‘Waste of taxpayer money’: How the Commonwealth Games was won – and lost

Victorian bureaucrats gave the state government the green light to host the Commonwealth Games despite significant and unresolved concerns and a business case that overstated the benefits and understated the costs, the auditor-general has found in scathing report into the handling of the scrapped event.

Premier Jacinta Allan – who was minister for the Games’ delivery before it was axed – said on Wednesday that she would meet the state’s top bureaucrat to discuss the findings.

Then-premier Daniel Andrews cancelled the Commonwealth Games last June, citing overblown costs of hosting the event.Credit: Joe Armao

She said the process had been far from ideal and that the government’s initial Games cost estimates were “clearly incorrect”.

The Victorian Auditor-General’s Office also put the cost of withdrawing from the Games at more than $589 million. This includes a previously announced $380 million settlement with Games organisers plus the costs of staff, design work and redundancies.

“This waste would have been avoided if agencies had worked together better to give frank and full advice to the government before it decided to host the Games,” the office wrote in a report tabled in Parliament on Wednesday

“This waste of taxpayer money on an event that will not happen is significant, especially considering the state’s recent sustained operating deficits and rising debt levels.”

The investigation heard officials were also hindered in part because Allan wanted to personally approve the sharing of budget updates across departments.

Even the blowouts then-premier Daniel Andrews used to justify the decision to cancel the Games in July last year – claiming it could cost $6.9 billion rather than the original budget of $2.6 billion – were found to be “overstated and not transparent”.

The true cost was $5.9 billion, according to the report.

The auditor-general found the 2022 business case relied upon to commit to the Games had overstated the benefits and understated the cost of hosting.

Unusually short deadlines and confidentiality had restricted consultation, but the report said that approach was unreasonable given a regional, multi-city event had never been done before.

“[The Department of Jobs, Skills, Industry and Regions] business case did not make a convincing argument that the benefits of hosting the Games outweighed the costs and risks,” the report said.

The jobs department (DJSIR), the Department of Premier and Cabinet (DPC) and the Department of Treasury and Finance (DTF) “knew this but did not advise government to delay a decision on hosting until a fit-for-purpose business case could be provided,” it said.

DJSIR in March 2022 recommended the government go ahead with the Games using the upper limit of the estimated cost – $3.2 billion.

The auditor-general said that advice conflicted with the department’s own business case because that level of investment would have only provided a 70¢ return for each $1 spent, “which should have led it to recommending the government not proceed with hosting the Games”.

The government announced Victoria would host the regional 2026 Games at the best-case cost of $2.6 billion, “in full knowledge of its limitations and that all the risks pointed to higher costs and lower revenue”, the report said.

A fifth of those benefits were also based on “avoided health costs due to increased physical activity” and “civic pride”. The jobs department included them in the cost-benefit ratio against Treasury’s advice they were speculative and overstated. If they had been removed from calculations, the best-case scenario in the 2022 business case would have resulted in a loss-making event.

While Treasury and the Department of Premier and Cabinet consistently raised concerns with the business case and budget during 2022 and early 2023, they did not question the feasibility of the event until June last year, the auditor-general said.

Treasury suggested the cost of hosting the event was likely to exceed the quantifiable benefits, but still supported recommendations that the government proceed and that Treasurer Tim Pallas approve the contract.

The business case also should have included a range of delivery options, the report said, including options to host events in Melbourne or just one regional city. The department auditors said this was not included because “the government provided a clear direction that it was only interested in a regional Games”.

The government has always maintained the value of the Games was to spread the benefits in the regions.

When Treasury and the Department of Premier and Cabinet repeatedly complained that the jobs department did not always give them enough time or detail to provide comprehensive advice about the risks and costs, they were told that was Allan’s decision.

“These departments raised their concerns with DJSIR. DJSIR’s responses indicated that its approach reflected the Minister for Commonwealth Games Delivery’s [Allan’s] wishes,” the report said.

Treasury also complained directly to Pallas’ private office that the need for clearance from Allan and Games Office chief executive Allen Garner made “departmental level influencing very difficult”.

In a published reply to the report, Department of Jobs, Skills, Industry and Regions secretary Tim Ada acknowledged engagement could have been more effective at times.

But he said: “The department believes engagement and information sharing was better overall than characterised in the report, noting that all departments were working to compressed timelines.”

Ada said the department worked diligently to complete the business case under significant time and confidentiality constraints, and had noted limitations and risks. He maintained it was developed using an established methodology.

In a joint response, Department of Premier and Cabinet secretary Jeremi Moule and Treasury secretary Chris Barrett said they always provided frank and fearless advice.

“We disagree with the suggestion that DPC and DTF failed to provide frank and fearless advice to government on the decision to host the games and to sign the host contract,” the response said.

Moule and Barrett also rejected that the updated price tag of $6.9 billion was overstated, arguing the figure was the upper limit of the possible cost of proceeding.

Allan on Wednesday said the report validated the decision to axe the event.

“We, looking back, acknowledge that the process was far from ideal. The [initial] estimates were clearly incorrect,” she said.

Asked if anyone would face consequences from the saga, Allan said many of those involved had since left the government.

“We are now 2½, nearly three years, down the track from that point in time,” Allan said.

Opposition tourism, sports and events spokesman Sam Groth said the report showed the Games plan was “just a cruel hoax to win votes in regional Victoria”.

“Labor only governs to play politics, and playing politics with the Commonwealth Games has destroyed our state’s reputation,” he said.