Administration of the Securing our Fishing Future Structural Adjustment Package Assistance Programs
The objective of the audit was to examine the effectiveness of DAFF's implementation and administration of the Securing our Fishing Future structural adjustment package industry and community assistance programs.
The Securing our Fishing Future package
The then Minister for Fisheries, Forestry and Conservation announced the Securing our Fishing Future package on 23 November 2005. The package consisted of a $220 million structural adjustment component and new management measures to be introduced by the Australian Fisheries Management Authority (AFMA) to halt overfishing and give overfished stocks a chance to recover.1
The structural adjustment package, which was delivered by the Department of Agriculture, Fisheries and Forestry (DAFF) was to:
- buy back up to $149 million in fishing concessions within and across Commonwealth managed fisheries;
- provide $50 million in industry and community assistance grants to individuals, businesses and companies that had been affected by the impacts of the buyback and/or by the new management measures;
- reduce the amount that AFMA would need to cost recover through fishing concession holders to implement the new management measures ($15 million); and
- improve AFMA's science, compliance and data collection ($6 million).
Industry and community assistance grants programs
Industry and community assistance grants (which are the focus of this audit) were available to onshore businesses and communities that had been, or would be, impacted by reduced fishing activity as a result of fewer fishing concessions in use following the buyback program or reduced access to fishing in marine protected areas (MPAs).2 Potential applicants included: communities dependent on the fishing industry; seafood industry cooperatives; wholesalers; retailers; exporters; local government bodies; community groups or councils; and non departmental government agencies. Up to $50 million in grants funding was available through three industry and community assistance programs (the assistance programs):
- Onshore Business Exit Assistance (OBEA): up to $50 000 for business owners who could not replace a leased concession that had been surrendered in the buyback or up to $100 000 for business owners who wished to diversify their operations, start up an entirely new business, or retire from the fishing sector;
- Onshore Business Development Assistance (OBDA): up to $250 000 for businesses that would provide services, infrastructure and processing capacity to Commonwealth-managed fisheries; and
- Fishing Community Assistance (FCA): up to $500 000 (nominally capped) for projects that contributed to the economy or created employment opportunities in the community.
There were three rounds of the OBEA and OBDA programs and two rounds of the FCA program through which applicants could apply for assistance.3 Across the three programs and funding rounds, 358 applications were received and 144 applications were approved between April and December 2007, for a total of $33.6 million. Assistance was available to either fully or partially fund project costs. Projects funded under the programs included, for example, the:
- development of an offshore salmon farming system;
- construction of a deep water wharf; and
- purchase of land and buildings as part of a multi-stage project to build a marine discovery centre.
Assessment and approval of applications
An assessment panel was responsible for assessing the eligibility and competitive merit of the applications that had been received for industry and community assistance. The panel included two government officers and four other members with fisheries related and broader finance and business management experience. To assist with the panel's assessment of applications, DAFF conducted a preliminary assessment and provided assessments of applications by a financial assessor and Area Consultative Committees (ACCs).4 AFMA, the Australian Bureau of Agricultural and Resource Economics (ABARE) and the Bureau of Rural Sciences (BRS) also provided information on the impact of the buyback program and the vulnerability of fishing communities. The panel recommended applications for approval by the relevant decision maker. The former Minister for Fisheries, Forestry and Conservation was the decision maker for the FCA program and a senior DAFF manager was the decision maker for the OBA programs. DAFF was also responsible for negotiating funding deeds with successful applicants, making payments and monitoring recipients' compliance with their funding deeds.
Audit objective and scope
The objective of the audit was to examine the effectiveness of DAFF's implementation and administration of the Securing our Fishing Future structural adjustment package industry and community assistance programs.
The ANAO examined a sample of 74 applications (20 OBEA, 28 OBDA and 26 FCA). This sample included 45 approved applications across the three programs valued at $15.5 million, 46 per cent of the total approved funding. In undertaking this audit, particular emphasis was given to the:
- promotion of the programs and the information provided to stakeholders;
- assessment and approval of applications;
- management of payments and compliance with the funding deeds; and
- governance arrangements supporting the programs.
The $21 million provided to AFMA under the structural adjustment package was not examined in this audit. The ANAO audited the department's administration of the $149 million buyback of fishing concessions in ANAO Audit Report No.38 2008–09, Administration of the Buyback Component of the Securing our Fishing Future Structural Adjustment Package, which has been tabled in conjunction with this report.
The industry and community assistance programs were one of the components of the Securing our Fishing Future structural adjustment package. The programs were to provide up to $50 million in assistance to onshore businesses and communities that had been, or would be, impacted by the reduction in fishing activity caused by the buyback program, the reduced access to marine protected areas and the new management measures introduced by AFMA. Of the 358 applications received, 144 were approved for the three programs between April and December 2007 for a total value of $33.6 million. Individual grants ranged from $12 000 to $1.4 million.
DAFF effectively established the three programs and gave potential applicants the opportunity and information necessary to apply for assistance. DAFF developed appropriate program guidelines and a sound framework to assess and approve the applications received for the three programs. However, in practice, the department's documented processes and procedures were not followed during the assessment process and when recommending applications to the decision makers.
An assessment panel, with fisheries-related and broader finance and business management expertise, was responsible for assessing the eligibility and competitive merit of applications and making recommendations to the relevant decision maker. The panel received input into its assessments from a DAFF secretariat, a financial assessor and the ACCs. As the panel did not appropriately document its assessments and justifications for its recommendations, the assessment process was not transparent or consistent with the panel's terms of reference. The lack of documentation meant that it was not clear how the panel determined the relative merit of over 60 per cent of the approved applications (28 applications) in the ANAO's sample, valued at $12 million (35 per cent of the total funding approved). There was no assessment of the competitive merit of 13 of these applications because the panel considered there were sufficient funds available to cover all applications received. For the other 15 applications, the viability of the project had not been assessed or the panel's recommendation was contrary to either the financial assessor's and/or the secretariat's assessment. Also, the advice provided to the decision makers did not accurately reflect the assessment undertaken by the panel or where a comprehensive assessment had not been completed.
Although not all funding deeds have been finalised, arrangements are in place to effectively manage payments and to report against the requirements in the funding deeds. Compliance strategies are also being developed for the programs.
Reporting of the programs is through DAFF's annual report and divisional performance reviews and reports to the department's Executive and the Minister. However, these reports do not advise the extent to which the objectives of the programs and the expected benefits from the structural adjustment package are being achieved. DAFF advised that it intends evaluating the programs when the
longer-term benefits can be properly assessed. DAFF will need to develop key performance indicators for each program and assess whether the performance data currently being collected will support the evaluation and measure the achievement of the programs' objectives.
The lack of documentation supporting the assessment of grant applications and subsequent recommendations for funding has been raised in previous audits of DAFF's grant programs.5 Whilst it is appreciated that DAFF has put considerable effort into reviewing its grant administration in recent times, this audit has highlighted the importance of the department reinforcing to program managers its procedures and processes, and obtaining assurance through its governance arrangements that programs are being administered in accordance with these requirements. Greater emphasis needs to be given to supervision, quality assurance and the management reporting of these programs. There would be benefits to the department in gaining assurance that its programs are being properly administered through, for example, its internal audit program.
The ANAO has made one recommendation in relation to performance reporting for the programs.
Key findings by chapter
Applying for grant assistance (Chapter 2)
DAFF provided sufficient opportunity and information for potential applicants to apply for grant assistance under the Securing our Fishing Future package. The guidelines provided advice regarding the eligibility and merit assessment criteria against which applications would be assessed. However, as DAFF did not advise applicants of the relative weightings that would be applied to each merit criterion, applicants were not aware of the relative importance being placed on each criterion. The feedback provided by applicants in the ANAO's sample would suggest that the guidelines and application forms were understood. However, the evidence initially provided by OBA applicants to support the impact they claimed to have experienced as a result of the reduction in fishing activity was not adequate for DAFF to properly assess the eligibility of applications. Consequently, DAFF sent a follow-up letter to individual applicants requesting the additional information.
Assessment and approval of applications (Chapter 3)
DAFF established a sound framework to assess and approve the 358 applications received for the three assistance programs. An assessment panel, which included two government officers and four other members with fisheries-related and broader finance and business management experience, was responsible for assessing the applications and making recommendations to the decision maker. Its assessment was assisted by: the DAFF secretariat's preliminary assessment of applications; advice from the financial assessor on the viability of applicants and projects; and for FCA applications, advice from the relevant ACC. Information was also provided by AFMA, BRS and ABARE on the impact of the buyback program and the vulnerability of fishing communities.
Arrangements were in place to manage any potential conflicts of interest that may arise from the involvement of external parties in the assessment process. However, the process for managing panel members' potential conflicts of interest would have been more effective if the declarations made, and the subsequent action taken, had been documented in the minutes of all meetings.
Assessment by the financial assessor
A financial assessor reviewed the applicant's financial statements to confirm the applicant was in an average positive profit position and therefore viable, when undertaking a short financial viability assessment (FVA). Where a long FVA was requested, the financial assessor also verified the applicant's credentials and the financial viability of the project. DAFF advised that a long FVA was generally for applications seeking over $200 000.
DAFF generally requested a long FVA for applications in the ANAO's sample. However, in some instances the financial assessor was unable to undertake the level of review required under the contract with DAFF when assessing the viability of applicants' projects. The reason for this was generally the lack of detail in the financial information provided by applicants. DAFF accepted the ratings given by the assessor, even where the lack of documentation had limited the assessor's ability to review aspects of the project. Specifically commenting on whether the applicant had access to the additional funds required for their share of the project would have provided more assurance that the project could be delivered as expected.
Preliminary assessment by the DAFF secretariat
DAFF was to undertake a preliminary assessment of the eligibility of each application and the merit of OBDA and FCA applications against the criteria set out in the program guidelines. OBEA applications were not assessed against the merit criteria as the panel considered that sufficient funds were available to cover all of these applications if the decision maker chose to approve them.
DAFF documented, in an assessment summary, scores for each criterion, which enabled the applications to be given a preliminary ranking. There would have been merit in the secretariat advising the panel where project viability had not been assessed and where it gave ratings for project viability that were inconsistent with those given by the financial assessor. The transparency of the assessment process would also have been enhanced if the secretariat had documented its assessment in all cases.
Assessment of applications by the panel
DAFF advised that the panel's decision making process took into account a wide range of information as well as their expertise and experience. However, the panel did not document its assessment of eligibility or assess the competitive merit of the 58 OBEA applications received across the three rounds, or the 17 FCA applications received in round one. The panel developed its own eligibility and merit criteria to assess and rate OBDA applications and round two FCA applications, which were broadly similar to those outlined in the guidelines. However, the guidelines indicated that applicant and project viability would also be assessed, but these were not generally included in the criteria used by the panel.
The panel did not use appraisal checklists or summaries to record its assessment of each application and minutes were generally not taken to record their discussions. Each application was discussed and a general consensus reached. The outcomes from these discussions for OBDA and FCA applications in round two were captured in an unsigned, undated printout from the electronic whiteboard used to record the assessment. From the rating recorded against each criterion (ticks, crosses, question marks), it is not clear how the overall rating (between one and nine) was determined for each application. In each case, applications that were similarly rated against each criterion were given different overall ratings. Conversely, applications with the same overall rating had a range of symbols documented for each criterion. Using these printouts, the secretariat recorded the overall results for these applications in a spreadsheet. DAFF advised that the spreadsheets were prepared by the secretariat during the panel's meeting. However, the ANAO was unable to confirm that this had occurred. The spreadsheets were sent to the panel members for approval and formed the basis for the advice provided to the decision maker.
For OBDA applications in round one, there is no record of the panel's assessment against each criterion and, in round three, a Y, N and/ or question mark was recorded. An overall rating for each application was recorded on the spreadsheet prepared by the secretariat.
It is not clear how the panel determined the relative merit of 60 per cent of the 45 approved applications in the ANAO's sample before recommending them to the decision maker for funding approval. For these 28 applications, valued at $12 million (35 per cent of the total funding):
- there was no assessment of the competitive merit of 13 applications ($1.4 million), because the panel considered there were sufficient funds to cover all applications received; and
- in 15 instances ($10.6 million), the viability of the project had not been assessed or the panel's recommendation was contrary to either the financial assessor's and/or the secretariat's assessment.
Further, it is not clear why the panel did not recommend three OBDA applications that were given overall ratings of seven or nine in round one when the cut off for recommending applications in that round was a rating of five or more.
Approval by the decision makers
All recommendations made by the panel were approved by the decision makers. However, the information provided to support these recommendations was the secretariat's assessment summary. These summaries did not accurately reflect the assessment undertaken by the panel or where a comprehensive assessment had not been completed. This was particularly relevant where the viability of projects had not been assessed by the financial assessor, the secretariat or the panel or where the panel's recommendations were contrary to the secretariat's and/or financial assessor's assessments.
Unspent program funds used to fund election commitments
In May 2008, the Minister for Agriculture, Fisheries and Forestry approved the use of unallocated funds within the Securing our Fishing Future package to fund an election commitment made prior to the 2007 election. In its response to this audit, the department advised the ANAO that although the election commitments were funded from underspends in the Securing our Fishing Future package, this was a matter of priorities and convenience, and they would have been funded from underspends in another portfolio program had that been more convenient.
Although, the Minister had previously been advised that the projects covered by this election commitment were not considered appropriate for funding by the assessment panel, this background information was not included in the minute to the Minister seeking formal approval to fund these commitments. Further, the Minister was not advised that, in providing additional funding to one project, the two recipients involved would receive more than the maximum funding allowed ($250 000) had the program guidelines applied. Should the department be required to provide advice in relation to future election commitments, the ANAO suggests that the Minister be provided with all relevant information including prior assessments, any significant risks to expected outcomes, and options how these risks might best be managed.
Managing payments and monitoring compliance (Chapter 4)
DAFF was responsible for negotiating funding deeds with successful applicants. In the 41 funding deeds examined by the ANAO: the applicant's contributions were not documented (13 deeds); the recipient was not required to report against specific employment outcomes (six deeds); and the deed contained unnecessary or irrelevant requirements (two deeds). The time taken to negotiate the deeds ranged from one to 19 months due to various factors, including the large number of variations made to projects. As a consequence, the time available to deliver the projects is reduced. Where variations have been approved, DAFF has taken steps to gain assurance that the impact of these changes on the projects' outcomes is limited.
Managing payments to grant recipients
Payments to grant recipients have generally been well managed. As at 12 January 2009, a total of 57 payments (totalling $5.4 million) had been made to 34 grant recipients in the ANAO's sample. From the ANAO's sample, 28 of the 43 payments made to OBDA and FCA recipients were made in advance. DAFF accepts that, in some cases, the project will not proceed without the injection of grant funds. Where advance payments are requested, DAFF advised that the department made a judgment on a case by case basis of the risk(s) presented by the payment. However, its assessment of these risks was generally not documented.
Final reporting requirements
A condition of receiving a grant is that a recipient is to provide an audited statement of their expenditure of the grant and a final report within 30 days of the final payment being made. These reports are DAFF's key mechanism for collecting performance data on whether the outcomes expected from the grant funding have been achieved. From the ANAO's sample, final reports and audited statements were due from 16 recipients. Of these 16 recipients, final reports were overdue from five recipients and audited statements were overdue from seven recipients. DAFF has sent reminders to these grant recipients seeking this information.
Implementation and ongoing governance arrangements (Chapter 5)
DAFF's implementation of the structural adjustment package was monitored by the Cabinet Implementation Unit (CIU) in the Department of the Prime Minister and Cabinet. DAFF submitted a draft implementation plan for the package to the CIU in December 2005, which included the assistance programs. A subsequent draft was agreed in February 2006 and used by the CIU to monitor the implementation of the package. DAFF reported on a quarterly basis until April 2007. The CIU advised that these reports satisfactorily addressed its concerns in relation to the implementation of the package.
DAFF has a sound governance framework to support the administration of the programs. Reporting of the programs externally is through the annual report. Internal reporting is through biannual divisional performance reviews and reports to the department's Executive and the Minister. These reports are activity based and provide information on the administration of the programs. However, these reports do not advise the extent to which the objectives of the programs and the expected benefits from the structural adjustment package are being achieved. DAFF advised that it intends evaluating the programs when the longer term benefits can be properly assessed. DAFF will need to develop key performance indicators for each program and assess whether the performance data currently being collected will support the evaluation and measure the achievement of the program's objectives.
Summary of agency response
The ANAO provided a copy of the proposed report to DAFF. In addition, the ANAO provided an extract of the relevant sections of the proposed report to the financial assessor and to all members of the assessment panel, for comment.
Responses were received from DAFF and two members of the assessment panel. DAFF's full response is included in Appendix One and the panel members' responses are included in Appendix Two. DAFF also provided the following summary comments:
The Department of Agriculture, Fisheries and Forestry (DAFF) notes the ANAO's conclusion that DAFF effectively established the three programs and gave potential applicants the opportunity and information necessary to apply for assistance. DAFF acknowledges the limited documentation surrounding the panel's assessment of applications including the information provided to the decision makers, but advises that the decision makers received extensive verbal briefings on applications where required. The panel members also contributed significant expertise and experience when assessing the eligibility and merit of applications. DAFF notes the ANAO's recommendation that the collection and analysis of relevant performance information will support the evaluation of the programs.
DAFF acknowledges the ANAO's comment that it has put considerable effort into reviewing its grants administration and governance. DAFF is revising its Chief Executive Instruction 23 Grants Management and its Grants Management Manual to incorporate the ANAO's suggestions for improvement. DAFF agrees with the ANAO's view of the importance of the department gaining assurance that its programs are being administered according to its procedures and processes. A campaign to raise awareness of procedural requirements with program managers and an increased internal audit focus on grants administration is planned for 2009–10.
1 On 14 December 2005, the former Minister for Fisheries, Forestry and Conservation issued a formal direction to AFMA under s.91 of the Fisheries Administration Act 1991 requiring new management measures to be introduced.
2 In May 2006, the then Department of the Environment and Heritage (DEH), which is currently known as the Department of the Environment, Water, Heritage and the Arts (DEWHA), announced 13 MPAs in the south-east marine region, which stretches from the far south coast of New South Wales, around Tasmania and Victoria and west to Kangaroo Island (South Australia).
3 The rounds closed on 12 January 2007, 25 May 2007 and 31 October 2007.
4 Area Consultative Committees are Australian Government funded, non-profit, community-based organisations.
5 For example, Australian National Audit Office Performance Audit Report No. 26 2007 08, Tasmanian Forest Industry Development and Assistance Programs.