Secret review reveals conflicts of interest in Labor’s $37 million community grants scheme

The Premier’s Department has kiboshed two community projects, including one worth $100,000, nominated for taxpayer funding under Labor’s controversial local grants program due to “unacceptable” conflict of interest concerns.

A further 28 projects were identified as having a “moderate probity risk” following a ministerial-commissioned review of funding allocated within 15 electorates through the Local Small Commitments Allocation (LSCA) program late last year. Concerns about the scheme led opposition minister of state Chris Rath to refer the scheme to the Office of the Auditor-General.

NSW Premier Chris Minns’ $37.2 million community grants program driven by Labor MPs and candidates has been highly controversial.Credit: Janie Barrett

Designed by Labor ahead of the 2023 state election, the LSCA scheme provided each of the party’s 93 MPs and unsuccessful local candidates with $400,000 to pledge towards community projects. The $37.2 million program faced accusations of using public money for political purposes, and breaching Labor’s own standards for grant funding.

The Herald has previously detailed a number of Labor MPs and candidates who awarded hundreds of thousands of dollars to organisations they were personally involved with, including Camden MP Sally Quinnell who gave $75,000 to the Camden Musical Society, an organisation she co-founded.

At the time, the premier’s office said the MP had raised her conflict ahead of the election. The project was considered a low probity risk by the review, noting she was a public patron in a volunteer role and would not benefit financially.

A briefing note from October last year, obtained under freedom of information laws by Liberal MP Matt Cross, reveals Special Minister of State John Graham commissioned a conflict of interest review across 15 electorates in response to probity concerns raised by the Coalition. Ultimately, 110 projects were reviewed, with more than half found to have existing, potential or perceived conflicts.

Two of those were prevented from proceeding.

A “high probity risk” was identified in the $100,000 nominated by Kate McGrath, Labor’s candidate in Tamworth, for the Gunnedah Urban Landcare Group. As a council delegate, McGrath was active in the organisation’s governance structure, the review found.

The review also flagged $7300 nominated by Labor candidate Julia Little to Drummoyne Community Centre for “transformation of the centre’s corridors into a permanent art gallery space” as high risk, given she was serving as secretary of the centre’s management committee in a voluntary capacity.

“The advice is that these interests are actual conflicts that are unacceptable to the integrity of the program and so should be declined for funding, even if recommended as having merit,” it concluded.

McGrath said she disclosed her relationship with the organisation when she submitted the funding nomination, saying she believed the conflict could have been managed appropriately. The landcare group had been chosen after her Labor branch identified protecting koala habitats as an area of priority, she said.

Other funding nominations under the LSCA had been based around motions or existing advocacy the branch had been undertaking in years preceding the election, she said.

Little did not respond to requests for comment, though an intermediary suggested she had disclosed her relationship with the community centre.

The Herald is not suggesting any MPs benefited financially from their awarding of grants.

The briefing note reveals another process for declaring conflicts of interest was developed in October last year, more than seven months after community groups were nominated for funding, as part of Graham’s review.

The review was the first time conflicts had been considered.

Of the 28 projects considered a “moderate” risk, 10 were due to political connections. This included Newcastle MP Tim Crakanthorp, who the review found received campaign support from connections in four of the nine organisations associated with his nominated projects.

Crakanthorp referred questions to the minister’s office.

Other moderate conflicts identified were in relation to “strong political or other affiliation” arising out of candidates nominating councils they served on for funding, as they “may stand to benefit politically from the project”.

In response to questions, Graham said a conflict of interest process was in place and “these documents are proof that it is working”, contrasting the scheme against the Coalition’s record on pork-barrelling.

“Every single project is subject to a rigorous probity, community benefit and value for money assessment process including by an expert independent assessment panel,” he said.

“Every time a question has been raised by opposition MPs or publicly in other ways I have asked the Premier’s Department to check into it.”

In his letter to the auditor-general, Rath asked the LSCA to be assessed to “ensure integrity in line with legislative requirements”, accusing the government of politicising the public service by requiring funding decisions by unelected Labor candidates to be implemented.

“Labor candidates made promises at the election. Many held conflicts of interest. They then fit the grant criteria around the projects. It defies proper process and must be audited,” he said.

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