The objective of this audit was to assess the extent to which the disaster recovery work plans for Queensland and Victoria were prepared, and appropriate monitoring reports provided, in accordance with the relevant National Partnership Agreement (NPA).

Summary

Introduction

1. The eastern states were subject to widespread flooding during the 2010–11 Australian spring and summer seasons, and Queensland was also impacted by a number of tropical cyclones. In this context, on 27 January 2011, the Prime Minister announced that preliminary estimates indicated that the Australian Government would need to contribute $5.6 billion to the rebuilding of flood-affected regions. Funding was to be provided under the existing Natural Disaster Relief and Recovery Arrangements (NDRRA). The majority of expenditure was expected to be on rebuilding essential infrastructure.

2. On 7 February 2011, the Prime Minister announced new oversight and accountability measures to ensure value for money would be obtained in the rebuilding of flood-affected regions. In particular:

  • to ensure the Commonwealth’s interests are protected and there is effective coordination across levels of government, two Australian Government representatives are on the board of the Queensland Reconstruction Authority (QRA)1;
  • the Australian Government Reconstruction Inspectorate was being established with the objective of providing assurance that value for money was received in the recovery effort. The Inspectorate is to perform its functions by:
    • working collaboratively with any reconstruction agency on the development of contractual frameworks, tendering processes and project management systems used;
    • where necessary, undertaking scrutiny of requests for reimbursement by local government for completed reconstruction projects;
    • undertaking scrutiny of contracts and benchmark prices, to ensure value for money;
    • undertaking scrutiny prior to execution for complex or high value contracts;
    • monitoring achievement against agreed milestones; and
    • responding to and investigating complaints or issues raised by the public; and
  • a dedicated taskforce (the National Disaster Recovery Taskforce, located within the Department of Regional Australia, Local Government, Arts and Sport (Regional Australia)) would be established to provide support for reconstruction work.2

3. These measures are in addition to the existing oversight, acquittal and audit requirements of NDRRA and do not alter States’ obligations under those arrangements. They are also in addition to the establishment of a Secretaries’ Steering Committee and the National Disaster Recovery Cabinet Sub-Committee, the appointment of the Minister Assisting on Queensland Floods Recovery and, for Victoria, the Minister for Regional Australia, Regional Development and Local Government was given an oversight role in respect of recovery. Further, Queensland established the Queensland Reconstruction Authority. In Victoria, the state established the Secretaries’ Flood Recovery Group and the Senior Officials’ Coordination Group (with one Commonwealth member on the latter).

4. To give effect to the additional oversight and accountability arrangements3, separate National Partnership Agreements (NPAs)4 were signed with the Queensland and Victorian state governments in February and May 2011 respectively. Among other matters5, the NPAs required that a recovery work plan be developed by each state, outlining a set of projects to assist with reconstruction and/or recovery. Each work plan was to be agreed between the relevant state and the Australian Government. The NPAs also included reporting obligations in respect to the work plans, with these reports to include:

  • progress against the relevant work plan and in meeting specified project milestones and outcomes;
  • progress with expenditure under NDRRA, including advice on the level of expenditure in key areas of the reconstruction effort;
  • revisions to estimates of costs; and
  • progress against community recovery plans, including the extent to which milestones are being achieved.

5. The Taskforce was the lead Australian Government agency in terms of developing the work plans with Queensland and Victoria. The Taskforce is also responsible for:

  • providing secretariat support to the Inspectorate;
  • reporting to relevant Ministers and providing the National Disaster Recovery Cabinet Sub-Committee with monthly progress reports on state plans for recovery, including updated estimates of the Commonwealth’s liability under NDRRA;
  • assessing spending on recovery and reconstruction efforts arising from the flooding and cyclone events so as to ensure consistency with NDRRA;
  • assessing requests for Commonwealth funding assistance outside of those automatically triggered by a NDRRA declaration; and
  • ensuring that a strategic approach is taken to reconstruction and recovery efforts.

6. The Taskforce and the relevant state body completed reviews of the Queensland and Victorian NPAs in 2012. The reviews found that the new arrangements were largely effective at coordinating and overseeing reconstruction activity and did not recommend any changes to either NPA. Nevertheless, the review of the Victorian NPA noted some areas relating to Commonwealth-state collaboration in emergency recovery that would benefit from further consideration between the Australian Government and the states for future events.6 A second review of each NPA is scheduled for 2013, once further progress has been made on the reconstruction program.

Audit objective, scope and criteria

7. The ANAO is undertaking three audits of key aspects of the NPAs signed with Queensland and Victoria in relation to natural disasters over the 2010–11 Australian spring and summer seasons.

8. The objective of this audit was to assess the extent to which the disaster recovery work plans for Queensland and Victoria were prepared, and appropriate monitoring reports provided, in accordance with the relevant NPA.

9. The audit criteria were based on the NPAs, which: outlined the three priority areas each work plan was to target; and required that they build on the planning work undertaken by Regional Development Australia committees and local governments. The NPAs also required that the work plans identify a set of specific reconstruction projects, and that each state provide monthly reports against the relevant work plan, including in respect to progress in meeting the project milestones and outcomes specified in the work plan for their state.

10. Separate but related ANAO performance audits are also underway, with the objective of assessing the effectiveness of the Inspectorate, supported by the Taskforce, in providing assurance that value for money is being achieved in recovery and reconstruction expenditure in Victoria and Queensland. The report of the first audit, relating to value for money oversight in respect to Victorian reconstruction projects, is being tabled in conjunction with this report. The report of the third audit, examining the Inspectorate’s value for money oversight activities in respect to Queensland reconstruction projects, is expected to be tabled in the 2013 Budget sittings.

Overall conclusion

11. Given their wide geographic impact and the high level of damage to public assets, the natural disasters in Queensland and Victoria over the 2010–11 summer presented significant challenges to the Australian, state and local governments to restore infrastructure and services and provide support to affected communities. In the context of the significant Australian Government contribution to the cost of recovery and reconstruction under NDRRA, new accountability and oversight measures were announced by the Prime Minister. These measures were given effect through separate NPAs signed with Queensland and Victoria. Among the new measures was a requirement for a flood recovery work plan for each state that listed the specific recovery and reconstruction projects that were being undertaken.

12. The Taskforce is overseeing reconstruction in Queensland and Victoria worth more than $7 billion in relation to the natural disasters in Queensland and Victoria over the 2010–11 summer, of which the Commonwealth is contributing up to 75 per cent. Recovery and reconstruction in both states has been reported as well underway, with significant project expenditure set out in the reports provided by each state.

13. A work plan has been agreed with each state. The Queensland plan was finalised in August 2011 and the Victorian plan in December 2011. Commencement of the Victorian plan was delayed because of the additional time taken to negotiate the NPA with that state.

14. The key role of each work plan was to identify the reconstruction and recovery projects towards which NDRRA funding was contributing. The contents of the two plans differ significantly, but neither meets the requirement of the NPA that it identify a set of specific reconstruction projects. Accordingly, neither work plan has provided the additional oversight and accountability that had been envisaged.

15. At the suggestion of the Taskforce, the one-page Queensland work plan does not identify any specific reconstruction projects.7 The Taskforce also suggested that reliance could be placed on the already developed state plan. However, the state plan titled Operation Queenslander: The State Community Economic and Environmental Recovery and Reconstruction Plan 2011–2013 does not identify specific reconstruction and recovery projects (as this was not its purpose). Rather, it is a strategic, high-level framework that aligns recovery efforts into six ‘lines of reconstruction’.

16. It would have been difficult to complete a list of reconstruction projects during the early stages of reconstruction. The approach proposed by the Taskforce was that it would be sufficient for ‘high level descriptions of work’ to be provided initially in the work plan with ‘further details added progressively’.8 However, the work plan for Queensland has not been updated as project details have become available. Some project level information is provided by Queensland to the Taskforce both for the purpose of the Inspectorate selecting projects for value for money reviews, and in monthly reporting prepared for the QRA board. However, this data has not been updated into the work plan (as the Taskforce had originally proposed to do) and the project level data has remained dispersed rather than being collated to include all metrics referred to in the NPA. As a result, neither source of data provides the full range of project information referred to in the NPA, for both state and council-delivered projects. Accordingly, through this data it is difficult to measure the progress of the projects making up the reconstruction program against the work plan and in meeting project milestones and outcomes (as required by the NPA).

17. The Victorian work plan is more substantial than the Queensland plan. It identifies 41 reconstruction initiatives costed at $1.02 billion. However, in many instances, the work plan simply identifies broad categories of work rather than specific reconstruction projects9, and therefore is also not fully consistent with the relevant NPA. In November 2012, Victoria advised the ANAO that: it agreed that the work plan did not provide specific detail as to which roads or sections of the regional rail network required work; these details are held by LGAs and/or relevant state departments; but the Taskforce did not seek this information from Victoria.

18. In this context, in November 2012, Regional Australia advised the ANAO that ‘as the new oversight and governance arrangements were implemented, it became clear that the specific requirements of the NPAs did not necessarily reflect the practicalities of rolling out the reconstruction programs’. However, this issue was not raised in the reviews of each NPA undertaken in 2012.10 Regional Australia also has not provided advice to Ministers on this matter, and there have been no recommendations put forward by the department that the NPAs be amended in respect to the requirement for a work plan to identify specific reconstruction projects.

19. The Taskforce’s development and administration of reporting arrangements has also not been to a sufficiently high standard. There was early recognition that Australian Government oversight of the recovery and reconstruction efforts in Queensland and Victoria was reliant on timely and high quality data. However, the Taskforce relied on the data it received from the states even where this data did not provide the information required by the NPAs. Of note was that, since the project level information contained in the work plans was limited, monthly reporting has not provided for adequate oversight of whether project milestones and outcomes are being met (a key matter that each NPA required to be addressed by the monthly reports). There is also limited evidence of the Taskforce analysing the information that has been reported by the states or raising questions about: omitted data (in relation to agreed reporting metrics); overly-aggregated data that provided limited transparency of actual reconstruction progress in relation to the events covered by the NPAs; and the consistency of the data that was provided over time.

20. The development of the work plans occurred at the same time that the Taskforce was developing its approach for undertaking value for money reviews of individual reconstruction projects. Conducting these reviews is the primary component of the approach adopted by the Inspectorate and the Taskforce to provide assurance that value for money is being achieved in recovery and reconstruction expenditure in those two states. In this context, the work of the Taskforce was more focused on supporting the Inspectorate in the development and implementation of a framework to conduct value for money reviews of Queensland reconstruction projects. As noted at paragraph 10, the ANAO is undertaking separate but related audits of the conduct of the value for money assurance activities in Queensland and Victoria.

21. The ANAO has made two recommendations in respect to the preparation and delivery of the recovery work plans for Queensland and Victoria, which were components of new accountability and oversight measures announced by the Prime Minister and agreed to by the respective state governments. The first recommendation is focused on obtaining the project level information on the respective reconstruction programs that was required by the respective NPAs to be included in each work plan. The second recommendation relates to improving data collection, analysis and reporting arrangements of reconstruction progress. This audit also provides a useful reminder to Commonwealth officials that measures agreed to by governments are expected to be implemented unless, in light of new information or circumstances, Ministers decide otherwise.

Key findings by Chapter

The Work Plans (Chapter 2)

22. The Queensland work plan was developed through five drafts over a period of five months, between February and June 2011. The plan was forwarded to the office of the Australian Government Minister Assisting the Attorney-General on Queensland Floods Recovery for agreement in early July 2011. The Minister was advised that the purpose of the work plan was to identify specific projects to assist with reconstruction and/or recovery but he was not provided with any advice as to whether the work plan met the requirements of the NPA. The Minister approved the work plan on 26 August 2011.

23. The Queensland work plan is a one-page document, with an additional one-page spreadsheet attachment that outlines the format of the monthly progress reports to be submitted by the state. The key role of the work plan was to identify the reconstruction and recovery projects towards which NDRRA funding was contributing. However, in developing the work plan, the Taskforce suggested to QRA that, rather than identifying specific projects, it would be sufficient for ‘high level descriptions of work’ to be provided initially with ‘further details added progressively as matters develop’. The Taskforce further proposed that, rather than developing a work plan specific to the Commonwealth’s needs, reliance be placed on public documentation already developed by the state (although the state planning document does not identify specific projects, as that was not its purpose). The result is that the work plan does not identify a list of specific projects.

24. Rather than progressively updating the work plan as it had originally proposed, the Taskforce has obtained some information on reconstruction projects through other means, but this information has not fully satisfied the requirements of the NPA. In particular, some data on approved projects is provided to the Taskforce to inform its sampling of Queensland reconstruction projects for the Inspectorate’s value for money reviews. In addition, since mid-2011, some information on projects being delivered by LGAs has also been reported each month to the QRA board (the Taskforce receives these reports).

25. Development of the Victorian work plan commenced later than that of Queensland, due to the additional time taken to negotiate the Victorian NPA. Drafts were exchanged between Victorian representatives and the Taskforce over the period June to September 2011 before the Victorian flood recovery work plan was agreed to by the Australian Government Minister for Regional Australia, Regional Development and Local Government on 16 December 2011.

26. The finalised Victorian flood recovery work plan is a more substantial document than that developed for Queensland. The work plan includes an appendix that listed 41 proposed reconstruction and recovery ‘initiatives’ for which the Victorian Government requested Commonwealth funding. The work plan costed these initiatives at some $1.02 billion, comprising $827.2 million in gross expenditure, $122.5 million in insurance offsets and $69.1 million in internal reprioritisation of funding by the state. However, in many instances, the ‘initiatives’ listed in the work plan do not identify specific reconstruction and recovery projects but relate to general categories of work.

27. In addition to the key requirement to list specific projects, the Victorian NPA also required that the Victorian work plan outline project plans and strategies for projects over $5 million. In total, 21 of the 41 initiatives listed in the appendix to the work plan were costed at greater than $5 million (recognising that an ‘initiative’ may comprise a number of projects). However, for none of these initiatives did the work plan outline the project plans and strategies that the state proposed to adopt, meaning the NPA requirement was not met. This impacted on the Inspectorate’s ability to be satisfied that the proposed plans and strategies were likely to deliver value for money.11

Reporting on Work Plan Delivery (Chapter 3)

28. The Taskforce’s terms of reference required it to provide the National Disaster Recovery Committee of Cabinet with monthly progress reports on progress with recovery and reconstruction, as well as updated estimates of the Australian Government’s liability under NDRRA.12 In this context, each NPA required that the two states provide the Taskforce with regular reports on progress against the work plan for their state, expenditure under NDRRA and revisions to cost estimates.

29. Reporting from Queensland commenced with a report for March 2011. In respect to Victoria, the first monthly report received related to July 2011, but also included comparative data for June 2011.

30. The Taskforce does not obtain reports from Queensland that meet the requirements of the NPA. Rather, the Taskforce has relied on monthly reports prepared by QRA for the state’s purposes. More recent reports have included data relating to natural disasters that occurred both before and after the timeframe covered by the NPA but this was also not addressed by the Taskforce. Over the first few months of 2012–13, QRA has been progressively separating the disaster events in its reporting but up to the date this ANAO report was prepared this was only for selective metrics or at a high level.

31. A key matter that each NPA required to be addressed by the monthly reports from each state was whether project milestones and outcomes are being met. While not containing information on project milestones, monthly reports from Queensland have included some data on projects being delivered by LGAs. However, the more recent reports have not included information on the value of each such project. Similar data has not been reported for those projects being delivered by state agencies. In addition, QRA reporting of the value of projects completed includes works in progress. There is limited evidence of the Taskforce analysing the information that has been reported to it by Queensland. Such analysis could usefully have focused on trends, and would beneficially have also drawn attention to the lack of project-specific reporting in respect to state delivery agencies and lack of clarity surrounding progress towards actual completion of the state reconstruction program.

32. Victoria has also consistently provided monthly reports to the Taskforce. These reports were broadly consistent with the terms of the NPA. They included progress made with the initiatives contained in the work plan, together with updated expenditure reports. However, as noted at paragraph 26, a high proportion of the ‘initiatives’ listed in the work plan do not identify specific reconstruction and recovery projects. In addition, similar to the situation with the reports from Queensland, there is no evidence that this data was analysed by the Taskforce in a systematic way. The reports also did not include progress against the recovery plans of the communities in Victoria that had been identified as being the most severely flood-affected (as required by the NPA to be included in the work plan and monthly reports).

33. Transparency and accountability was also less than originally envisaged, because of the inclusion by Victoria of recovery and reconstruction activities originating from events that either pre-dated or post-dated the disaster events specified in the NPA. Ideally, these activities should have been separated. Although Queensland has commenced this process, at the time of preparation of this audit report, there had been no similar move in this direction in relation to the Victorian flood progress reporting. In late-January 2013, Regional Australia advised the ANAO that it agrees that the work plan could be amended to exclude initiatives not related to the early 2011 flooding and that discussions with Victorian officials in relation to this have taken place. However, the department did not advise of the outcome of those discussions in relation to the work plan, nor whether the events covered by the NPA would be separately disclosed in future in the Victorian flood progress reports.

Agency responses

34. The proposed audit report was provided to Regional Australia, the Chair of the Inspectorate, the Attorney-General’s Department, the Department of Finance and Deregulation, the Department of the Prime Minister and Cabinet, the Department of the Treasury, the Victorian Senior Officials Coordination Group and the Queensland Reconstruction Authority. Regional Australia, the Victorian Senior Officials Coordination Group and the Queensland Reconstruction Authority provided formal comments on the proposed report. These are included at Appendix 1. PM&C also provided a departmental response on the recommendations.

Recommendations

Set out below are the ANAO’s recommendations and the responding agencies’ abbreviated responses. More detailed responses are shown in the body of the report immediately after each recommendation.

Recommendation No.1
Paragraph 2.64

The ANAO recommends that the Department of Regional Australia, Local Government, Arts and Sport, in preparation for the forthcoming reviews of the National Partnership Agreements, identify the most effective means of obtaining the project level information on the respective reconstruction programs required by the Agreements to be reported on and, if appropriate, seek amendments to the Agreements.

Regional Australia’s response: Agreed.

PM&C’s response: Noted.

Recommendation No.2

Paragraph 3.86

The ANAO recommends that the Department of Regional Australia, Local Government, Arts and Sport improve its monitoring of the delivery of the Natural Disaster Recovery Work Plans for Queensland and Victoria by:

(a)  seeking from each state the project level data that is required to report to Ministers on reconstruction progress in the manner required by each National Partnership Agreement (or as may otherwise be agreed); and

(b)   undertaking analysis of relevant data that has been reported by each state over time to identify significant trends and other matters of importance, and updating this analysis as and when further data is reported.

Regional Australia’s response:  Agreed.

PM&C’s response: Noted.

Footnotes

[1]     QRA was established by the Queensland Government to provide, manage and coordinate a range of recovery and reconstruction programs on behalf of the state. This includes a range of state and Commonwealth funding and assistance programs, including NDRRA.

[2]     Initially, the Taskforce was funded to operate until the end of 2012. The May 2012 Budget included additional funding to extend the operation of the Taskforce by one year. This was in response to the increased time granted to the Queensland Government for the completion of reconstruction projects.

[3]     The existing NDRRA arrangements continue to apply to expenditure covered by the NPAs. These arrangements include states providing audited financial statements to acquit expenditure, including expenditure of advance payments.

[4]     The NPA with Queensland relates to the reconstruction of communities that were affected by the
2010–11 floods and Tropical Cyclone Yasi. The NPA with Victoria relates to the early 2011 flooding in Victoria. NDRRA continues to apply to those natural disasters covered by the NPAs, with payments to the states controlled by Emergency Management Australia (EMA) within the Attorney-General’s Department (which administers NDRRA).

[5]     For example, the NPAs also included provisions relating to the Australian and state Auditors-General undertaking complementary performance audit work in respect to the NDRRA funding governed by each NPA.

[6]     See further at paragraph 2.19.

[7]     See further at paragraph 2.21.

[8]     Similarly, the 2012 review of the Queensland NPA observed that a work plan ‘may need to be a living document where further detail, such as project level information, is added as it becomes available so as to meet the project monitoring and reporting requirements of the NPA and ensure value for money’.

[9]     For example, one initiative is $121.5 million for repair of flood damage to arterial roads, with the arterial roads involved not identified or even the number of roads requiring repairs.

[10]     In 2012, the Taskforce and the relevant state body undertook reviews of the Queensland and Victorian NPAs. The reviews found that the new arrangements were largely effective at coordinating and overseeing reconstruction activity and did not recommend any changes to either NPA. Nevertheless, the review of the Victorian NPA noted some areas relating to Commonwealth-state collaboration in emergency recovery that would benefit from further consideration between the Australian Government and the states for future events (see further at paragraph 2.19).

[11]     The Inspectorate’s terms of reference included reviewing contractual frameworks, tendering processes and project management systems.

[12]     See further at paragraph 3.1.