Introduction

1.1 The 2021 Regional Telecommunications Review highlighted the importance of reliable and modern digital connectivity to regional communities to support the growth and resilience of the Australian economy and in accessing essential services such as health, education and emergency services.⁴

1.2 The review noted that despite strong demand for mobile services across regional and rural Australia, there are often limited commercial incentives to invest in these areas due to high costs and low revenues because of a dispersed population base. The Australian Government supports commercial investment in regional and remote telecommunications to expand mobile coverage through grant programs.

Mobile Black Spot Program

1.3 The Mobile Black Spot Program (MBSP) provides funding for telecommunications infrastructure to improve handheld mobile phone coverage across regional and remote Australia. The Department of Infrastructure, Transport, Regional Development, Communications and the Arts (the department) administers the program on behalf of the Australian Government. The program is supported by co-contributions from state and local governments, mobile network operators and infrastructure providers, businesses and local communities.

1.4 The Australian Government has the legislative authority to make grants under the MBSP by section 32B of the Financial Framework (Supplementary Powers) Act 1997 and item 211 of Schedule 1AB to the Financial Framework (Supplementary Powers) Regulations 1997.

1.5 Between 2014 and 2023, the Australian Government has awarded $271.4 million in funding across MBSP rounds one to 5A. As at December 2023, a total of 1,118 base stations have been activated under the program. Table 1.1 outlines the funding outcomes of MBSP rounds one to seven.

Table 1.1: Overview of Mobile Black Spot Program Rounds 1–7

Note a: Funding provided by the Australian Government, excluding GST (Goods and Services Tax). A solution is a mobile base station to address a mobile black spot issue.

Note b: The Priority Locations Round and the Improving Mobile Coverage Round were both established to deliver mobile coverage election commitments at targeted locations.

Source: ANAO analysis of MBSP award of funding outcomes.

1.6 At the time of the 2022 federal election in May 2022, $79.1 million of administered funding allocated to a future round six of the MBSP was uncommitted. In the 2022–23 October Budget, the government agreed to reallocate this funding to implement the Improving Mobile Coverage Round (IMCR) ($40 million terminating on 30 June 2025) and towards delivering additional rounds of the Peri-Urban Mobile Program⁵ ($39.1 million over three years from 2022–23).

Improving Mobile Coverage Round

1.7 The IMCR formed round six of the MBSP and was designed to provide funding to improve mobile coverage and quality of service to 54 target locations. Locations were identified by the Australian Labor Party in election commitments announced during the 2022 federal election.

1.8 Forty of these 54 target locations were in electorates held by the Australian Labor Party (74 per cent), 11 were in electorates held by the Liberal Party of Australia (20 per cent), two in an electorate held by the Centre Alliance (four per cent) and one in an electorate held by Katter’s Australian Party (two per cent) at the time of the election.

1.9 The IMCR is a targeted competitive grant opportunity subject to the Commonwealth Grants Rules and Guidelines 2017. Design of the IMCR was based on the Priority Location Round (MBSP round three) and the Peri-Urban Mobile Program (PUMP), lessons learned from prior MBSP rounds and feedback from stakeholders on the draft grant opportunity guidelines.

1.10 In November 2022, the department consulted publicly with stakeholders on the draft guidelines. A total of 108 submissions were received from industry and other stakeholders during the consultation period.

1.11 Applications for the IMCR opened on 2 February 2023 and closed on 13 April 2023. Three eligible applications were received for the IMCR, proposing a total of 79 solutions across 49 of the 54 target locations.

1.12 On 12 September 2023, the Minister for Communications awarded 41 grants servicing 42 target locations, totalling $37.2 million in funding.⁶ Grant outcomes were announced by the minister on 19 October 2023. Figure 1.1 illustrates IMCR timeframes and key milestones.

Figure 1.1: Improving Mobile Coverage Round timeframes and key milestones

Source: ANAO analysis of IMCR records and department emails.

1.13 Two out of three applicants were awarded funding under the IMCR:

• Telstra was awarded $36,549,536 for 40 solutions.
• TPG Telecom was awarded $680,000 for one solution.⁷

1.14 The 41 solutions funded under the IMCR were assessed by the department as providing:

• over 975 km² of new handheld mobile coverage;
• 296 km² of overlapping handheld mobile coverage with existing mobile coverage in a target location;
• 19.49 kilometres of new and overlapping highway mobile coverage (included in total figures for new and overlapping coverage above); and
• mobile coverage to 12,688 new premises.

1.15 The number of IMCR solutions funded in each state and territory is outlined in Table 1.2.

Table 1.2: Number of mobile coverage solutions funded by jurisdiction

Note: Funding contribution is GST exclusive.

Note a: The Northern Territory did not have any target locations.

Source: ANAO analysis of IMCR award of funding outcomes.

Auditor-General reports

1.16 The department’s⁸ award of funding under the first round of the program was audited in Auditor-General Report No. 10 2016–17 Award of Funding under the Mobile Black Spot Programme.

1.17 The report concluded that the department had established the key elements expected of a competitive, merit-based grants program and it made three recommendations to improve the program’s assessment criteria, assessment methodology and performance measurement and program evaluation.

Rationale for undertaking the audit

1.18 During the 2022 federal election campaign, the Australian Labor Party announced commitments to improve mobile coverage and quality of service across target locations. Round six of the MBSP was designed to deliver these election commitments and allocated $40 million in the 2022–23 October Budget.

1.19 Previous grant administration audits in the department have identified risks where assessment criteria are not applied in line with program guidelines and funding recommendations to the decision-maker are not consistent with assessment outcomes.⁹

1.20 This audit will provide assurance to the Parliament on the effectiveness of round six’s design and that the award of grant funding is being managed appropriately.

Audit approach

Audit objective, criteria and scope

1.21 The objective of the audit was to assess the effectiveness of the design and award of funding for round six of the Mobile Black Spot Program.

1.22 To form a conclusion against the objective, the following high-level criteria were applied.

• Was the design of round six of the Mobile Black Spot Program effective and consistent with the Commonwealth Grants Rules and Guidelines?
• Were round six applications assessed in accordance with the approach set out in the grant opportunity guidelines?
• Were round six funding decisions informed by clear advice and consistent with the grant opportunity guidelines?

1.23 The scope of this audit focused on round six program design and the award of funding to applicants. The audit did not examine subsequent stages in the grants management process, including the development and management of round six grant agreements.

1.24 The government also opened round seven of the MBSP, round three of the Regional Connectivity Program¹⁰ and round two of the Peri-Urban Mobile Program in 2023. These activities are not in scope for this audit.

Audit methodology

1.25 The audit methodology included:

• review of departmental records related to the design of round six of the MBSP, advice to the minister, assessment of grant applications and the decision to award funding;
• analysis of mobile black spot data sets, including grant applications and spatial data to assess eligibility requirements and the allocation of funding under the program;
• meetings with departmental staff to discuss relevant aspects of the program; and
• walkthroughs of the departmental design and assessment process.

1.26 The audit was conducted in accordance with ANAO Auditing Standards at a cost to the ANAO of approximately $372,000.

1.27 The team members for this audit were Lauren Dell, Kai Clark, Danielle Page, Nathan Daley, Renina Boyd and Michelle Page.

2.1 The delivery of election commitments through a grants program must be consistent with the Public Governance, Performance and Accountability Act 2013 (PGPA Act), Public Governance Performance and Accountability Rule 2014 and the CGRGs.

2.2 The CGRGs require accountable authorities to establish practices and procedures to ensure the key principle of robust planning and design is met.¹¹ Accountable authorities should also adhere to guidance in Part 4 of Resource Management Guide No. 412¹² when implementing election commitments through a grant program.

2.3 Capturing lessons learned throughout the implementation of government programs contributes to continuous improvement in policy and program design as well as supporting enhanced organisational effectiveness. Entities should develop an evaluation strategy when designing a grant program as a part of a broader set of assurance mechanisms to support accountability, understand risk and determine how well grant opportunity objectives are being achieved.¹³

Was appropriate analysis carried out to inform target locations for round six?

Target location identification

2.4 During the 2022 federal election, the Australian Labor Party announced commitments to improve mobile coverage and quality of service in various electorates across Australia. The department maintained a register of election commitments publicly announced by all parties during the election.

2.5 The department used information within the election commitments to compile an initial list of 47 target locations with potential mobile coverage issues. When briefing the new government in June 2022, the department recommended that a dedicated competitive grant funding round was the most efficient and effective way to deliver against improving mobile coverage election commitments.

2.6 On 8 July 2022, the Minister for Communications (the minister) through their office informed the department of an additional 10 locations that were not on the department’s list of election commitments. The minister through their office requested the following sites be included for a combined list of 57 target locations:

• Kuranda West, Upper Stone and East Douglas (Queensland);
• Herne Hill, Brigadoon, Stoneville North, Breera (Brand Highway) and Alkimos North (Western Australia); and
• Port Rickaby and Wool Bay (South Australia).

2.7 The department located election commitments for four of the 10 additional target locations identified by the minister through their office, but could not identify any public announcements for the following six locations:

• Breera, in the electorate of Durak;
• East Douglas, in the electorate of Herbert;
• Kuranda West, in the electorate of Leichhardt;
• Port Rickaby, in the electorate of Grey;
• Upper Stone, in the electorate of Kennedy; and
• Wool Bay, in the electorate of Grey.

2.8 On 11 July 2022, the department requested information from the minister through their office to verify the election commitments and potential mobile coverage issues in these six locations. The department did not receive a response from the minister for this request.

2.9 On 5 February 2023, the department sent a follow-up request to the minister through their office to seek advice of any announcement details for the six target locations which did not have identified commitments. On 7 February 2023, the minister through their office advised the department that ‘I [have] checked and confirmed these locations were approved for announcement in early May 2022.’ The office provided details on the funding amounts committed against the six locations. The office did not provide the department with information verifying potential mobile coverage issues at these sites or that the commitments were publicly announced during the 2022 federal election campaign.

2.10 During the development of the grant opportunity guidelines, the target locations list was reduced from 57 to 54 target locations following discussions between the department and the minister through their office.

• A site identified by the department in North Harbour was removed from the list, with advice from the minister through their office that it was not an election commitment.
• The Yarramalong election commitment was assessed by the department as a resilience upgrade project to be progressed through a separate grants process and was removed from the list.
• The Killcare–Hardys Bay election commitment was identified by the department as a current project under the MBSP Priority Locations Round, and subject to appeal in the New South Wales Land and Environment Court. It was removed from the list.

2.11 On 6 October 2022, the minister approved the list of 54 target locations and the department consulted on the draft opportunity guidelines in November 2022 (see paragraphs 2.63 to 2.70). In seeking the minister’s approval of the final grant opportunity guidelines in December 2022, the department noted to the minister that some community and industry stakeholders had expressed concern during the consultation period that other mobile black spot locations were ineligible. The department also advised the minister that ‘consultation on the guidelines for the next general round of the Regional Connectivity Program (including a Mobile Black Spot component) will have commenced before IMCR opens, which will help address community concerns’.¹⁴

2.12 On 2 February 2023, the department released the grant opportunity guidelines on GrantConnect with the list of the 54 IMCR target locations as an appendix, including details on the specific mobile coverage issues at the target locations.

2.13 The department could not inform government of the relative merits of selecting the list of 54 IMCR target locations over other mobile black spots in regional and remote Australia. The department does not maintain data that enables it to undertake strategic analysis of priority areas across Australia to direct government investment in delivering new and improved mobile coverage.

Target location analysis

2.22 Twenty-seven target locations were in New South Wales, nine in Tasmania, six in Western Australia, four each in Queensland and South Australia, three in Victoria and one in the Australian Capital Territory (Jervis Bay Territory). Figure 2.1 shows the distribution of IMCR target locations across Australia.

Figure 2.1: Map of the 54 Improving Mobile Coverage Round target locations

Source: ANAO analysis of IMCR target locations.

2.23 To determine mobile coverage issues in the 54 target locations, the department reviewed information contained in the election commitments and existing mobile coverage maps. The department also carried out mobile coverage surveys of targeted highways and reviewed complaints of poor mobile access or coverage at the target locations.

2.24 The department advised the ANAO on 18 August 2023 that this desktop analysis was not the most effective method to identify localised capacity or dominance issues that could affect user experience at the target locations.

2.25 The department determined that the market would be best placed to determine potential solutions and shifted to classifying each target location into one of three categories:

• new mobile coverage — where coverage issues appeared to primarily relate to poor or no mobile coverage across the target location;
• new highway coverage — where issues primarily relate to stretches of highway with poor or no mobile coverage; or
• improved mobile coverage — where issues appear to primarily relate to either mobile capacity, poor indoor coverage or both.

2.26 In total, 14 target locations were identified as new mobile coverage, six locations as new highway coverage and 34 locations as improved mobile coverage.

National Mobile Black Spot Database

2.27 For round one of the MBSP, the department developed a national mobile black spot database to inform applicants of potential locations to help develop their grant applications for that round. The database contained mobile black spot locations reported by members of the public or nominated by members of parliament, however the reported mobile black spot issues were not independently verified by the department or updated as issues were rectified.

2.28 The department advised the ANAO on 30 August 2023 that this database did not inform the design of the IMCR as it was discontinued in 2018 and no longer in use. The department noted that the database represented a point in time, could not be validated and was no longer accurate.

Target location eligibility

2.29 The grant opportunity guidelines state that the objectives of the MBSP are to extend and improve mobile phone coverage and competition in regional and remote Australia, by co-funding new or upgraded telecommunications infrastructure. In most MBSP rounds, except for the Priority Locations Round, major urban areas¹⁶ have been ineligible for funding consistent with the grant opportunity guidelines.

2.30 In September 2022, the department advised the minister that the design of the IMCR was based on the Priority Locations Round. This round of the MBSP targeted 125 pre-announced priority locations, including major urban areas, with solutions funded through a targeted competitive grant program.¹⁷

2.31 Nine IMCR target locations were in areas classified as major urban. The department advised the ANAO on 5 October 2023 that it determined major urban areas were eligible under the IMCR to streamline the grant application process for industry and to reduce inefficiencies of administering multiple grant programs. The legislative and policy authority for the MBSP does not restrict funding to regional and remote Australia.¹⁸

2.32 The department did not advise the government that major urban areas had been ineligible under previous MBSP rounds (except for the Priority Locations Round), and did not update the grant opportunity guideline objectives to clarify that major urban areas were eligible for grant funding under the IMCR.

Target locations previously funded through Australian Government grant programs

2.36 The department advised the government that some election commitments were in locations that had received grant funding under existing government programs. Seventeen target locations had received funding under earlier grant program rounds.

2.37 In January 2023, the department advised the minister through their office that the market should be tested again as some sites could not be built at the time or may have had conditions change to warrant additional telecommunication infrastructure investment. The department stated that previously funded sites may require further coverage or capacity upgrades to address localised black spot issues.

Target location risks

2.38 The department advised the minister through their office in July 2022 that some target locations might be challenging to deploy coverage solutions or might not be of commercial interest to mobile network operators. The department stated these issues could result in some locations not attracting funding applications and that there was a higher risk of infrastructure not being completed at the Kangaroo Valley, Carwoola, St Leonards, Mt Tomah and Bowen Mountain target locations.

2.39 The department also advised the minister that specifying target locations for investment could reduce the competitive incentive for applicants and state and territory governments to offer funding co-contributions.

2.40 The department identified in its draft program risk register that its award of grant funding may contribute to an increase in Telstra’s incumbent market share throughout regional Australia. The draft risk register stated that poor program design could limit market competition in regional areas due to reduced investment incentives from other providers.

2.41 The department identified the following controls to manage the risk:

• assessment criteria within the grant opportunity guidelines factored in solutions that provide new mobile coverage in an applicant’s network but not wholly new coverage to an area;
• grant opportunity guidelines targeted mobile network operators and mobile network infrastructure providers with high incentives to be seen investing in regional areas; and
• the government evaluates former rounds of the program for effectiveness, including effects on market incentives and competition, and program rounds are designed using evidence-based policy research.

2.42 The department assessed the likelihood of the reduced competition risk occurring as rare in the risk register, resulting in an overall low risk rating. The department advised the ANAO on 12 February 2024 that it did not raise the reduced competition risk with the government in the development of the IMCR as the department classified the potential risk as low.

Analysis of highway target locations

2.43 The department engaged Ventia as an external technical adviser to carry out mobile coverage testing²¹ for the identified highway locations to detect mobile coverage issues, which was completed in June 2022. The testing resulted in the reclassification of one highway target location to the ‘improved mobile coverage’ category. All other highway target locations remained in the ‘new highway coverage’ category.

Were lessons learned from previous mobile black spot rounds effectively used to inform the design of round six?

Using lessons learned to design the Improving Mobile Coverage Round

2.44 The department advised the government that a targeted competitive grants program was the most effective way to deliver against its improving mobile coverage election commitments, consistent with the Department of Finance’s Resource Management Guide 412.²²

2.45 When developing the IMCR, the department modelled the grant opportunity on the MBSP Priority Location Round to deliver election commitments and considered lessons learned from previous rounds of the MBSP, the Peri-Urban Mobile Program and feedback from public consultation to update the grant opportunity guidelines (see Table 2.1).

Table 2.1: Lessons learned and applied into the design of the Improving Mobile Coverage Round

Note a: Macrocell solutions provide mobile coverage to a wide area over several kilometres, while a small cell solution has a smaller mobile coverage range (hundreds of meters) and a lower power output to that of a macrocell.

Note b: To assess the mobile coverage claims made by applicants under the Improving Mobile Coverage Round, the department uses Reference Signals Received Power (RSRP) to model signal strength proposed at a location at 90 per cent confidence. For the 4G (LTE) service mode, an RSRP measured at -85 decibel-milliwatts should provide strong signal strength with good data speeds. Decibel-milliwatts (dBm) is the amount of power that an antenna can produce or how much signal is available at a site. The RSRP is a measurement of this power spread over the full bandwidth and narrowband and is indicated by a negative dBm value. The closer the negative dBm measurement is to zero, the stronger the signal.

Note c: Regional Telecommunications Independent Review Committee, 2021 Regional Telecommunications Review: a step change in demand, RTIRC, Canberra, 2021, available from https://www.infrastructure.gov.au/sites/default/files/documents/2021-rtirc-report-a-step-change-in-demand.pdf [accessed 17 January 2024].

Note d: Communications equipment can be installed on a range of physical infrastructure such as a mobile tower, rooftops of commercial and residential buildings, or light poles and bus stops (known as passive infrastructure). Co-location occurs when a Mobile Network Operator (MNO) installs their equipment on the infrastructure as another MNO in a passive sharing arrangement. Active sharing involves the sharing of electronic infrastructure such as radiocommunications spectrum and radio access network between MNOs.

Source: ANAO analysis of MBSP lessons learned captured by the department.

Performance monitoring and reporting

2.46 The PGPA Rule and the Department of Finance Resource Management Guide 131 requires entities to have meaningful performance information that is measurable, reliable and related to entity’s purpose and objectives.²³

2.47 Outcome 5 in the department’s Portfolio Budget Statements 2023–24 is to:

Promote an innovative and competitive communications sector, through policy development, advice and program delivery, so all Australians can realise the full potential of digital technologies and communications services.

2.48 A key activity under Outcome 5 is to implement and administer programs that expand digital connectivity, including the MBSP. The objective of the MBSP is to extend and improve mobile phone coverage and competition across Australia, with a focus on regional and remote areas, by co-funding new or upgraded telecommunications infrastructure.

2.49 The department monitors MBSP implementation through the following key performance indicators (KPIs) set out in the grant agreements:

• amount of new and upgraded handheld coverage achieved (km²);
• new external antenna coverage (km²);
• new coverage proved to major transport routes (kms); and
• number of premises receiving new handheld coverage.

2.50 The department requires that grantees provide KPI baseline data for each funded solution in the grant agreements. The department uses this data to monitor implementation and report progress against the MBSP objective of extending and improving mobile coverage. The grant agreements also require grantees to provide asset completion reports and data on total contracted versus actual mobile coverage outcomes for delivered infrastructure.

2.51 Performance measure 25 in the department’s 2023–27 Corporate Plan is the ‘Total amount of new and improved mobile coverage delivered through the Mobile Black Spot Program and the Peri-Urban Mobile Program’.²⁴ The department reports against this performance measure using the MBSP KPI data (see paragraph 2.49).

2.52 The 2023–24 target for performance measure 25 is mobile coverage that is equal to or greater than 90 per cent of total contracted coverage delivered by assets where completion reports are received and approved in the financial year, for both the MBSP and Peri-Urban Mobile Program.²⁵

2.53 For the MBSP in 2022–23, the department reported it had met the target against performance measure 25, with 6,420km² of new handheld mobile coverage delivered across 79 base stations representing 158 per cent of the total contracted coverage from these assets.²⁶ The ANAO audited the department’s performance statements for the year ending 30 June 2023 and did not find any non-compliance with the PGPA Act and Rule for this performance measure. The department does not have a target for competition objectives or whether mobile telecommunication users in regional and remote Australia are provided with a greater choice of mobile network operators.

Program evaluation

2.54 The Commonwealth Evaluation Policy sets a framework to assess implementation and to measure the impact of government programs. Resource Management Guide 412 states that the evaluation of grant programs should focus on the extent to which the government’s policy outcomes have been achieved. Australian Government entities should also adopt an early focus on evaluation during the design phase of a grant opportunity.²⁷

2.55 In 2022, the Minister for Communications asked the Standing Committee on Communications and the Arts to inquire into the experiences, opportunities and challenges for co-investment in multi-carrier regional mobile infrastructure. In its report released in November 2023, the standing committee recommended:

the Australian Government review the policy intent, objectives, and guidelines of the Mobile Black Spot Program to ensure it remains fit for purpose. The review should be completed within 12 months and have regard to other relevant recommendations made in this report.²⁸

2.56 Auditor-General Report No. 10 2016–17 Award of Funding under the Mobile Black Spot Programme, recommended that the department implements a performance measurement and evaluation framework for the MBSP.²⁹ The department agreed to this recommendation.

2.57 In February 2024, the department advised the ANAO that it was developing a MBSP evaluation strategy and planning an approach to market for external evaluation services.

2.58 As at March 2024, the department does not have a MBSP evaluation framework in place and has not evaluated the program prior to initiating further grant opportunities. Without an effective evaluation, the department is unable to provide assurance that the MBSP contributes to improving mobile phone coverage and competition in regional and remote Australia.

Has the department established appropriate grant opportunity guidelines?

Design of the grant opportunity guidelines

2.62 The CGRGs require accountable authorities to develop grant opportunity guidelines for all new grant opportunities.³⁰ Officials should develop clear and consistent guidelines to effectively communicate the program’s intended outcomes to applicants.

2.63 On 14 November 2022, the department published the draft guidelines for public comment. The draft guidelines were updated with input from public consultation, and feedback from state and territory governments, and mobile network operators.

2.64 The department received 108 submissions across industry, non-government organisations and the public as part of the consultation process. Sixty-five submissions (60 per cent) identified a mobile coverage issue in one or more target locations. The department advised the minister through their office that stakeholder engagement identified the impact of poor connectivity across target locations, including issues with ‘EFTPOS, communications during natural disasters or medical emergencies, working and studying from home, and receiving two-factor authentication codes for banking and government services.’

2.65 The department wrote to three mobile network operators on 14 November 2022 to notify of the consultation period and offered to discuss the draft grant opportunity guidelines. Telstra and TPG Telecom requested meetings with the department which were held on 22 November 2023 and 29 November 2023 respectively. The consultation meetings covered the program timeframes, types of coverage issues at target locations, assessment coverage metrics and multi-carrier provisions. Optus did not request a meeting with the department.

2.66 Following consultation with all parties, the department made three key updates to the guidelines:

• identified additional areas with poor connectivity in target locations;
• clarified that eligible costs for supporting additional mobile network operators in a proposed solution can be included at the lead applicant’s cost; and
• clarified the nominal cap and expected levels of co-contribution from applicants.

2.67 As required by the Commonwealth Grants Policy Framework, the department conducted a self-assessment risk analysis of the grant opportunity guidelines and applied a low-risk rating. In January 2023, the department consulted with the Department of Finance and the Department of the Prime Minister and Cabinet on the risk rating, with both departments agreeing with the low-risk rating.

2.68 In September 2020, the Minister for Communications, Cyber Safety and the Arts wrote to the Minister for Finance seeking agreement for MBSP rounds 5A and six to be exempt from using the government’s grants hubs. On 4 October 2020, the Minister for Finance agreed to the exemption due to the ‘complex nature of the programs and the need to have consistency for stakeholders.’ Given this exemption, the department administered the IMCR directly.

2.69 The minister approved the guidelines on 24 January 2023 and the guidelines were published on GrantConnect on 2 February 2023.

2.70 The guidelines largely aligned to the requirements and better practice principles of the CGRGs (see Table 2.2).

Table 2.2: Alignment of the Improving Mobile Coverage Round grant opportunity guidelines with better practice principles

Note a: Australian Government, Department of Infrastructure, Transport, Regional Development, Communications and the Arts 2023–24 Portfolio Budget Statement, Commonwealth of Australia, Canberra, 2023, available from: https://www.infrastructure.gov.au/about-us/corporate-reporting/budgets/budget-2023-24/portfolio-budget-statements-2023-24 [accessed 15 January 2024].

Source: ANAO analysis of the IMCR grant opportunity guidelines against CGRG requirements.

Eligibility requirements and assessment criteria

2.71 Eligibility requirements were outlined in the IMCR guidelines. To be eligible for IMCR funding, applicants need to be a registered mobile network operator or mobile network infrastructure provider.³¹ Proposed solutions must provide new or improved mobile coverage at the identified target locations to be eligible for funding, meet the technical requirements set out in the guidelines and provide a minimum standard of service in the target locations.

2.72 In response to Auditor-General Report No. 10 2016–17 Award of Funding under the Mobile Black Spot Programme, the department agreed to the Auditor-General’s recommendation for the department to ‘implement an appropriately detailed assessment methodology tailored to the objectives of the programme.’

2.73 The guidelines outlined the assessment criteria which consisted of formulas to determine the cost per coverage outcome of each proposed solution. The assessment criteria for improved coverage solutions also included scope to assess the material improvement of a solution proposed for a target location (see paragraph 3.45). The department also outlined the key factors it would consider in assessing a proposed solution’s potential to demonstrate value for money (see paragraph 3.51).

Internal processes and procedures

2.74 The department’s internal processes were consistent with the published grant opportunity guidelines and the CGRGs. Officials were supported by internal process documents, which include standard operating procedures, checklists, geospatial mapping tools, and probity and evaluation plans. The MBSP project management plan and IMCR risk register remained in draft form (see opportunity for improvement at paragraph 2.96).

Are appropriate arrangements in place to manage probity risks?

2.75 The department had a range of measures in place to manage IMCR probity risks:

• department-level risk management policy and framework, and associated risk appetite and tolerance statement;
• overarching departmental probity framework;
• IMCR probity plan;
• IMCR draft risk register identifying probity risks, controls and mitigations; and
• individual conflict-of-interest declarations made by program participants and a conflict-of-interest register.

Internal controls to manage probity risks

2.76 The department has a Risk Management Policy and Framework in place to guide its approach to managing and engaging with risk. The department outlines in its risk appetite and tolerance statement that it has a very low appetite for unethical behaviour and no tolerance for fraud or corruption.

2.77 The department developed a draft IMCR risk register which identified probity not being managed appropriately during the application, assessment and contract negotiation periods as a key program risk. The department rated this risk for the IMCR as ‘Low.’

2.78 Two controls were identified by the department to manage probity risk: program participants were required to complete conflict-of-interest declarations; and the department engaged an external probity adviser to support the program. The IMCR risk register was not finalised by the department and remained in draft form as at 8 March 2024.

2.79 The department had an IMCR probity plan to identify and seek to manage probity risks. This plan provided detail on:

• IMCR background and probity plan application;
• roles and responsibilities, including the role of the probity adviser;
• procedures for the handling of gifts and benefits and managing actual, perceived and potential conflicts of interest;
• procedures for communication with applicants in the course of evaluation activities;
• protecting confidential and commercially sensitive information;
• handling complaints; and
• processes to monitor compliance with the probity plan.

2.80 In February 2023, the department engaged Sparke Helmore Lawyers as its probity adviser for a number of communications grant programs, including the IMCR. The probity adviser reviewed the draft probity plan on 28 March 2023 and provided feedback which was incorporated into the probity plan. The project director reviewed the probity plan in April 2023 and the final plan was presented to the evaluation committee on 16 June 2023. The probity plan was not signed by the project director until 18 August 2023.

2.81 Two members of the evaluation committee, including the Chair, attended a probity briefing delivered by Sparke Helmore Lawyers on 1 May 2023. A new member was nominated to participate on the evaluation committee in June 2023 and provided with a probity briefing on 11 July 2023. A probity briefing was also delivered by Sparke Helmore Lawyers to two officers within the minister’s office on 7 August 2023.

2.82 Sparke Helmore Lawyers submitted its review of the draft evaluation report and summary of assessment on 18 August 2023 and, following amendments made by the department, the probity adviser found ‘there are no other probity concerns.’ The department submitted the evaluation report to the minister on 23 August 2023 and advised that ‘the Program’s Probity Adviser, Sparke Helmore Lawyers, had provided clearance of the Evaluation Report.’ The department did not receive formal probity sign-off on the IMCR assessment process from Sparke Helmore Lawyers until 11 December 2023.

Separation of duties

2.83 The CGRGs state that accountable authorities should establish appropriate internal control mechanisms for grants administration, which can include the separation of duties.³²

2.84 There were appropriate oversight arrangements and separation of duties for the IMCR. Key roles and duties were outlined in the IMCR grant opportunity guidelines and evaluation plan:

• the department was responsible for eligibility checks, evaluating applications against minimum requirements, assessing proposed solutions, and preparing merit lists for each target location; and
• the Minister for Communications, as the decision-maker, was responsible for the award of funding under the IMCR.

Evaluation committee

2.85 An evaluation committee was established within the department to assess and evaluate each application to form a merit list of proposed solutions. The evaluation committee also carried out an assessment on whether each proposed solution demonstrated value for money. The evaluation committee consisted of three officials from within the department (see paragraphs 3.33 to 3.36 for the evaluation committee’s role in assessing applications).

2.86 The evaluation committee convened 12 times between June and August 2023 and recorded its outcomes in meeting minutes (see paragraphs 3.37 to 3.57). An overview of the department’s governance arrangements is provided at Figure 2.2.

Figure 2.2: Governance structure for the Improving Mobile Coverage Round

Source: ANAO analysis of the IMCR evaluation plan, probity plan and grant opportunity guidelines.

Identifying and managing conflicts of interest

2.87 The CGRGs state that accountable authorities should put in place appropriate mechanisms for identifying and managing conflicts of interest for grant opportunities.³³ The CGRGs define a conflict of interest as:

where a person makes a decision or exercises a power in a way that may be, or may be perceived to be, influenced by either material personal interests (financial or non-financial) or material personal associations.

2.88 The probity plan applied to all departmental personnel, contractors and advisers involved in the evaluation process for the IMCR. The probity plan required all personnel to complete a conflict-of-interest declaration as soon as possible after commencing work on the program.

2.89 In March 2023, the department developed a register of conflict-of-interest declarations made by officials which it maintained during the IMCR assessment process. All members of the evaluation committee and other officials involved in the IMCR assessment process completed conflict-of-interest declarations in line with probity plan requirements.

2.90 Conflict-of-interest declarations made by department officials and employees of the probity adviser included personal mobile phones connected to an applicant’s network, family or friends employed by an applicant, or their own intention to seek employment with an applicant.

2.91 The probity plan states ‘on receipt of a declaration of an actual, perceived or potential conflict of interest, the project director refers the matter to the probity adviser for advice on the proper management of the situation.’ The department sought and received advice from Sparke Helmore Lawyers in May 2023 regarding a matter where a declaration was made by a department official in relation to potential employment with an applicant. Measures were identified by the probity adviser to mitigate the risk of a conflict of interest arising. These included:

• reminding the officer of their confidentiality, non-disclosure and general probity obligations covering the programs they were working on and obligations pursuant to the PGPA Act and APS Code of Conduct;
• removing the officer from involvement in matters concerning the applicant (the mobile network operator where the officer had applied for employment);
• allowing the officer to work on matters involving the applicant’s competitors but removing access to commercially sensitive information such as pricing schedules; and
• regular review of the officer’s work by a member of the department’s legal team.

2.92 The IMCR conflict of interest register was not updated to record details of this declaration and the associated mitigation strategies put in place by the department. The officer remained involved in work on regional mobile grant programs administered by the department until resigning in June 2023.

2.93 On 18 August 2023, the chair of the evaluation committee (the chair) endorsed the IMCR evaluation report, finalising the assessment process. On 21 August 2023, the chair commenced as acting senior adviser to the Minister for Communications.

2.94 The department put in place the following mitigation measures to address any potential conflicts of interest arising from this appointment:

• the chair, in their capacity as acting senior adviser to the minister, would not be part of the review and ministerial decision on the IMCR assessment report and recommendations brief;
• all departmental correspondence on the IMCR was to be addressed to an alternative adviser within the minister’s office; and
• the IMCR project team was notified by email of these arrangements on 22 August 2023.

2.95 On 23 August 2023, the acting senior adviser to the minister confirmed arrangements in an email to senior department officials. The email stated that they would not be involved in reviewing the IMCR brief and would not discuss or interact with others in the minister’s office until the brief was signed off by the minister. The department took steps to manage the potential conflict of interest declared by the chair but did not update its conflict-of-interest register or seek probity advice in this instance.

3.1 To ensure transparent and equitable grant administration, grant opportunity guidelines should contain all the necessary information a potential grantee needs to enable them to submit a grant application.³⁴ Guidelines should include information on how to apply for the grant; the process and timeframes involved, including all eligibility and assessment criteria; the roles and responsibilities of all relevant stakeholders; and the expectations if their application is successful.

Were applications assessed against the eligibility requirements?

Application lodgement

3.2 The Commonwealth Grants Rules and Guidelines 2017 (CGRGs) prescribe that officials should treat applicants fairly and equitably by applying a transparent and systematic application process.³⁵ The grant opportunity guidelines outline the IMCR application lodgement process and how applications will be assessed against the IMCR eligibility requirements.

3.3 To lodge an application, the guidelines required applicants to pre-register interest, provide coverage maps of existing handheld coverage³⁶, use required application forms and documents, and warrant that proposed solutions are not in their forward-build plan from 2022–23 to 2026–27.³⁷

3.4 One applicant did not fully submit its final application before the deadline on 13 April 2023. The department exercised discretion under the guidelines to accept the late application and noted the applicant had begun uploading documents before the deadline. No material changes were made to the application when its upload was completed on 14 April 2023. The application was discussed at the first meeting of the evaluation committee and the department recorded its decision-making process and reasons to accept the application. All other applications were lodged in line with the grant opportunity guidelines.

3.5 On 5 May 2023, the department provided the minister through their office with a high-level summary of the applications received. This included the number of applications, total number and value of proposed solutions, the type of proposed solutions and potential Commonwealth co-contribution costs. The department also noted that, for probity reasons, it would not provide further material information on the IMCR applications or assessment processes until it formally briefed the minister on the assessment outcomes.

3.6 On 10 July 2023, TPG Telecom withdrew 18 out of 34 proposed solutions (53 per cent) after the Australian Competition Tribunal (the tribunal) affirmed the Australian Competition and Consumer Commission’s (ACCC) decision to not authorise a proposed regional spectrum authorisation arrangement between TPG Telecom and Telstra.³⁸

3.7 This arrangement would have seen TPG Telecom provide Telstra with the use of its radiofrequency spectrum and Telstra supplying TPG Telecom with mobile network services in regional areas. The ACCC refused the Telstra and TPG Telecom application, determining that the arrangement was likely to entrench Telstra market share and reduce the incentives for mobile network operators to invest in improving mobile coverage in regional areas.³⁹ The tribunal affirmed the ACCC decision, denying authorisation as it ‘was not satisfied that the proposed arrangements were not likely to have the effect of a substantial lessening of competition or that the benefit to the public likely to result would outweigh the detriment’.⁴⁰

3.8 TPG Telecom informed the department when submitting its grant application that the 18 proposed solutions were contingent on the tribunal overturning the earlier ACCC decision. The department kept records of TPG Telecom’s withdrawal and excluded the withdrawn solutions from assessment. On 12 July 2023, Telstra informed the department that it intended to proceed with its IMCR proposed solutions impacted by the tribunal’s decision.

Minimum technical requirements for applicants

3.9 The grant opportunity guidelines outlined the minimum technical requirements that applicants must meet to receive funding. The guidelines required applicants to be a mobile network operator or infrastructure provider, deliver a minimum standard of service, back-up power and backhaul access⁴¹ for mobile base stations, and meet the specified technical configurations for co-located base stations.

3.10 The department reviewed each application against the minimum technical requirements in its ‘application completeness report.’ On 16 June 2023, the report was provided to the evaluation committee at its first meeting and the evaluation committee assessed that all applications met the minimum technical requirements.

3.11 The department received applications that proposed solutions to upgrade existing mobile base stations from 4G to 5G technology. The grant opportunity guidelines did not specify whether these proposed infrastructure upgrades were eligible for funding under the IMCR.

3.12 The evaluation committee determined that the 5G upgrade proposals were not inconsistent with services required in the grant opportunity guidelines and noted that the proposed upgrades could improve capacity and service to the target locations. On 19 June 2023, the evaluation committee agreed that 5G upgrades were eligible for funding under the IMCR and recorded its decision in its meeting minutes.

Proposed solutions received

3.13 The department received a total of 79 complete proposed solutions across 49 target locations.⁴² Fifteen proposed solutions were for new coverage solutions, nine were for new highway coverage solutions, and 55 were for improved coverage solutions. Of the 79 proposed solutions received, 21 were from Optus, 49 were from Telstra, and the remaining nine from TPG Telecom (see paragraphs 3.6 to 3.8).⁴³

3.14 Of the 49 target locations that received proposed solutions, 33 locations (67 per cent) received one proposed solution and 16 locations (33 per cent) received two or more proposed solutions (see Table 3.1). Five target locations did not receive any proposed solutions, which were Breera, Brigadoon, Herne Hill, Monaro Highway and Mount Tomah.

Table 3.1: Total number of Improving Mobile Coverage Round proposed solutions received per target location

Note a: Five target locations received no applications.

Source: ANAO analysis of IMCR proposed solutions received by the department.

Eligibility of proposed solutions

3.15 For a proposed solution to be eligible for assessment, it must provide coverage to the target location and meet the solution type requirements specified in the grant opportunity guidelines. The department carried out eligibility checks on all 79 proposed solutions and determined 13 as ineligible. Of these 13 ineligible solutions, 11 did not provide material coverage in the target location and two proposals put forward a macrocell tower solution when the guidelines required a small cell solution at the target location to meet the eligibility criteria.

3.16 Sixty-six proposed solutions across 45 target locations met the solution eligibility requirements and progressed for assessment against the assessment criteria. Four target locations that received applications did not have any eligible solutions following these checks.

3.17 Nine target locations did not have any solutions proceed to assessment (see Table 3.2). Five locations did not receive any applications (see paragraph 3.14) and the department determined that four target locations did not have any eligible solutions.

Table 3.2: Number of eligible Improving Mobile Coverage Round proposed solutions per target location

Note a: Nine target locations received no eligible proposed solutions (including five locations that did not receive any applications).

Source: ANAO analysis of IMCR proposed solutions received by the department.

Was the assessment of applications against the assessment criteria robust and reliable?

Assurance activities

3.18 The grant opportunity guidelines established an assessment framework which the department used to assess applications. This framework was supported by an assessment plan to score proposed solutions submitted by applicants and required the department to undertake assurance activities when assessing applications.

3.19 The grant opportunity guidelines required the department to assess the risk of the applicant not fulfilling its proposed solutions. The department’s assessment noted previous experiences with each applicant and identified contractual risks, target location risks due to frustrated sites⁴⁴ from earlier rounds of the program, and the risk of asset non-completion within the specified timeframes. These assessments informed the department’s advice to the minister and were noted in the evaluation report.

3.20 The department sought clarification from applicants throughout the assessment process on aspects of their applications (see Table 3.3).

Table 3.3: Types of clarifying information requested by the department

Source: ANAO analysis of correspondence between the department and applicants during the assessment period.

Forward-build plans

3.21 The grant opportunity guidelines stated that applicants must not seek government funding for proposed solutions where they have already planned to invest commercially. For assurance, the department required applicants to sign a statutory declaration as part of their application that their proposed solutions were not in their forward-build plans for 2022–23 to 2026–27.

3.22 The department advised the ANAO on 6 December 2023 that it can audit applicants forward-build plans and use public third-party data to review if applicants intend to build at a target location. These checks included reviewing the Radio Frequency National Site Archive⁴⁵, the Australian Communications and Media Authority’s Register of Radiocommunications Licences⁴⁶, and checking an applicant’s public coverage maps for evidence of pre-planning work.

3.23 The department reviewed 27 out of 79 proposed solutions (34 per cent) against these public databases. The department advised the ANAO on 26 April 2024 that it checked 27 out of 30 (90 per cent) eligible brownfield or 5G upgrade sites as ‘it wasn’t clear from the existing coverage in the area whether or not there may be existing towers delivering services.’

3.24 The department requested applicants’ forward-build plans under round one of the MBSP in 2015. The department advised the ANAO on 6 December 2023 that it has not requested these plans under later MBSP rounds, as the process was ‘onerous for the applicants and resulted in the department holding extremely commercially sensitive information for little benefit to the program.’ The department stated it has not undertaken an audit of an applicant’s forward-build plans since round one, given the statutory declaration requirements set out in the grant opportunity guidelines (see paragraph 3.21). The department does not have a risk-based audit schedule of applicants’ forward-build plans.

3.25 The use of statutory declarations is a control for minimising the risk of applicant’s non-compliance with the grant opportunity guidelines. The absence of a risk-based audit program, however, reduces the effectiveness of this control and creates a long-term risk of applicants providing inaccurate information in their statutory declarations.

3.26 It was suggested to the department in Auditor-General Report No. 10 of 2016–17 Award of Funding under the Mobile Black Spot Programme, that it:

compare the proximity of applicant proposals to their competitor’s forward build plans to help demonstrate that programme funding directly supports outcomes that are in addition to normal commercial investment.

3.27 The grant opportunity guidelines do not require the comparison of a proposal against other mobile network providers’ forward-build plans; however comparing the proximity of planned commercial investment could assist the department in assessing mobile black spot needs in priority locations (see paragraphs 2.11 to 2.14).

3.28 During the department’s assessment of a proposed solution at Bowen Mountain, its check of the Radio Frequency National Site Archive found that another mobile network operator, which did not propose a solution for Bowen Mountain, had plans to build a commercial site at the target location (see paragraph 4.14). The evaluation committee assessed the one proposed solution as not having potential to demonstrate value for money (see paragraph 3.55), resulting in Bowen Mountain not receiving any funded solutions.

Application assessment

3.30 To assess applications, the department provided a structured spreadsheet for applicants to populate with information about their proposed solutions. Once the spreadsheets were lodged by applicants, the department processed and imported the data into a geospatial mapping tool developed by its geospatial analysis team. This mapping tool was then used by the department to visualise the applicant’s existing and proposed mobile coverage and to automatically calculate the assessment scores.

3.31 The department verified this data by visually checking the mobile coverage maps produced in the geospatial mapping tool for each target location and sought clarification from applicants for inconsistencies. The department recorded detailed instructions on the design of the interface and documented efforts to clarify claimed mobile coverage outcomes with applicants, but it did not record how business rules were implemented or how testing processes were carried out. The ANAO did not identify any issues with the output of the mapping interface.

Evaluation committee

3.33 The department’s evaluation process was supported by an evaluation committee to ‘assess each application on its merit and compare it to other eligible applications before recommending which grant proposals should be awarded a grant.’ The evaluation committee comprised of three departmental officials and was chaired by a senior executive.

3.34 The IMCR assessment plan stated that the committee was responsible for approving the evaluation report and making recommendations to the decision-maker. The evaluation committee also provided strategic direction to and oversight of the project team in developing the evaluation report and merit list.

3.35 The evaluation committee was advised by the project team and used the geospatial mapping tool (see paragraphs 3.30 to 3.32) to evaluate each proposed solution individually before comparing it to any other proposed solutions.

3.36 The department recorded the committee’s decisions and screenshots of proposed new and improved mobile coverage in assessment summary sheets. All applications were assessed in line with the guidelines using the appropriate assessment criteria for the proposed solution.

Assessment of new coverage solutions

3.37 New coverage solutions were assessed by the department using a formula to calculate the cost per coverage in square kilometres for each proposed solution. The formula was included in the grant opportunity guidelines as:

3.38 The evaluation committee assessed 11 eligible new coverage solutions across 11 target locations, recommending nine solutions be placed on the merit list for funding (see Figure 3.1).

Figure 3.1: Assessment scores for eligible new coverage solutions

Note: A lower score indicates more mobile coverage per dollar cost.

Source: ANAO analysis of assessment sheets for proposed new coverage solutions.

3.39 The evaluation committee considered the Carwoola proposal at high risk of frustration, as a site funded under the Priority Locations Round was unable to be built at the Carwoola target location. The department sought clarification from the applicant, who was unable to provide the department with assurance that site acquisition at Carwoola would be successful if funded under the IMCR.

3.40 The committee considered a solution at the Wee Jasper target location as not demonstrating value for money as it exceeded the nominal funding cap by 350 per cent and had minimal applicant co-contribution.

3.41 The evaluation committee did not recommend funding these solutions at the Carwoola and Wee Jasper target locations and they were not placed on the merit list in accordance with the grant opportunity guidelines.

Assessment of new highway coverage solutions

3.42 The department assessed new highway coverage solutions using the same formula as applied for new coverage solutions (see paragraph 3.37), adapting the formula to calculate highway coverage in linear kilometres instead of square kilometres.

3.43 The evaluation committee assessed six eligible new highway coverage solutions across four target locations, recommending three solutions be placed on the merit list for funding across three target locations (see Figure 3.2).

Figure 3.2: Assessment scores for eligible new highway coverage solutions

Note: A lower score indicates more linear highway coverage per dollar cost.

Source: ANAO analysis of assessment sheets for proposed new highway coverage solutions.

3.44 The evaluation committee determined three new highway coverage solutions on the Snowy Mountains Highway and the Princes Highway (Batemans Bay to Eden) did not demonstrate value for money. The evaluation committee determined these solutions exceeded the nominal funding cap, provided minimal new mobile coverage to the highway target location and had low applicant co-contributions.

Assessment of improved coverage solutions

3.45 The grant opportunity guidelines outlined the assessment methodology for improved mobile coverage solutions, consisting of three scoring criteria (see Table 3.4).

Table 3.4: Improved mobile coverage scoring criteria as set out in the grant opportunity guidelines

Source: ANAO representation of improved mobile coverage criteria in the IMCR grant opportunity guidelines.

3.46 The evaluation committee assessed improved coverage solutions consistent with the three scoring criteria, awarding up to 10 points against each criterion for a total of 30 points. The evaluation committee based its scoring on the:

• area size of proposed improved mobile coverage;
• cost to the Australian Government as a percentage of the nominal cap⁴⁷; and
• extent to which the proposed solution addressed an identified quality of service issue in a target location.

3.47 The evaluation committee assessed 49 eligible improved coverage solutions against the assessment criteria. Figure 3.3 demonstrates the breakdown of assessment scores for each eligible improved coverage solution.

Figure 3.3: Disaggregated assessment scores for eligible improved coverage solutions

Note: A higher score indicates better responses against the three criteria, each worth 10 points for a total of 30 points.

Source: ANAO analysis of assessment sheets for proposed improved coverage solutions.

3.48 Thirty solutions (61 per cent) scored a total of 14 out of 30 points each. These scores were driven by the design of the assessment criteria.

• Thirty-two of 49 improved coverage solutions (65 per cent) offered more than 5.5km² of coverage and were awarded 10 out of 10 points for criterion one.
• Two applications, covering 38 solutions, contained generic evidence and only partially addressed the quality-of-service issues in target locations. The evaluation committee assessed all 38 improved coverage solutions in these two applications as ‘poor,’ resulting in a score of three points being awarded to each solution for criterion two.
• Forty-one of 49 improved coverage solutions (84 per cent) exceeded 90 per cent of the nominal funding cap and were scored one point against criterion three.

3.49 Gisborne South and Woodend target locations both received two proposed solutions which each scored 14 points. Due to limits in the scoring methodology design⁴⁸, the evaluation committee relied on judgement to differentiate between the proposals to determine potential value for money in making recommendations for funding at these two target locations.

3.50 To assess solutions proposed at the Gisborne South and Woodend target locations, the evaluation committee visually reviewed the proposed mobile coverage for the solutions overlayed on maps at the target locations. The evaluation committee made its recommendations based on the proposed solution that delivered better mobile coverage quality compared to the other solution which offered more coverage, but at a lower quality.⁴⁹ The evaluation committee recorded its decisions within the assessment scoring sheets for each location and the minutes of its meetings.

Were merit lists developed and clearly recorded in accordance with the grant opportunity guidelines?

Merit list development

3.51 In developing the merit list, the evaluation committee considered the following value for money factors as stated in the grant opportunity guidelines:

key factors considered in the overarching Value for Money assessment include, but are not limited to, the:

• degree to which mobile services are improved at the target location;
• extent to which competitive multi-Mobile Network Operator (MNO) services are provided at a target location;
• number of premises that will benefit from new or improved handheld coverage, including coverage that is new for a participating MNO but overlaps with another MNO’s network;
• degree to which the proposed solution is supported by third-parties (as demonstrated by third-party co-contributions and/or written evidence of support); and
• cost to the Commonwealth of the proposed solution.

3.52 The committee recorded its decisions in meeting minutes and noted its value for money considerations in assessment summary sheets for each target location in line with the value for money factors outlined in the guidelines. No other considerations outside of the guidelines were recorded.

3.53 The evaluation committee adopted three principles when assessing solutions and determining the merit list order based on the value for money assessment:

• endeavour to fund at least one solution at as many of the target locations as possible⁵⁰;
• prioritise solutions that are within the nominal funding cap for the target location over solutions at other target locations that are above the nominal funding cap; and
• rank proposed solutions that provide new coverage outcomes over solutions that only provide improved coverage outcomes.

3.54 The evaluation committee recommended funding solutions that scored lower against the assessment criteria than other solutions at the same location once a value for money assessment was applied. This occurred in three target locations. The evaluation committee recorded its recommendations in the evaluation report and included its reasoning for each site, consistent with the grant opportunity guidelines⁵¹ (see Table 3.5).

Table 3.5: Evaluation committee’s value for money considerations

Key: ✔ Recommended for merit list ✘ Not recommended for merit list

Source: ANAO analysis of individual assessment scoring sheets and evaluation committee decisions.

3.55 In developing the merit list, eight solutions were assessed by the evaluation committee as not demonstrating value for money and were excluded. This resulted in the Bowen Mountain, Carwoola, Queenstown and Wee Jasper target locations receiving no funded solutions. The evaluation committee’s rationale for excluding these solutions was consistent with the grant opportunity guidelines and recorded in the evaluation report.

Final merit list

3.56 The final merit list accurately reflected the assessment process outcomes and was signed by the chair on 18 August 2023. The merit list was sent to the Minister for Communications on 23 August 2023 for decision. The merit list contained solutions ranked from 1 to 40 as recommended and solutions ranked 41 to 57 as not recommended.⁵²

3.57 The evaluation committee noted that there was $2.8 million in remaining funding that could be used to fund additional solutions. The committee decided not to recommend more solutions to exhaust the IMCR funding allocation as it determined that the remaining solutions were high cost, demonstrated limited value for money for the mobile coverage outcomes proposed or were ineligible for funding.

4.1 During the decision-making process for the award of grant funding, the CGRGs require officials to follow relevant legislative and administrative frameworks, provide clear and accurate advice to the decision-maker, and record the reasons for funding decisions.

4.2 These obligations provide assurance that Australian Government spending satisfies the key principles for grant administration, which include achieving value with relevant money, governance and accountability, and probity and transparency.⁵³

Were clear funding recommendations provided to the decision-maker that reflected the results of the assessment process?

Advice to the minister

4.3 The IMCR grant opportunity guidelines state that the Minister for Communications (the minister) is the decision-maker for the program. The CGRGs require officials to inform ministers in writing that a spending proposal is a grant and detail the legal authority for the grant. Officials must advise the minister of their obligations as the decision-maker under relevant frameworks. Officials are also required to provide an overview of the selection criteria, merits of the grants and whether the grants meet the selection criteria.⁵⁴

4.4 On 12 July 2023, the department advised the minister through their office, that it expected to submit the IMCR evaluation report by early to mid-August 2023. A further update on timing was provided to the minister through their office on 8 August 2023, along with general advice on locations:

As per the department’s original high-level summary of the applications received (email 5 May 2023), it is expected there will be a number of Target Locations that won’t receive a recommended solution through the current process, as a small number of locations did not receive a proposal in the application process. Consistent with the Guidelines and the summary email, it is also possible some proposals received may be ineligible or assessed as not offering value for money to the Commonwealth.

4.5 On 23 August 2023, the department submitted the merit list to the minister for decision. The department’s submission to the minister complied with the requirements and better practice elements of the CGRGs and advised the minister of their obligations under specific sections of the Public Governance, Performance and Accountability Act 2013 (PGPA Act) and the CGRGs. The department’s submission included the evaluation report, merit list and summary of each recommended solution. On the same day, department officials discussed the merit list and funding recommendations with the minister through their office.

4.6 On 25 August 2023, the department provided verbal advice on options regarding the 12 target locations that did not have any solutions recommended for grant funding. The department made records of this advice following the discussions.

4.7 On 4 September 2023, the department met with the minister through their office for further discussion on the IMCR funding recommendations. The department noted it could formally advise the minister, if requested in writing, on funding options for the 12 target locations that were not recommended to receive a funded solution.

4.8 On 12 September 2023, the minister formally requested advice from the department (see paragraph 4.12). Officials appropriately made file notes and kept meeting minutes to record summaries of the discussions and capture agreed outcomes.

Was the funding approval process conducted and recorded in line with the published grant opportunity guidelines?

Record of funding decision

4.9 As the decision-maker, the minister must comply with the CGRGs and, in line with section 71 of PGPA Act, be satisfied after reasonable enquiries that the proposed expenditure would be proper use of relevant money. The CGRGs oblige ministers, when acting as a decision-maker, to be satisfied that a proposed grant will be an economical, efficient, effective and ethical use of relevant money.⁵⁵ Any approval of a grant must be recorded in writing as soon as practicable.⁵⁶

4.10 On 12 September 2023, the minister agreed with the department’s recommendations for the award of funding under IMCR, with written approval returned to the department on 13 September 2023.

4.11 Twelve target locations did not receive new or improved mobile coverage from a funded solution:

• five locations did not receive any grant applications;
• four locations received grant applications which the department assessed as not demonstrating value for money; and
• three locations received applications that did not satisfy the technical coverage or solution requirements of the guidelines.

4.12 The minister also requested on 12 September 2023 that the department provide advice to their office on:

options for locations where carriers were willing to co-invest but submitted ineligible solutions, or solutions that were not recommended for other reasons, within the remaining available funding – and a value for money frame. Where no solutions put forward by carriers, Dept to advise on a broader set of policy options to support connectivity for locations like those around the country.

4.13 On 20 September 2023, the department advised the minister through their office on options to run a targeted competitive ad-hoc grant round for the Majors Creek, Queenstown and Wee Jasper target locations based on the applications received from the applicants. The department also presented options to the minister through their office to fund sites that did not receive any eligible solutions at Mangrove Mountain, Princes Highway (Ulladulla to Batemans Bay), and Bowen Mountain.

4.14 On 6 October 2023, the department further advised the minister through their office that a mobile network provider was potentially building a site at Bowen Mountain, removing the need for Australian Government funding (see paragraph 3.28).

4.15 On 17 October 2023, the minister through their office requested:

Consistent with the Department’s initial options advice (20/9/23) on Majors Creek, and your subsequent advice on Mangrove Mountain (6/10/23), the Minister would like to further test industry solutions to identify value for money and eligible solutions, within remaining IMCR funding, given the advice these areas have a reasonable prospect of an outcome through a supplementary competitive process.

4.16 On 20 March 2024, the department advised the ANAO that (see also Table 4.1):

The Office has asked the department to proceed with preparatory work for a competitive market testing process for Majors Creek and Mangrove Mountain. We have commenced developing new guidelines for a stage 2 of IMCR. … The remaining unallocated IMCR funding will be used for the round. The department is not proposing to supplement this funding. It is intended that the new guidelines will be subject to the usual approvals processes, including with the Department of Finance.

Table 4.1: Status of unfunded target locations as at 20 March 2024

Source: ANAO analysis of unfunded target locations provided by the department to the ANAO on 20 March 2024.

Other recording obligations

4.17 Ministers must record a decision to approve a grant within their electorate or a decision to approve grants not recommended by the department.⁵⁷ There were no proposed funding solutions within the minister’s electorate and the minister agreed with all solutions recommended for funding by the department. The minister did not approve any grants for solutions that were not recommended for funding by the department.

4.18 One funded solution in the Maraylya target location was near the minister’s electorate of Greenway. The department reviewed whether the mobile base station provided any material benefit to the minister’s electorate, and confirmed it did not, based on the IMCR’s new improved handheld or overlapping handheld metrics.⁵⁸

Funding announcement

4.19 The minister publicly announced the outcomes of the grant opportunity on 19 October 2023. Two out of three applicants were awarded funding under the IMCR:

• Telstra was awarded $36,549,536 for 40 solutions.
• TPG Telecom was awarded $680,000 for one solution.

4.20 The two successful applicants were informed of the minister’s decision on 18 October 2023 and the unsuccessful applicant was informed on 19 October 2023. One successful applicant and the unsuccessful applicant requested feedback and met with the department on 11 and 12 December 2023 respectively.

4.21 The minister agreed to all funding recommendations from the department and awarded a total of $37.2 million to 41 proposed solutions providing new or improved mobile coverage across 42 target locations (see Table 4.2). Around $2.8 million in IMCR funding remained unawarded.

Table 4.2: Analysis of target location outcomes

Note a: The department did not recommend funding solutions for two target locations at Alonnah and the Snowy Mountains Highway. The department assessed that these two locations would benefit from mobile coverage provided by funded solutions at Verona Sands and Talbingo respectively.

Source: ANAO analysis of IMCR award of funding outcomes.

4.22 The average Australian Government contribution for all funded solutions was $908,037 and the average applicant contribution was $703,486. As set out in Figure 4.1, the average proportion of the government’s contribution to the applicant’s contribution was 56 per cent, with a minimum of 35 per cent and a maximum of 77 per cent.

Figure 4.1: Proportion of government and applicant funding co-contributions across 41 funded solutions

Source: ANAO analysis of government and applicant co-contributions across 41 funded solutions.

4.23 Analysis of the funded solutions shows that 36 of 41 solutions (88 per cent) exceeded the nominal funding cap for macrocell and small cell solutions (see Figure 4.2). The department advised the ANAO on 30 August 2023 that most solutions exceeded the nominal funding cap due to the rising cost of land and materials and that the cost of operational expenditure may not have been considered when the Australian Labor Party committed $40 million for the program during the 2022 election period.

Figure 4.2: Cost of funded solutions against the nominal funding cap across target locations

Note a: The nominal funding cap was $680,000 for macrocell solutions and $250,000 for small cell solutions.

Note b: Mystery Bay received two small cell solutions dependent on one another to provide mobile coverage at the target location, not included in Figure 4.2. Both solutions exceeded the nominal funding cap of $250,000.

Note c: Fourteen target locations did not receive any funded base stations (Alonnah and Snowy Mountain Highway target locations were not funded for a base station but the department assessed as receiving material mobile coverage from funded solutions at Verona Sands and Talbingo respectively).

Source: ANAO analysis of funded solution costs against the IMCR nominal funding caps.

Distribution of grant funding

4.24 The CGRGs state that officials should ‘conduct grants administration in a manner that minimises concerns about equitable treatment’.⁵⁹ One indicator of equitable treatment for officials to consider when assessing and awarding grants is the geographic and political distribution of grant funding.⁶⁰ Previous audit reports have identified cases where grant funding was disproportionately awarded across electorates or geographic areas.⁶¹

Funding by electoral distribution

4.25 Forty of the 54 target locations (74 per cent) are in electorates held by the Australian Labor Party. Of the 42 target locations to receive mobile coverage outcomes, 30 sites (71 per cent) are in electorates held by the Australian Labor Party. The proportion of original target locations compared to funded outcomes is consistent across other political parties (see Table 4.3).

Table 4.3: Distribution of target locations per political party

Note a: The rounding of percentage figures results in a 99 per cent total.

Source: ANAO analysis of the award of funding by electoral distribution.

4.26 A detailed breakdown of the distribution of target locations by political party is available at Appendix 3.

Funding by notional seat status

4.27 Analysis of the ‘notional seat status’ of each electorate identified that 44 out of 54 target locations (81 per cent) were in ‘marginal’ electorates, two locations (4 per cent) were in electorates considered ‘fairly safe’ and eight locations (15 per cent) in ‘safe’ electorates.⁶² These proportions remained consistent for funding outcomes across the 42 target locations receiving material mobile coverage from funded solutions (see Table 4.4).

Table 4.4: Proportion of target locations’ notional seat status

Note a: The Australian Electoral Commission defines safe seats as ‘when the leading party receives more than 60 per cent of the two-party preferred vote; fairly safe seats as ‘when the leading party receives 56–60 per cent of the two-party preferred vote; and marginal as ‘when the leading party receives less than 56 per cent of the two-party preferred vote.

Note b: Figures may not sum to 100 due to rounding.

Source: ANAO analysis of target locations by nominal seat status.

4.28 A total of $29.0 million out of $37.2 million (78 per cent) was awarded to target locations located in marginal seats, with $1.9 million (5 per cent) awarded to locations in fairly safe seats and $6.4 million (17 per cent) awarded to locations in safe seats.⁶³ Thirty-three target locations receiving new or improved mobile coverage from funded solutions were in marginal seats (see Table 4.5).

Table 4.5: Proportion of target locations and funding amounts by notional seat status

Note a: See Table 4.4 for a definition of ‘safe’, ‘fairly safe’ and ‘marginal’ and see footnote 62 for a definition of ‘notional seat status.’

Note b: The grand total of $37.23 million is rounded.

Source: ANAO analysis of the award of funding by nominal seat status.

Funding by state and territory jurisdictions

4.29 The breakdown of funding awarded across each state and territory jurisdiction is shown in Table 4.6. New South Wales had 27 out of 54 target locations (50 per cent) and received 44 per cent of awarded funding.

Table 4.6: Award of funding by jurisdiction

Note a: Northern Territory did not have any target locations for the IMCR.

Note b: The department assessed that the Snowy Mountains Highway will receive mobile coverage from the funded solution at the Talbingo target location.

Note c: Mystery Bay target location received two funded solutions that are dependent on one another for coverage.

Note d: The department assessed that the Alonnah target location will receive mobile coverage from the funded solution at the Verona Sands target location.

Source: ANAO analysis of the award of funding by jurisdiction.

4.30 Three jurisdictions had target locations that were not funded. Ten of 27 locations (37 per cent) in New South Wales did not receive funded outcomes, as well as one of seven locations (14 per cent) in Tasmania and three of six locations (50 per cent) in Western Australia (see Figure 4.3). This distribution across jurisdictions is due to:

• no applications for two locations in New South Wales and three locations in Western Australia;
• ineligible solutions received for three locations in New South Wales; and
• solutions in three locations in New South Wales and one location in Tasmania that did not demonstrate value for money.

Figure 4.3: Target location outcomes by jurisdictions

Note: One target location, Wreck Bay Village, is in Jervis Bay Territory (JBT).

Source: ANAO analysis of funding outcomes by jurisdiction.

Appendix 1 Entity response

Appendix 2 Improvements observed by the ANAO

1. The existence of independent external audit, and the accompanying potential for scrutiny improves performance. Improvements in administrative and management practices usually occur: in anticipation of ANAO audit activity; during an audit engagement; as interim findings are made; and/or after the audit has been completed and formal findings are communicated.

2. The Joint Committee of Public Accounts and Audit (JCPAA) has encouraged the ANAO to consider ways in which the ANAO could capture and describe some of these impacts. The ANAO’s Corporate Plan states that the ANAO’ s annual performance statements will provide a narrative that will consider, amongst other matters, analysis of key improvements made by entities during a performance audit process based on information included in tabled performance audit reports.

3. Performance audits involve close engagement between the ANAO and the audited entity as well as other stakeholders involved in the program or activity being audited. Throughout the audit engagement, the ANAO outlines to the entity the preliminary audit findings, conclusions and potential audit recommendations. This ensures that final recommendations are appropriately targeted and encourages entities to take early remedial action on any identified matters during the course of an audit. Remedial actions entities may take during the audit include:

• strengthening governance arrangements;
• introducing or revising policies, strategies, guidelines or administrative processes; and
• initiating reviews or investigations.

4. In this context, the below actions were observed by the ANAO during the course of the audit. It is not clear whether these actions and/or the timing of these actions were planned in response to proposed or actual audit activity. The ANAO has not sought to obtain assurance over the source of these actions or whether they have been appropriately implemented.

• As noted in paragraph 2.57, the Department of Infrastructure, Transport, Regional Development, Communications and the Arts (the department) is developing an evaluation plan for the Mobile Black Spot Program (MBSP) and is planning to progress a formal evaluation of the MBSP program.
• The department advised the ANAO in January 2024 that it updated the MBSP conflict-of-interest register to include a decisions tab of actions taken to mitigate probity risk. The register is being trialled as part of a continuous improvement approach to program governance.
• The department updated its improving mobile coverage assessment criteria for future rounds of its mobile connectivity programs such the Peri-Urban Mobile Program (see footnote 49).

Appendix 3 Improving Mobile Coverage Round target locations by demographic profile and political party

Appendix 4 List of target locations and associated data

Note a: Locations that overlapped multiple areas were categorised by the site of the funded solution or, if unfunded, the area with the largest proportion of the target location.

Note b: The grant opportunity guidelines specified that Alonnah and Majors Creek required a small cell solution.

Source: ANAO analysis.

Appendix 5 List of target locations and assessment data

Note a: The department assessed that Alonnah will receive mobile coverage from the Verona Sands funded solution.

Note b: Mystery Bay received two funded solutions that are dependent on one another for coverage.

Note c: The department assessed that Snowy Mountains Highway will receive mobile coverage from the Talbingo funded solution.

Source: ANAO analysis.