRAC structure, opaque
processes for appointing SRAC members and a lack of transparency around application
processes.
11.4
In general terms, the Committee's findings point to the
importance of strengthening the governance framework for both programs with
improved accountability and transparency measures. Regular reporting to the
Parliament and greater openness at several levels around decision making within
these programs would improve monitoring and scrutiny of funding decisions and
administrative practice. This is crucial to enable the Parliament to keep
itself informed of a significant area of public expenditure, and would serve as
a check on arbitrariness and politicisation of funding decisions. Stronger
accountability measures are equally important for good management of these
programs at the levels of departmental administration and consultative
committees.
Regional Partnerships Program
Program administration
SONA guidelines
11.5
As discussed in the case studies of the report, the
SONA procedures have been employed by DOTARS to allow projects which do not
meet the RPP eligibility and assessment criteria to be approved and funded from
the program. For example, the Primary Energy project was clearly ineligible for
RPP funding. Regardless, following a ministerial request, the project was
funded by using the SONA procedures. The SONA procedures appear to provide so
much flexibility that the government could, in effect, fund from RPP almost any
project it favours that is loosely relevant to regional development.
11.6
The ANAO's Administration
of Grants Better Practice Guide states that 'Criteria for eligibility
should be straightforward, easily understood and effectively communicated to
potential applicants'.[831] The SONA
procedures were only made publicly available after the program became subject
to intense scrutiny in the Parliament with the Government under pressure to
explain some of its funding decisions. Prior
to this the SONA procedures had limited circulation via an internal procedures
manual only available to relevant DOTARS employees and to members and staff of
the ACCs. Even then, as demonstrated at the Committee's hearings, the
procedures were not commonly known or understood by ACC chairs and executive
officers. Applicants, as in the case of Primary Energy, were left in the dark
about the existence of the procedures and that they had been used to approve
funding for their project.
11.7
The SONA procedures represent a major accountability
black hole. They expand the scope for departmental and ministerial discretion
to unacceptable limits, providing a default to fund projects in an arbitrary
fashion and undermining the integrity of the program. The Committee considers
that the reasons for having room in the program to fund worthy projects that do
not conform to funding criteria can be better met through other mechanisms,
which are discussed below. The Committee considers that the SONA procedures
should be withdrawn from operation.
Recommendation 1
11.8
The Committee recommends that the operation of the SONA
guidelines cease.
Area Consultative Committees
11.9
As discussed in chapters 2 and 3, DOTARS encourages
proponents to contact the local ACC to seek assistance in developing and
submitting RPP applications. However, applications can be lodged directly with
DOTARS, as occurred in the case of several contentious projects.
11.10
The Committee considers that involvement of the ACCs in
the application development process is an important safeguard for the RPP
program. Several ACCs advised the Committee that they would not put applications
forward to DOTARS unless they were of an acceptable standard and complied with
criteria in the guidelines.
11.11
As demonstrated in the case studies to this report,
where applications have not been developed in consultation with the relevant
ACC, subsequent problems have arisen. In the case of Tumbi Creek, Wyong Shire
Council was advised by a ministerial staffer to submit the applications
directly to DOTARS. The Council did not consult the relevant ACC prior to
lodging the applications and, as discussed in Chapter 5, the submitted
applications were of very poor quality. In the case of Beaudesert Rail, the
decision to give an RPP grant was made at the political level, with no
involvement from the relevant ACC.
11.12
The Committee considers that allowing proponents to
lodge applications directly with DOTARS leaves the application process open to
undue pressure and political intervention to expedite lodgement of
applications, at the expense of sound project and application development.
11.13
In comparison, the application process for SRP is less
open to abuse. Proponents are required to first provide an expression of
interest to the relevant SRAC. SRACs then invite proponents of suitable
projects to lodge a full application. This process ensures that SRACs are
consulted in relation to the development of all SRP applications.
11.14
Evidence to the inquiry from the department and many of
the ACC chairs and executive officers emphasised the important role of ACCs in
providing comments on applications from their region. ACC comments were viewed
as an important source of independent advice and a means of assessing the local
priority given to each project.
11.15
As discussed in the case studies of this report, in
some instances the ACC's assessment of an application was not provided to the
minister for consideration or the ACC had not been given sufficient time by
DOTARS to provide an informed assessment.
11.16
In the Committee's
view, the rigorous assessment procedures employed for many RPP projects are
undermined by the examples where the ACC assessment role has been truncated or
bypassed due to pressures to expedite grant approvals. The automated referral
of applications to ACCs for comment has limited value if procedures are not
adopted to ensure adequate response times are given and that the ACC assessment
is actually passed on to the decision maker. ACC assessments should be an
integral part of the decision making process for all applications, not an
optional element that can be bypassed depending on circumstances.
11.17
There is less scope for the advisory committee's
assessments to be bypassed or timeframes truncated in the SR program because
SRACs provide advice directly to the minister.
Recommendation 2
11.18
The Committee recommends it be mandatory for all
Regional Partnerships program applications to be developed in consultation with
local Area Consultative Committees.
Recommendation 3
11.19
The Committee recommends that Area Consultative
Committees must receive copies of relevant applications and be afforded an opportunity
to consider and make recommendations not less than ten working days from
receipt of the application.
Multi region projects
11.20
The Committee considers that consultation with the ACCs
is an integral part of RPP application development and should be mandatory for
all applications. Notwithstanding, the Committee recognises that collaborative
and multi-region projects should be supported by regional development programs
and that these may not easily align to one ACC region.
Recommendation 4
11.21
The Committee recommends that the Department of
Transport and Regional Services incorporates and outlines appropriate
assessment procedures for multi-region funding applications into the published Regional
Partnerships program guidelines.
Recommendation 5
11.22
The Committee recommends that multi-region funding
applications be referred to all relevant Area Consultative Committees for
review comments and recommendations.
Funding decisions
11.23
As described throughout the report, the decision to
fund or not to fund RP projects is taken by the relevant minister and should be
informed by at least two sources of advice: the advice of the department and
the priority rating of the relevant ACC. Chapter 2 noted that there have been a
number of cases in which the minister's decision did not accord with the
department's advice. As discussed in Chapter 3, some stakeholders are of the
view that funding decisions are too arbitrary and that due weight is not given
to the relevant ACC's advice.
11.24
The ANAO's Administration
of Grants Better Practice Guide specifies that a record of the reasons for
grant decisions should be maintained and be publicly accessible:
Appraisal forms or some other systematic process should provide
for the recording of reasons for decisions and recommendations to demonstrate
the process had been rigorous and transparent. They should be maintained
consistently as part of the official record...and be accessible under Freedom of
Information provisions.[832]
And later:
In particular, the reasons for the departures from agreed
appraisal procedures or decisions that are contrary to recommendations of
officials or other expert panels and advisers should also be properly
documented. ... The retention and availability of these records protect all those
involved in the selection process against any suggestion that projects have not
been selected on their merits.[833]
11.25
The Guide also makes relevant observations regarding
the accountability of ministerial grant decisions:
Where individual Ministers or groups of Ministers make
administrative decisions or judgements involving the meritorious selection of
one application over another, documentation, recording the appraisal process
and the reasons for selecting particular applications would aid program
transparency and public accountability.[834]
11.26
In the Committee's view, RPP funding decisions
currently lack transparency. While the Committee was informed that all funding
decisions are auditable by the ANAO,[835]
documents informing the decision and recording the decision outcome are not
open to public or parliamentary scrutiny. This is a fundamental gap in the
accountability and transparency of the program and one that leaves RP
vulnerable to perceptions of politicisation, if not exposed to political bias
and circumvention of proper process. The Committee considers that
accountability of RP funding decisions would be strengthened if basic
information about the funding recommendations and decisions were open to public
and parliamentary scrutiny.
Recommendation 6
11.27
The Committee recommends that a biannual statement be
tabled in the Senate by the Minister representing the Minister for Transport
and Regional Services, listing:
-
the Regional Partnerships program grants approved
in the preceding six month period;
-
the Department of Transport and Regional
Services' and Area Consultative Committee's recommendations; and
-
where the funding decision is inconsistent with
the departmental and/or Area Consultative Committee recommendation, a statement
of the reasons for the decision.
Distribution
11.28
The ANAO's Administration of Grants Better Practice
Guide states:
Grant administrators should be
aware that geographic and political distribution of grants may be seen as
indicators of the general equity of the program.[836]
11.29
As discussed in Chapter 2, while the proportion of RP
grants approved is similar across Government, Opposition and Independent
electorates, there are substantial differences in the number of projects put
forward and amount of funding approved. The Committee asked DOTARS to consider,
in consultation with the ACCs, possible reasons for the difference in the
number of applications coming forward across electorates. In May 2005, the
department advised that it 'is currently looking at options for including this
issue in future evaluation activities for the programmes'.[837]
11.30
The Committee expects DOTARS to report to the Committee
both the option it adopts for assessing this issue and the results of the
evaluation. The Government should examine the evaluation results and identify
mechanisms to address the equity of funding distribution.
Recommendation 7
11.31
The Committee recommends that the Government address
inequities in the distribution of Regional Partnerships program funding
consistent with the ANAO Better Practice Guide.
Eligibility
11.32
As discussed in Chapter 2, local government bodies are
eligible to apply for RPP funding. However, ACT government which performs both
state and local government functions is ineligible. The Committee considers
that ACT government departments should be allowed to apply for RPP funding for
projects that would otherwise be eligible under the RPP guidelines.
Recommendation 8
11.33
The Committee recommends that the exclusion of the Australian
Capital Territory government from eligibility for
Regional Partnerships program funding be rescinded.
Area Consultative Committees
Funding
11.34
It was evident to the Committee that effective and
dedicated executive officers and ACC staff are integral to delivering outcomes
through RPP. In numerous submissions the Committee received evidence of the
commitment of ACC chairs, executive officers, staff and volunteers to
delivering successful RPP projects. At hearings ACC staff demonstrated their
in-depth knowledge and commitment to local projects and dedication to following
and supporting projects beyond the initial funding. It is necessary that ACCs
are adequately resourced to engage skilled staff and to operate effectively in
their region.
11.35
The committee has not had the opportunity to assess the
operational funding allocated to each ACC, or to discuss with all ACCs their
operational requirements. However, the concerns raised by some ACCs regarding
the costs of operating in different areas are noteworthy and point to
limitations in current ACC funding arrangements.
11.36
The Committee also considers that the ACCs' current
annual funding arrangement does not give ACCs the opportunity to strategically
plan their short to medium term operations. A three-year funding cycle would
allow ACCs to plan their activities and operations more effectively.
Recommendation 9
11.37
The Committee recommends that the Government review
resourcing of Area Consultative Committees, and training for committee members
and employees, to ensure that they can adequately perform their role in
relation to Regional Partnerships program.
Recommendation 10
11.38
The Committee recommends the introduction of three-year
operational funding contracts for Area Consultative Committees.
Performance assessment
11.39
As discussed in Chapter 3, evidence to the inquiry
indicated that the employment focussed aims and performance measures for RPP do
not meet the development needs of all regions. The Committee also heard that the
partnership funding targets of the program are prohibitive for some
communities. Yet, as evident in the case studies, expected levels of
partnership support have been waived for some high cost projects with political
profile.
11.40
The Committee considers that the Government should
examine the concerns raised during this inquiry regarding RPP outcomes and
performance measures. There is scope for DOTARS to further negotiate with ACCs
to ensure that each ACCs' Key Performance Indicators (KPIs) are appropriate for
their region.
Recommendation 11
11.41
The Committee recommends that the Government negotiates
with each Area Consultative Committee in relation to key performance
indicators, including job creation and partnership support, to ensure performance
measures are regionally appropriate.
Area Consultative Committee
recommendations
11.42
The ANAO's Better Practice Guide notes that
accountability and transparency is increased when the reasons for decisions
about successful projects are made publicly available. The Guide also observes
that it is important that unsuccessful applicants have access to the reasons
their applications were not approved. In the ANAO's words, 'together with the
publication of reasons for selection of successful projects, this [information
would assist] applicants in preparing any future application'.[838]
Recommendation 12
11.43
The Committee recommends that Area Consultative
Committee recommendations be disclosed to funding applicants upon request.
Review
11.44
As noted in Chapter 3, the Committee questions whether
the contribution of some ACCs to the RP program is effectively encapsulated by
the roles and functions currently specified. The Committee also questions
whether the currently defined roles maximise ACC members' contribution to the
program.
Recommendation 13
11.45
The Committee recommends that the Government conduct a
review of the role of Area Consultative Committees to ensure that their
contribution to regional development is maximised.
Sustainable Regions Program
Sustainable Regions Advisory
Committees
Appointment method
11.46
As discussed in Chapters 9 and 10, the Committee was
unable to examine the process by which the minister selects and appoints SRAC
members. In view of the serious concerns within the Atherton Tablelands region
about the structure of ATSRAC and interests of its members, there is a clear
cut case for greater exposure and transparency of the appointment process. As
SRACs are intended to represent local interests and concerns, at the very least
the process by which they are constituted and members selected should be open
for public scrutiny. The public is entitled to see how the regional
representative body, charged with recommending the distribution of public funds
to benefit their region, is appointed. Furthermore, openness in this area may
reduce some of the existing barriers between regional bodies and the
communities they are supposed to represent, thus assisting the SR program to
achieve its intended outcomes.
Recommendation 14
11.47
The Committee recommends that the appointment process for
Sustainable Regions Advisory Committee members, including selection criteria,
be made public.
Appointment model
11.48
As discussed in Chapter 10, the Committee saw benefits
in the skills-based composition of the Cradle Coast SRAC, compared with the
local government emphasis of the Atherton Tablelands SRAC. The Committee
considers that a skills-based approach to the composition of SRACs is integral
to ensuring that sound projects are developed and delivered and that SRACs
maintain non-parochial, region focussed objectives.
Recommendation 15
11.49
The Committee recommends that the Government adopts a
skills-based approach in relation to the appointment of future Sustainable
Regions Advisory Committees, including the two new bodies announced during the
2004 federal election campaign.
Regional Partnerships and Sustainable Regions Programs
Australian National Audit Office
11.50
The case studies and issues discussed in this report
illustrate some serious inadequacies and inconsistencies in the administration
of the RP and SR programs. The Committee considers that there is significant
scope for improving the administration, accountability and transparency of both
programs. In light of these concerns, the Committee considers it appropriate
that the ANAO conduct an audit of the administration of the RP and SR programs.
Recommendation 16
11.51
The Committee recommends that the Australian National
Audit Office audit the administration of the Regional Partnerships and
Sustainable Regions programs, with particular attention to the case studies
highlighted in this report.
Program administration
Planning approvals
11.52
In Chapters 2 and 5 of the report the Committee has
remarked on the confusion created by different versions of the RPP guidelines
being concurrently available on the department's website. In the earlier
version of the guidelines, projects that were in the process of obtaining
relevant approvals or licences were ineligible for funding. The revised version
stated that projects that had not obtained the relevant approvals or licences
'will not generally be considered'.
11.53
As described in the Tumbi Creek case study, while the
revised guideline allowed the Tumbi Creek grants to be approved without relevant licences, a funding agreement could not
be entered into before the licences were obtained. Effectively, the project
remained ineligible for funding until the relevant approvals and licences were
obtained, but the grant announcement could be made. This circumstance raises
serious concerns about the intent of the revised guideline. As described in the
Tumbi Creek case study, that project had particular political profile. Funding
was announced by the Prime Minister in a marginal electorate just days before
the 2004 federal election was announced. Yet the project was at the time
ineligible to actually obtain the announced funding. As at mid-August 2005 a funding
agreement for the project still had not been entered into.
11.54
The Tumbi Creek dredging grant announcement lacked both
integrity and transparency. Requiring potential RPP projects to obtain
necessary licences and approvals prior to grant approval and announcement would
prevent such situations occurring. It would also assist in ensuring the
viability of RPP projects.
11.55
As discussed in Chapter 10, under SRP project
assessment criteria it is mandatory that proposals comply with relevant
planning and environmental laws. Yet the Committee discovered that for the Kalamunda
Ecostay project, relevant planning approvals
were not obtained prior to the grant being approved. Instead, this requirement
was enacted in the funding agreement—well after the 'project assessment'
stage and after the grant approval and announcement.
Recommendation 17
11.56
The Committee recommends that projects that cannot
obtain or have not yet obtained relevant approvals or licences not be eligible
for Regional Partnerships or Sustainable Regions funding.
Competitive neutrality
11.57
Many complaints raised in relation to SRP projects on
the Atherton Tablelands, particularly grants to private businesses, related to
the fact that people were not aware of the projects until after they had been
approved and had not been afforded the opportunity to raise concerns or
objections about the projects.
11.58
The current process for assessing competitive
neutrality, that is, seeking information from the proponent, is inherently limited and insufficient. The Committee
believes that giving the public, or at least potential competitors, the
opportunity to lodge any objections or concerns about potential RPP and SRP
projects would improve the rigour of the application assessment process. Any
objections or concerns raised would provide ACCs, SRACs and DOTARS with a
larger evidence base to inform their assessments and recommendations. Community
perceptions about unfair advantage may also be allayed.
11.59
There are numerous possible avenues for allowing
competitors the opportunity to lodge objections or complaints about proposed
RPP and SRP projects. Competitors could be identified by the SRAC or ACC and
written to, or public notices placed, inviting a response. The Committee
considers that the Government, in extending these funding programs to private
enterprises, has an obligation and responsibility to ensure that consequent
competitive neutrality issues are adequately addressed.
Recommendation 18
11.60
The Committee recommends that competitive neutrality
procedures be strengthened, including the introduction of a procedure for
potential competitors to lodge objections.
Due diligence
11.61
The Committee recognises that due diligence
assessment processes need to be located within a robust risk assessment
framework. It would be injudicious for DOTARS to undertake equivalent due
diligence assessments for all applications without regard to project size,
complexity and proponent. However, the Committee is disturbed by evidence which
shows that in some instances basic checks have not been undertaken. That the
Department was not aware of legal action by a state government department
against the proponent of the A2 Dairy Marketers project, highlights existing
shortcomings in the due diligence process.
Recommendation 19
11.62
The Committee recommends that due diligence processes
be strengthened including a routine inquiry relating to legal action against
applicants.
Approval
Recommendation 20
11.63
The Committee recommends that no program funding be
approved for projects that do not meet Regional Partnerships and Sustainable
Regions guidelines and fail other tests including proper due diligence.
Ministerial intervention
11.64
The Committee believes that stronger measures need to
be established to ensure that ministers remain at arm's length from decisions
on applications for projects that are located in their electorates. This is
essential for reducing the risk of a conflict of interest in funding decisions.
The case of Primary Energy discussed in Chapter 7 involved an application from
the portfolio minister's electorate. Although
the department followed established practice by referring the case to another
minister as the decision maker, one of the portfolio minister's advisers
intervened in the process and caused the department to alter its advice to the
decision maker. Regardless of whether the adviser's intervention was
appropriate, this example reveals that the current 'practice' is inadequate
and, as this instance demonstrates, leaves the process open to perceptions of a
conflict of interest and partisanship.
11.65
The Committee considers that it should be mandatory
that ministers are kept at arm's length from decisions on applications based in
their electorates. In such cases, ministers and their offices should be
quarantined from the decision making process. In instances (such as the Primary
Energy case) involving applications from the senior portfolio minister's
electorate, the practice of copying departmental briefings to the junior
minister or parliamentary secretary to the portfolio minister should be
suspended until after a decision has
been made. This should be formal policy.
11.66
The Committee is also deeply concerned by the nature of
the ministerial intervention in the department's advice regarding the Primary
Energy application, discussed in Chapter 7. It is one thing for ministers and
their staff to direct departments to implement government policy; it quite
another for ministers and their staff to direct departments to alter or tailor
departmental advice to the government on the assessment and approval of grants.
The Committee considers intervention of the kind demonstrated in the Primary
Energy case to be inappropriate and antithetical to the principle of the public
service providing frank and impartial advice to ministers.
Recommendation 21
11.67
The Committee recommends that it become formal policy
that ministers and their staff are kept strictly at arm's
length from decisions, including all relevant departmental advice, on
applications from their own electorates. The portfolio minister and his or her
staff should not be included in the circulation of departmental advice on
applications for projects based in the minister's
electorate.
Recommendation 22
11.68
The Committee recommends that Ministers and
Parliamentary Secretaries, and their staff, should be prohibited from
intervening in the assessment of grants.
Extended caretaker period
11.69
Concerns about the propriety of the approval and
announcement of RPP grants in the lead up to the 2004 federal election were a
key reason for the establishment of this inquiry. A large proportion of grant
approvals occurred in the three months leading up to the election announcement.
Allegations of 'pork barrelling' and that the
programs had been used as election 'slush funds' demonstrate that these
programs are currently open to perceptions of bias, particularly in the context
of an election campaign. The Committee considers it appropriate that measures
be put in place to improve the accountability of ministerial discretion in
these programs during the lead up to an election. These measures may assist in
avoiding perceptions that funding decisions are being made for party-political
purposes.
Recommendation 23
11.70
The Committee recommends that from the 1 July preceding
a general election, the following procedures apply to grant approvals and announcements:
-
when the Minister's decision to approve or not
approve a grant is different to the recommendation of either the Area
Consultative Committee or the Department, or the funding amount approved by the
Minister is different to the amount recommended, then the grant approval
decision be made in conjunction with the relevant Shadow Minister. The
Committee further recommends that all grants approved in these circumstances be
announced jointly by the Minister and the Shadow Minister.
Program transition
11.71
The Committee considers that there are lessons to be
learned from the controversy around the RP grant to Primary Energy Pty Ltd. A
number of concerns relating to that grant arose because the original
application had been made under one program, which became defunct, and the
grant was subsequently approved under another program. The absence of
appropriate transitional arrangements and procedures at the end of the program
for applications still under consideration was a major shortcoming.
11.72
With the first tranche of the SRP scheduled to end on 30 June 2006 it is important that
appropriate procedures are put in place to manage the cessation of the program.
In particular, consideration should be given to procedures to manage unresolved
applications. Similar considerations should be made in relation to RPP.
Recommendation 24
11.73
The Committee recommends that the government develops
and discloses procedures to govern the cessation or transition of the Regional
Partnerships and Sustainable Regions programs.
Regional development
Review
11.74
While this inquiry has highlighted administrative
shortcomings and accountability deficits in the regional programs, the
Committee is also cognisant of the need for an examination of whether such programs
achieve regional development outcomes.
11.75
As discussed in Chapter 2, the Committee has noted the inadequacies
of the reviews and evaluations so far conducted of the Regional Partnerships
and Sustainable Regions programs. Accordingly, the Committee considers that a
thorough review must be undertaken of the effectiveness and appropriateness of
grants-based programs as a mechanism to achieve regional development.
Recommendation 25
11.76
The Committee recommends that the government reviews
the efficacy of a grants-based approach to regional development.
Value for money
11.77
As discussed in Chapter 2, the Committee was concerned
at evidence that a number of projects to be funded under the RP program would
duplicate the Tasmanian Government's
recreational infrastructure program. The Committee considers that value for
money from the RP and SR programs can only be achieved through coordination
with other levels of government. As well as avoiding duplication, coordination
of regional development priorities can multiply the benefits of local, state
and commonwealth government programs.
11.78
Existing aspects of the Regional Partnerships and
Sustainable Regions programs could be drawn upon to maximise coordination
opportunities, for example, partnership funding requirements that are often
fulfilled by state governments, the ability of local governments to apply for
funding and the presence of many local government representatives on ACCs and
SRACs.
Recommendation 26
11.79
The Committee recommends that the Regional Partnerships
and Sustainable Regions programs should complement, not compete with state and
local government funding programs.
Senator Michael Forshaw
Chair
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