BY YEE-FUI NG

Yet another rorts scandal is swirling around the federal government, dubbed the ‘car park rorts’ affair. The Auditor-General has reported that a $389 million car park construction fund has been administered ineffectively and that the Minister had distributed the grants with ‘inadequate assessment’ for eligibility (at [25]).

The Auditor-General’s report found that 77% of the commuter car park sites selected for funding were in Coalition electorates (at [23]), rather than in areas of real need with congestion issues. Damningly, none of the 47 project sites selected for funding commitment were proposed by the department responsible for administration of the relevant fund: the Department of Infrastructure, Transport, Regional Development and Communication. This suggests there has been extensive ministerial interference in the funding decision-making.

At a Senate estimates hearing held on 19 July 2021, Australian National Audit Office (ANAO) staff told the Senate Standing Committee on Rural and Regional Affairs and Transport that a list of the top 20 marginal electorates guided the distribution of the fund during the 2019 election campaign.

Sitting Coalition MPs were invited to nominate projects for funding. In some cases, money was allocated to electorates when a project had not yet been identified (at 6). One adviser from the Prime Minister’s Office involved in the funding allocation — was also involved in the “sports rorts” incident discussed below.

The fact this questionable allocation of funding occurred the day before Prime Minister Scott Morrison called the 2019 federal election indicates a strong element of “pork barrelling”: the channelling of public funds to government electorates for political purposes, rather than proper allocation according to merit.

A few questions arise: What is the history of rorts in Australia? Why do rorts keep happening? What are the governance and accountability arrangements for grants administration? And finally, how can we reform the system to ensure the probity of grants administration?

What is the history of rorts in Australia?

We have been inundated with pork-barrelling scandals in recent years. This includes the “sports rorts” scandal, in which the biased distribution of funds and a conflict of interest prompted the resignation of former Sports Minister Bridget McKenzie.

Then Home Affairs Minister Peter Dutton was also accused, in relation to the Safer Communities program, of reducing funding to the highest ranked community safety projects and redirecting the funding to projects of his choice, including those not recommended by his department.

Although this post focuses on the federal level of politics, it should be noted that states have also had issues with pork barrelling. For example, NSW Premier Gladys Berejiklian was accused of biased distribution of the Stronger Communities fund, as she approved $252 million funding before the state election, with 95% of funds going to Coalition electorates.

Rorting isn’t new in Australian federal politics. More than a decade ago, we had a previous “sports rorts” incident under the Labor Government, in which grants were distributed in favour of the Labor Party. Famously, then Sports Minister Ros Kelly claimed that decisions on short-listed applications were made on a “great big whiteboard” that was erased without permanent record. The Minister resigned as a result of the scandal.

A number of empirical studies over the years have confirmed a strong partisan component to allocating grant money towards the party in power.

Why do rorts keep happening?

Australia has a single member electorate parliamentary system, which makes it more susceptible to pork-barrelling than multi-member electorates like Norway or Spain. The belief is that politicians who “bring home the bacon” for their constituents are electorally rewarded for doing so.

This means there are incentives for the central cabinet to strategically apportion benefits to marginal electorates to increase their prospects of electoral success. There is also an incentive to bias the apportionment of funds towards the party in power.

In short, rorts scandals keep happening because governments believe that channelling money to marginal and government electorates will win them elections.

What are the accountability arrangements for grants?

Given we have had so many rorts scandals over the years, the question is why they are still happening unabated? Why hasn’t the problem been fixed?

To answer this question, it is necessary to understand the legal and political regulation of grants programs in Australia.

First, the political regulation of grants programs is generally working well.

The Auditor-General, an independent officer of Parliament (Auditor-General Act 1997 (Cth), s 8(1)), is the main actor who investigates federal grants administration. The Auditor-General has significant coercive powers (ss 30-35), and is independent of government (s 8(4)). Although the Auditor-General lacks the power to change governmental practices, the publicity of their reports may encourage government agencies to respond in a positive and productive way.

The Auditor-General has been vigilant in reporting on maladministration of grants in government. Their office conducts both systemic audits of the system, and ad hoc audits over individual departments or agencies. Many of the rorts scandals have been brought to light through Auditor-General reports.

Parliamentary committees have also been vigilant in investigating grants rorts, and reporting on these incidents, with committees set up for both ‘Sports Rorts’ affairs in 1993 and 2021. These hearings have shed light on important details about the processes of grants allocations, as well as shown evidence of ministerial interference in grants decision-making. Parliamentary committees have thus been very effective in bringing to light the politicisation of grants programs, and undoubtedly contribute to the political accountability of the executive.

However, the legal regulation of grants programs is problematic.

At the federal level, we have sophisticated financial management legislation, the Public Governance, Performance and Accountability Act 2013 (Cth) (PGPA Act), which provides a framework for grants rules. A whole-of-government framework is issued by the Minister for Finance in the Commonwealth Grants Rules and Guidelines 2017 (Commonwealth Grants Rules), which sets out a detailed set of guidelines that Ministers and government officials must follow on grant application and selection processes.

Under these rules, where a Minister approves a grant in their own electorate, the Minister must write to the Finance Minister advising of the details (r 4.11). Although Ministers may approve grants that are not recommended by the relevant officials, they must report all instances of this occurrence annually to the Finance Minister, including a brief statement of reasons (i.e. the basis of the approval for each grant; r 4.12).

However, there are significant loopholes in the rules. For example, the “car park rorts” scandal is not covered by these rules because it involves money being channelled through the states under s 96 of the Constitution, which provides the ability of the Commonwealth to provide financial assistance to the States on such terms and conditions as it sees fit. The Commonwealth Grants Rules do not apply where payments are made to the states in accordance with s 96 of the Constitution, including where such payments are made for the purposes of the Federal Financial Relations Act 2009 (Cth). In addition, the “sports rorts” affair was not covered by the rules because the government cannot make grants rules for government statutory corporations, such as the Australian Sports Commission (also known as Sport Australia). Under section 105(2) of the PGPA Act, the Finance Minister may, by legislative instrument, make rules about grants by non-corporate Commonwealth entities, but not for corporate Commonwealth entities. This is problematic because many grants programs are administered by independent statutory corporations or through the states.

Another issue is that breaches of these grants rules do not result in any legal sanction. There is no penalty for breaching the Commonwealth Grants Rules in the financial management legislation. So, Ministers and government officials can break the rules without any legal repercussions.

A further problem is the limited opportunity for grant applicants to challenge partisan decisions. Courts in judicial review will confine themselves to the legality of the decisions. They will not intrude into public policy considerations by Ministers, such as which applicants deserve the grants, or whether there has been a partisan allocation of funds.

How can we fix the system?

In light of the pervasive and repeated rorts scandals that have plagued Australian politics, it is time to reform the rules.

The Labor party will be proposing a Bill to Parliament today (4 August) to require Ministers who approve grants rejected by their departments, or award grants in their own electorates, to report the decision to the Minister for Finance within 30 days. The Minister for Finance would then be required to table those reports in the Parliament within five sitting days of receiving them.

However, this proposed Bill will not fix the loopholes in the system, as this process of reporting to the Finance Minister already exists in the Commonwealth Grants Rules, albeit with an annual reporting requirement, rather than within 30 days as proposed by Labor.

This proposed Bill will not fix the glaring omissions in the grants administration system. To properly fix the grants administration system, larger scale reforms need to be implemented.

First, the loopholes need to be closed. The Commonwealth Grants Rules should be broadened to include situations where the Commonwealth distributes grants through an independent statutory corporation or through the states.

Second, there needs to be legal enforcement of the Commonwealth Grants Rules. This may lead to more effective legal challenges of partisan grant decisions in the courts.

With no legal repercussions for breaches, politicians will continue to flout the rules.

It is imperative our grants administration system be reformed to ensure that taxpayer funds are protected from governmental abuse. If the ministerial discretion available in grants processes is improperly used, this can give rise to political favouritism and corruption.

In the context of the declining public trust in democratic institutions in Australia, we should ensure the probity of the use of public funds. The repeated rorts scandals in Australia undermines a basic tenet of our democracy: that allocation of public money should be administered responsibly by our elected officials.

We need to reform the regulation of grants programs in Australia to enhance the probity, transparency and integrity of the use of public funds.

Editors’ note: A shorter version of this post appeared in The Conversation on 20 July 2021.

Dr Yee-Fui Ng is an Associate Professor in the Faculty of Law at Monash University, and the Deputy Director of the Australian Centre for Justice Innovation.

Suggested citation: Yee-Fui Ng, ‘The “Car Park Rorts” Affair and Grants Regulation in Australia: How can We Fix the System?’ on AUSPUBLAW (4 August 2021) <https://auspublaw.org/2021/08/the-car-park-rorts-affair-and-grants-regulation-in-australia-how-can-we-fix-the-system/>