The objective of the audit was to assess whether the Council Allocation component of the RLCIP has been effectively designed, implemented and administered. The audit examined each of the three funding rounds, albeit with a focus on the first round (as it was due to be completed by 30 September 2009), with the second round not due to be completed until late in the audit timetable (31 December 2010) and third round funding agreements being signed and payments being made at the time audit work was completed.



1. The Regional and Local Community Infrastructure Program (RLCIP) was an element of the various fiscal stimulus measures announced by the Australian Government in late 2008 and early 2009 in response to the onset of the global financial crisis. The RLCIP funding was made available to councils for additional ready-to-proceed community infrastructure projects and for additional stages of projects that were already underway. Funding of such projects was intended to support local jobs during the global financial crisis or during the recovery phase, and provide long-term benefits to communities by assisting councils to build and modernise local infrastructure.

2. There are two components to the RLCIP, intended to be complementary and to be delivered simultaneously for the economic stimulus to be fully effective. The two components comprised:

  • $670 million made available across two application rounds for a limited number of large strategic projects. Referred to as the Strategic Projects component, the first ($550 million) application round was examined in ANAO Audit Report No.3 2010–11;[1] and
  • $450 million made available across three rounds through a non competitive, direct allocation shared amongst all local governments, with council allocations calculated on the basis of a formula.[2] This part of the RLCIP is referred to as the Council Allocation component, and is the subject of this audit report.

3. The three funding rounds under the Council Allocation component (see Table S.1) were announced at the inaugural, second and third meetings respectively of the Australian Council of Local Governments. A total of $450 million was available across the three rounds, with some 6 000 projects approved for funding. The published program guidelines outlined six categories of community infrastructure projects on which funding could be used, with most of the approved projects put forward by councils in the areas of children, youth and seniors facilities (33 per cent) or access facilities (24 per cent).

Table S.1: Key milestones in the rounds of the Council Allocation component

Source: ANAO analysis of departmental data.

4. The Administrative Arrangements Order of 14 September 2010 created the Department of Regional Australia, Regional Development and Local Government (RA). Amongst other things, RA is to deal with the delivery of regional and rural specific services, regional development and regional Australia policy and coordination. Immediately prior to the creation of RA, the delivery of regional funding programs had been the responsibility of the former Department of Infrastructure, Transport, Regional Development and Local Government (DITRDLG, now the Department of Infrastructure and Transport). In this context, RA’s responsibilities include the ongoing administration of both components of the RLCIP. Staff of the former Local Government and Regional Development Division of DITRDLG have transferred to the new department.

Audit objective

5. The objective of the audit was to assess whether the Council Allocation component of the RLCIP has been effectively designed, implemented and administered. The audit examined each of the three funding rounds, albeit with a focus on the first round (as it was due to be completed by 30 September 2009), with the second round not due to be completed until late in the audit timetable (31 December 2010) and third round funding agreements being signed and payments being made at the time audit work was completed.

Overall conclusion

6. The first round of the Council Allocation component of the RLCIP was implemented in the context of the global financial crisis and was part of the Government’s fiscal response to the emerging crisis. The later two rounds have been described as part of the Government’s broad stimulus package[3] with their focus on supporting local jobs during the crisis as well as during the economic recovery. Together with the related Strategic Projects component, more than $1.1 billion has been made available to local government for local community infrastructure projects, with the objectives of providing economic stimulus or supporting economic recovery, creating jobs and assisting councils to address the backlog in community infrastructure work.

7. The program was appropriately designed, and endorsed by government, to distribute funds across the nation. Funding allocations were set by a formula that was similar to that used in the long running Roads to Recovery Program. The formula did not give any priority to particular geographic areas. Rather, it gave a preference to those councils in a growth area as well as those with larger numbers of residents.

8. Implementation of the program has proceeded, with more than 6 000 projects approved for funding across the three rounds of the Council Allocation component. Each council was able to identify its own project priorities, so long as the project represented additional work, was ‘ready to proceed’ and was in an eligible asset category. By the middle of March 2011, more than 71 per cent of projects had been completed, with a further 6 per cent of projects having been reported by councils as underway. The rate of project delivery has been slower than anticipated, but progress is largely in the hands of councils once projects have been approved by the department, and a funding agreement signed.

9. Consistent with the intention of providing timely economic stimulus by funding new construction work and major renovations or refurbishments, the program administrative arrangements were designed to be simple. In addition, considerable effort was exerted by the department to obtain eligible project nominations from councils by the relevant application closing dates, and to assess and approve project applications in a timely manner so that a funding agreement could be signed and funds paid as soon as possible. Further, particularly in respect to the first two rounds, the department developed effective processes for monitoring council progress with the delivery of approved projects. For the third round, councils were not asked to provide a forecast expenditure profile for the nominated projects as part of the application. This meant that, unlike the first two rounds, a baseline was not established at the time each project was nominated and approved for funding.

10. The establishment of the Council Allocation component, in the context of the emerging financial crisis and the need for a timely government response, meant that significant reliance was necessarily placed in the first round on the ability of councils to identify community infrastructure projects that could provide the desired economic stimulus, and to then deliver these projects in a timely manner. By the time the second round of funding was announced, the department had started to become aware that projects were not proceeding as quickly as councils had forecast in their funding applications, and spending by councils was well below the level envisaged. However, it was not until the latter part of 2009 that the full extent of delays in construction work (and associated stimulus spending by councils) became clear.

11. The experience of project delays and slower than expected expenditure was, in large part, repeated in the second funding round. In addition, there were considerable delays with councils being able to identify and put forward eligible project nominations for the third funding round, even after the application closing date was extended by some two months. However, the need for, the allocation approach, and the optimal timeframe in respect to, a further $100 million of economic stimulus through a third funding round was not addressed by the department in its advice to the incoming government. As many councils had not commenced construction on their Round 3 projects or had experienced delays in construction (in some cases due to recent flooding), the department deferred the first progress report in respect to Round 3 for a month (from 1 March 2011 to 1 April 2011). When received, these progress reports confirmed delays with Round 3 projects commencing construction as well as delays in funds paid to councils being spent.

12. Given the history of delays with councils delivering projects funded under the Council Allocation component, ANAO has recommended that:

  • the monitoring of approved grants be improved by the department being more consistent in requiring grant applications to include a profile of planned expenditure, and revised expenditure profiles in progress reports, to promote informed monitoring of the timeliness of performance by funding recipients in spending grant funds; and
  • that the department regularly evaluate the need for, and the optimal timeframe of, subsequent rounds having regard to any delays with the commencement and completion of projects funded in earlier rounds. For example, this will be important in the administration of the various rounds of the Regional Development Australia Fund.[4]

Key findings

Application assessment practices

13. The Council Allocation component was similar to a demand-driven grants program[5] under which applications that satisfy stated eligibility criteria receive funding, up to the limit of available appropriations and subject to revision, suspension or abolition of the program. In such programs, eligibility criteria applied are of particular importance. Accordingly, the focus of the department’s assessment activities was on being satisfied that applications were complete and complied with the published program guidelines and guidance provided to councils in a Frequently Asked Questions document.[6]

14. Councils that lodged incomplete applications or proposed to spend their allocation on work that was not eligible for funding (as defined by the published program guidelines) were asked to amend and resubmit a complete and compliant application. In the context of an economic stimulus grants program where each council was provided with an allocation rather than competing to be awarded a grant, providing councils with some further opportunity to submit complete and compliant applications was appropriate.

15. A similar methodology was employed for the receipt of applications for each round, modified to reflect the differences in the various program guidelines. In addition, starting with the second round, the department enhanced its assessment practices to explicitly examine (for a risk-based sample of projects) whether the budgets submitted by councils represented a fair and reasonable estimate of likely costs, thereby providing greater assurance that the projects nominated by councils represented value for money.
Timeliness of departmental processes

16. In order to achieve the desired economic stimulus outcomes from the program, considerable effort was exerted by the department to assess and approve project applications from councils in a timely fashion, and then develop and sign funding agreements so that payments could be made to councils. These efforts were successful in respect to the first funding round, with an average of 51 days being taken to complete the assessment process, approve projects, and develop and sign a funding agreement with each council. As a result, all funding was paid to councils between late February and late May 2009 (for applications that closed at the end of January 2009).

17. Considerably longer time (123 days on average) was taken in the second round to assess and approve projects, and develop and sign funding agreements. In part, this reflected the additional project information requested from councils in their application as the department sought to be better informed about how councils intended to use their allocated funding. As a result of the delays, the majority of funding was not paid to councils until between 30 March 2010 and 30 June 2010, between four and a half and seven and a half months after applications were due to have been received (on 20 November 2009).

18. In respect to the third round, a number of planned assessment processes were either abandoned before they had been applied to all applications or not employed. The department viewed this as necessary and appropriate (on a risk-basis) given the delays that had already occurred with receiving and assessing applications, and the target of having all project nominations approved by 30 September 2010.[7]

19. As at mid-February 2011 (when ANAO audit fieldwork was completed), 497 funding agreements for the third round had been signed, but 68 funding agreements (12 per cent) had not yet been completed and signed. In addition, notwithstanding the steps taken to truncate the assessment process, for those councils with a funding agreement signed, the time taken in Round 3 to reach this milestone has been, on average, 127 days (significantly longer than Round 1, and slightly longer than Round 2). The majority of the delay occurred in having funding agreements developed and signed with councils. As a result, as at mid-February 2011, only $50.5 million of the $100 million in Round 3 funding had been paid to councils. By mid-April 2011, $64.12 million had been paid to 557 councils in relation to 1353 projects included in executed funding agreements.

Departmental arrangements to monitor construction activity and the spending of stimulus funding

20. Consistent with the economic stimulus nature of the Council Allocation component, the program guidelines for each round provided clear deadlines of when funding was to have been expended on approved projects (see Table 1 on page 3 above). In addition, for the first two funding rounds, the program governance arrangements indicated that the department was interested in tracking expenditure by obtaining from councils with their application a forecast spending profile for each project and then requiring regular progress reports on actual expenditure (together with an updated forecast) as well as a final acquittal report at the completion of the project. By way of comparison, Round 3 applications were not required to include a forecast expenditure profile, and the progress report requirements were not finalised until March 2011.

21. The progress reporting arrangements for the first two rounds have provided useful information for the department to monitor the performance of councils in using the funding as an economic stimulus measure. In particular, whilst a key parameter in the design of the RLCIP related to funding ready to proceed (‘shovel ready’) projects, there have been significant delays in projects commencing compared with council forecasts provided as part of their applications for funding. Some of the delays with projects commencing have been recaptured through work being completed more quickly but, overall, construction activity funded through the Council Allocation component has taken place later than was forecast by councils in their application for funding (see Figure S.1).

Figure S.1: Round 1 and Round 2 projects construction activity by month

Source: ANAO analysis of RA data.

Council expenditure of program funds

22. As outlined in ANAO’s audits of other economic stimulus programs involving the funding of infrastructure construction projects,[8] the typical situation found in respect to construction projects is that expenditure follows an S-curve, usually with a slow start but reaching a peak by the 50 per cent to 75 per cent complete construction milestones before flattening out towards the end of the project. This situation was reflected in the Council Allocation component, where the delays in construction activity occurring have led to a significant consequential lag in the funds paid to councils being spent. In particular, and as illustrated by Figure S.2:

  • the $250 million in Round 1 funding was required to have been spent by 30 September 2009 but, by this date, nearly one quarter of the funds paid to councils remained unspent. It took a further nine months (to June 2010) for the expenditure of program funding to reach $250 million and, of this amount, $7.8 million related to expenditure on Round 2 projects due to continuing delays with a small number of Round 1 projects;
  • the $100 million in Round 2 funding was required to have been spent by 31 December 2010 but for a significant number of projects, this milestone was not met; and
  • as at mid-April 2011, more than 26 per cent of Round 3 projects had been reported as having not yet started, with less than $14 million of the Round 3 $100 million allocation having been reported as spent.

Figure S.2: Delivery of economic stimulus: Rounds 1, 2 and 3

Source: ANAO analysis of RA data. Note: The chart includes Round 3 forecast expenditure from progress reports (for the full project amount as reported) but at the time of reporting there was no forecast payment data for outstanding payments to councils (amounting to some $35.9 million). Accordingly, the chart only includes the amounts paid to councils to date.

23. Similar to the Roads to Recovery Program on which the program’s design was based, the Council Allocation component gave councils considerable autonomy in the selection and delivery of works. Also, given the urgency attached to the first funding round, the department necessarily placed considerable reliance on the accuracy of council timelines and expenditure forecasts included in the approved applications. However, the department could reasonably have been expected to have applied considerably greater scrutiny to the practical achievability of project timeframes and expenditure forecasts put forward by councils in the second and third rounds of this economic stimulus program given:

  • the nature of the projects being nominated for funding;
  • typical construction economics; and
  • the experience of the significant body of projects the department was already managing in respect to each council through Round 1 as well as other programs.

24. In these circumstances, and as outlined in ANAO’s Administration of Grants Better Practice Guide,[9] there would have been benefit in the department examining whether:

  • the funds allocated to councils that had not submitted applications for eligible projects by the closing date should be considered for return to the Budget as a savings measure, or redistributed to other councils;
  • the allocation approach required adjustment from the existing approach of giving preference to councils with larger populations and those councils classified as being in a ‘growth’ area; and
  • expanding the types of projects eligible for funding would have assisted councils to identify ready to proceed projects that could be nominated for funding.

Summary of agency response

25. A copy of the proposed report was provided to RA and the Department of Infrastructure and Transport. The Department of Infrastructure and Transport did not have any comments. Summary comments made by RA on the proposed report are reproduced below, with the full response included in Appendix 1:

The department notes the acknowledgment by the ANAO that the program was appropriately designed, and endorsed by government, to distribute funds across the nation. The department acknowledges further refinements to the monitoring processes and subsequent advice to the Minister will improve our current grants administration practice.


[1] ANAO Audit Report No.3 2010–11, The Establishment, Implementation and Administration of the Strategic Projects Component of the Regional and Local Community Infrastructure Program, Canberra, 27 July 2010.

[2] Each council was to receive a minimum payment ($100 000 for the first round, and $30 000 for each of Round 2 and Round 3) with the balance distributed on the basis of a methodology that used data collected by State and Territory local government grants commissions. The formula gave preference to those councils classified as in a ‘growth’ area as well as those councils with more than 5 000 residents.

[3] The Hon. Simon Crean MP, Minister for Regional Australia, Regional Development and Local Government, $100 million boost for community infrastructure, Media Release, 7 December 2010.

[4] A total of more than $1 billion is to be available under the Fund over five years, commencing in 2011–12. Applications for the first $100 million round close in May 2011, and the second round is expected to take place in late 2011. In relation to the timely commencement and completion of projects, the recently released guidelines for the Fund outline that:

  • applications will be assessed, in part, on the demonstrated capacity of the proponent to deliver the project on time, within budget and according to the agreed outcomes; and
  • funding should only be requested for projects that are ‘investment ready’ which is defined as being ready to proceed, including to commence construction within six months of signing the funding agreement, with all planning, rezoning, environmental and/or native title approvals in place.

[5] ANAO Better Practice Guide, Implementing Better Practice Grants Administration, Canberra, June 2010, p. 44.

[6] As the Council Allocation component did not involve competitive funding rounds, the department did not need to prioritise (or rank) competing, eligible applications in terms of the available funding.

[7] This target date was subsequently changed to having assessments completed by 31 October 2010.

[8] ANAO Audit Report No.3 2010–11, The Establishment, Implementation and Administration of the Strategic Projects Component of the Regional and Local Community Infrastructure Program, Canberra, 27 July 2010, pp. 221 to 222 and ANAO Audit Report No.33, 2009–10, Building the Education Revolution—Primary Schools for the 21st Century, Canberra, 5 May 2010, p. 157.

[9]  ANAO Better Practice Guide, Implementing Better Practice Grants Administration, Canberra, June 2010, p. 64.