The Auditor-General responded on 29 March 2019 to correspondence from Ms Cathy McGowan AO MP dated 5 March 2019, requesting that the Auditor-General investigate the conduct of a range of parties in relation to the announcement of grants under Round 3, Building Better Regions Fund. 

Auditor-General's response

29 March 2019

Ms Cathy McGowan AO MP
Federal Member for Indi
By email:

Dear Ms McGowan

I am writing in response to your letter dated 5 March 2019 requesting an audit of the circumstances surrounding the announcement of grants awarded under Round Three of the Building Better Regions Fund (BBRF).

I will consider including an audit on this topic in the context of developing the Australian National Audit Office’s (ANAO’s) Annual Audit Work Program (work program).

The work program is designed to inform the Parliament, the public and government entities of planned audit coverage to commence in 2019–20 and will be published on the ANAO website in early July 2019.

As you would be aware, the Commonwealth Grant Rules and Guidelines (CGRGs) establish the overarching Commonwealth grants policy framework and articulate the expectations for all non-corporate Commonwealth entities in relation to grants administration. Under this overarching framework, non-corporate Commonwealth entities undertake grants administration based on the mandatory requirements and key principles of grants administration in the CGRGs. The CGRGs apply to the BBRF program.

The CGRGs also contain a small number of requirements that apply to Ministers. These include grants related decision-making and reporting requirements, in addition to the legislative requirements that apply where a Minister approves proposed expenditure. In particular, the CGRGs require that a Minister:

  • obtain written advice on the merits of proposed grants before making funding decisions (including an assessment of each proposed grant against the eligibility requirements and assessment criteria set out in the relevant program guidelines);
  • not approve grant expenditure unless satisfied, after reasonable inquiries, that the expenditure is a proper use of money;
  • record the basis of the approval as well as the terms of the approval as soon as practicable after the approval is given;
  • inform the Finance Minister of any grants approved within his/her own electorate; and
  • report annually to the Finance Minister on all instances where they have decided to approve a particular grant which the relevant officials have recommended be rejected.

Since the grants policy framework was first introduced in 2007, the ANAO has drawn upon it when developing criteria for performance audits of individual programs. In the event that I decide to undertake an audit of the BBRF, our scoping work will take into account your request that the role of relevant Ministers be examined in terms of the requirements of the CGRGs consistent with longstanding ANAO practice.

Yours sincerely

Grant Hehir

Correspondence from Ms Cathy McGowan AO MP

Ms Cathy McGowan AO, MP correspondence page 1

Ms Cathy McGowan AO, MP correspondence page 2

Transcript of letter from Ms Cathy McGowan AO MP

Mr Grant Hehir
Australian National Audit Office
GPO Box 707

By email only:

Dear Mr Hehir

Re: Announcement of grants under Round 3, Building Better Regions Fund

I refer to Regional Services Minister, Senator Bridget McKenzie's series of announcements in my electorate of lndi on Monday 4 March 2019. In her press release, Senator McKenzie says she was in the region at the invitation of Mr Mark Byatt, the unelected Nationals candidate for lndi, to announce more than $3.4 million worth of Commonwealth grants from the Building Better Regions Fund. Joining them was the unelected Liberal candidate for lndi, Mr Steve Martin.

I am concerned about the process that led to the making of these announcements, as well as what appears to be the politicisation of taxpayer-funded grants and the impact on my communities.

In terms of process, I understand local applicants to the Building Better Regions Fund received no formal notification from the Department of Infrastructure, Regional Development and Cities or the Department of Industry, Innovation and Science about whether their grant applications had been successful. Instead, a number of the successful applicants were contacted informally by Senator McKenzie's office for the purpose of arranging media events on Monday. Those contacted were also advised they should not discuss Monday's announcements with me — their elected representative — or other third parties.

Despite placing an embargo on the announcement of grant recipients, I understand some media organisations were given advanced notice of Monday's announcements. This meant grant applicants were contacted by journalists and in some cases, this was the first time they had heard about their successful grant applications.

The absence of a formal notification process resulted in significant confusion and distress for local grant applicants. My staff have been working with many of the applicants under the Building Better Regions Fund to support their applications with the appropriate correspondence. Please see the attached copies of my correspondence with constituents. I was contacted by a number of constituents asking whether their applications had been successful because they had heard announcements were going to be made on Monday. Despite being their elected representative, I was unable to provide them with any information because neither the Minister for Regional Services nor the Department had been in touch with me or my office. Nor did I receive an invitation to attend Monday's announcements. Despite repeated requests to the Department and the Minister's office, I am yet to receive formal notification of the grant recipients.

Subsequently, what should have been a celebration for my community became a confused and divided process and more of an embarrassment to them. The community is concerned by what they see as the deliberate exclusion of their democratically elected member, forcing them to make a very difficult decision in terms of their loyalty.

In addition to having concerns about the process, I am concerned that taxpayer-funded grants are being used for party political purposes by the Federal Government. The attached photograph published on social media by Senator McKenzie, shows Monday's announcements were used to promote the campaign of Mark Byatt, the unelected Nationals candidate for lndi.

The $3.4 million worth of Commonwealth grants for lndi are not gifts from Senator McKenzie, Mark Byatt or the Liberal and National Parties. These are grants made by the Australian Government under the taxpayer-funded Building Better Regions Fund. By arranging for the unelected Nationals candidate to "announce" these grants alongside Senator McKenzie before I was informed about them, Senator McKenzie and the Government appear to have used taxpayer dollars for their own political purposes.

There is a perceived conflict of interest with Mr Byatt previously employed as the manager of economic development for Regional Development Victoria and his prominent place at Monday's announcement. Senator McKenzie says he had been "working hard to ensure lndi was well represented in this round of funding". See attached media release from Senator McKenzie.

Can you please investigate the conduct of the National Party, Mr Byatt, the Government Ministers, including Senator McKenzie, and the relevant Departments in relation to this matter? It is my understanding that departmental practices are designed so this does not happen. What should we be expecting in terms of a best practice model that ensures the correct and transparent process is followed? The best practice should be to advise the local MP, the successful and unsuccessful grant applicants, local government, and then the media ahead of any announcement.

I have copied this letter to the Secretary of the Department of Infrastructure Regional Development and Cities, Dr Steven Kennedy and the Secretary of the Department of Industry, Innovation and Science, Dr Heather Smith. I will also write to the Australian Electoral Commissioner, Mr Tom Rogers.

Yours sincerely

Cathy McGowan AO MP
Independent Federal Member for lndi

5 March 2019

Ref: CM80641/DT

Encl. Correspondence to lndi constituents re BBRF Round 3 applications; social media post Sen Bridget McKenzie 4 March 2019; media release Sen Bridget McKenzie 4 March 2019

cc Dr Steven Kennedy, Dr Heather Smith