By David Crowe
The Auditor-General has warned the Morrison government to lift its performance on the use of taxpayer funds after a scathing inquiry into a $220 million jobs scheme which found it suffered from conflicts of interest and intervention by ministers.
The auditor savaged the government's management of the sweeping policy to create "jobs and growth" in ten regions as part of a Coalition promise at the 2016 election, with some decisions skewed in favour of Coalition seats.
The government's regional jobs and investment program has been savaged by the Auditor-General.Credit: Louie Douvis
The problems led the auditor to issue a rare alert to all federal agencies to guard against failures in the use of contractors and the handling of conflicts of interest in future grants.
Government officials recommended hundreds of applications for regional job programs but were overruled by a ministerial panel which rejected 64 projects seeking $75.9 million.
Instead, the ministerial panel allocated $77.4 million to 64 other projects not recommended by officials responsible for regional development and industry.
"This adversely affected accountability as it meant there was not a clear line of sight between the departmental assessment results, the subsequent adjustments by the ministerial panel and the funding decisions," Auditor-General Grant Hehir said.
This meant 28 per cent of recommended applications were not funded under the $220.5 million Regional Jobs and Investment Packages announced over the two years following the 2016 election.
"Applications were not soundly assessed in accordance with the program guidelines," the auditor said.
"The eligibility requirements were not applied in full and there are indications of shortcomings in the assessment of the merit criterion most directly related to the program outcomes."
Infrastructure Minister Michael McCormack defended the scheme on Tuesday night, saying it had helped to stimulate economic growth and create thousands of jobs.
Michael McCormack said the scheme had helped to stimulate economic growth and create thousands of jobs.Credit: AAP
Mr McCormack said the $220.5 million in grant funding had "leveraged" an estimated additional $467.8 million to support projects in regional Australia.
"It is worth noting the report concluded there was no bias evident in the assessment and decision making process concerning funding of projects in RJIP regions over others," he said.
But Labor regional development spokeswoman Catherine King said Mr McCormack had been on the ministerial panel responsible for approving an ineligible project, failed to verify claims around the jobs created and did not provide reasons when rejecting applications recommended by officials.
Ms King also accused the government of trying to "bury" the audit report by releasing it less than an hour before the Melbourne Cup.
The Coalition unveiled the scheme with a promise to create jobs in nine regions including the Bowen Basin in Queensland, the NSW North Coast, the Goulburn Valley of Victoria, the NSW South Coast and regional Tasmania.
While 634 projects sought $630.7 million in funding, only 232 were approved in a process managed by the Department of Infrastructure, which in turn outsourced some of the work to the Department of Industry, triggering problems.
The audit found other schemes incurred costs equivalent to about 2.5 per cent of total funding but this rose to 4 per cent under the RJIP without any certainty about the jobs to be created.
The audit questioned the "credibility of the employment outcomes being promised" or whether the results showed "value for money" given the total cost.
In two cases, projects in the NSW South Coast electorate of Gilmore received funding from the ministerial panel when they were not backed by the department process.
The Liberal Party fought to retain Gilmore at this year's election but lost to Labor candidate Fiona Phillips.
There were 132 funding decisions that differed from the department recommendations and were "overturn" decisions made by the ministerial panel.
"Overturn decisions predominantly related to projects located in a Coalition electorate," the Auditor-General said.
"Overturn funding decisions occurred most often in the Bowen Basin and the Wide Bay Burnett regions."
However, the audit report added it was "not evident" the panel was giving preference to some electorates in the region over others.
Membership of the ministerial panel changed over time during the upheavals in the government after the 2016 election, with the infrastructure portfolio shifting from Darren Chester to Michael McCormack.
Nationals MPs including George Christensen, Michelle Landry, Ken O'Dowd and Keith Pitt proclaimed the benefits of the funding for their regions in the years after the 2016 election as the money was allocated.
The audit warned of poor management with conflicts of interest but did not name individuals or projects that suffered from specific conflicts.
"The program guidelines foreshadowed that grant applicants would be required to declare whether they had any conflicts but the application form did not follow through and require applicants to actually do this," the audit said.
"Contractors were not required to sign a written declaration that they had no conflicts."