Michael McCormack and secret group of ministers funded projects against department recommendations

Deputy Prime Minister Michael McCormack and a secret group of government ministers intervened in the selection of more than a third of the projects funded from a $200m regional grant fund.

The scale of projects chosen by the ministerial panel — which were eligible for funding but not among those recommended by department officials for funding — raises further questions about ministerial intervention in government grant schemes.

In the weeks leading up to the start of the 2019 election, Mr McCormack announced $200 million in spending under the third round of the Building Better Regions Fund (BBRF) for 330 projects across Australia.

A number of projects that received funding were publicly championed by Mr McCormack and other Nationals members of parliament in a series of press conferences and announcements at the time.

The scheme was enormously popular, with organisations seeking grant applications of up to $10 million, and with 915 applications within the third round alone. 

Under the Commonwealth Grant Rules, ministers must disclose to the Finance Minister when they approve grants against the recommendations of their department. Ministers must give a brief statement of reasons for departing from funding decisions.

A sets out: “Of the 330 projects approved under round three of the BBRF, a total of 112 as listed … were chosen by the ministerial panel against the department’s recommendations.”

The explanation provided by the panel said it took into account the regional spread of projects relating to current and future government investments and that this was “a key factor in the selection process”.

It said the selected projects “address key infrastructure priorities in each region, taking into account Australian government properties that align with the government’s intent of supporting regional Australia.”

The letter from Mr McCormack continues: “Please note that although not recommended by the Department, all the projects were assessed as value with relevant money.”

Under the grant guidelines for round three of the program, the ministerial panel can depart from the recommendations of the department, and 7.30 is not suggesting that the grant recipients were not eligible for funding.

Ordinarily, ministerial briefings provide a list of the highest-scoring projects they recommend for funding, and a separate reserve list of lower-scoring but eligible projects.

It appears the ministerial panel selected the 112 projects from this reserve list.

A spokesman for the Department of Infrastructure told 7.30 it provided an “initial ranking of projects” to the ministerial panel.

The spokesman said those rankings included projects that were eligible and represented value for money, and the department recommended as suitable for funding, based on the funding allocation available.

They said it included projects that were eligible and represented value for money, but if projects were chosen in order of the initial ranking only there would not be enough funding available to fund.

Concerns other higher-scoring projects were overlooked

Legal experts 7.30 has spoken with are alarmed at the scale of ministerial intervention in the scheme, and the possibility that higher-scoring projects may have been overlooked for funding.

“The problem may well be that there were other community projects that were equally needed or even needed more that weren’t being funded,” University of Sydney law professor Anne Twomey told 7.30.

“It just seems completely unfair. And it’s contemptuous of the people who have made the effort to make these applications.”

The ministerial panel also selected a number of grant recipients not recommended by the department in the fourth round of funding under the Building Better Regions Fund, which was specifically focused on drought recovery.

Forty-nine out of the 163 projects approved for funding “were not recommend [sic] for funding by the Department”, according to a further letter from Mr McCormack.

In that letter Mr McMormack also said: “It should be noted that the Department did not specifically recommend that these projects be rejected, however for transparency these projects are listed.”

He wrote in that letter that all projects met value for money, and the ministerial panel differed in its assessments because “they are in areas significantly impacted by drought and those projects listed demonstrated value for the broader region.”

A spokesman for the Deputy Prime Minister told 7.30:

“The Department provides recommendations on which projects to fund to the ministerial panel, which in consultation with Cabinet makes the final decision and may consider other factors including the spread of projects, funding across regions and the regional impact of each project.

“Not a single project that was ‘not recommended’ by the department received approval. All projects approved were assessed by the Business Grants Hub as eligible and representing value with relevant money.

“The Australian people elect governments to make decisions and it is entirely appropriate that the ministerial panel and the Cabinet continue to have final oversight in decision-making.”

The finance department has withheld the details of the 112 projects not recommended for funding — including their total value — on the grounds that they “contain the outcome of Cabinet deliberations”.

It has also withheld the names of the other ministers who sat on the ministerial panel along with Mr McCormack.

Ministers can ‘completely overturn’ regional grant assessments

The Building Better Regions Fund is a $1 billion fund set up to provide economic and social benefits to regional and remote areas and is now in its fifth round of funding.

Round three of the program was held out to be an open and competitive grant program.

Projects are all assessed on merit and provided with a score based on how they compared with a series of criteria, according to the grant guidelines.

Eligible organisations included not-for-profit organisations, local councils and charities.

But the grant guidelines also give a broad discretion to the ministerial panel, chaired by Mr McCormack, that makes the final decisions.

That body also decides “in consultation with cabinet” which grants to approve.

Factors the panel may take into account include the spread of projects across regions, whether there are similar projects, and the extent of funding provided in previous programs.

Other factors include the “reputational risk to the Australian government” and the “Australian government’s priorities”.

Ms Twomey told 7.30 that building in this degree of ministerial discretion into guidelines undermined the merit-based processes of grant programs like these.

“In this case, it’s not just one minister, it’s a panel of ministers — they can completely overturn the entire assessment, just chuck out all the value that the poor community groups slaved over putting into their applications,” she said.

More than $44m in grants approved against recommendations

7.30 has obtained a that reveal at least $44 million in grants have been approved by ministers contrary to their department’s recommendations since 2017.

These decisions relating to other grant schemes outside the Building Better Regions Fund are in a range of programs overseen by different ministers. 

Under the Commonwealth Grant Rules, all ministers who approve grants that are not recommended for funding by departmental officials must report them annually to the Finance Minister.

They must also provide a brief set of reasons for why they made their decisions.

Dozens of these since 2017 obtained by 7.30 under freedom of information laws set out the detail of a number of grants awarding against funding recommendations.

Legal experts 7.30 has spoken with said the adequacy of reasons given by different ministers for approving grants varied significantly.

“The problem here is ministers not taking seriously their obligations,” Ms Twomey said.

“When ministers make those decisions that overturn the decisions of public servants, they need to be made according to proper public principles of spending.”

In some instances, ministers declined to give any reasons for their decisions.

In a March 2019 letter, Minister for Indigenous Health Ken Wyatt wrote that he had approved a grant of $462,000 to the Geraldton Regional Aboriginal Medical Service against his department recommendations.

In his statement of reasons to the finance minister, he wrote: “No reasons provided”.

A spokeswoman for Mr Wyatt told 7.30:

“Australians in rural and remote areas are at a disadvantage in accessing dental care due to the lack of availability of dentists and other oral health facilities, and the greater distances involved.

“Geraldton Regional Aboriginal Medical Service (GRAMS) is an Aboriginal Community Controlled Health Service providing culturally appropriate health services to the mid-west and Murchison communities of Western Australia.

“GRAMS outreach service travels to Cue, Yalgoo and Pia Wadjarri to engage and support patients living in remote WA. It is critically important the people living in remote communities have access to dental services, even more so that those services be provided by a culturally appropriate provider.”

Ms Twomey said one of the better examples of a minister clearly setting out in their notification to the Finance Minister of why they went against the reasons of their department was when then-Arts Minister Bridget McKenzie approved funding for battery back-up power to improve mobile cell coverage for Telstra, Optus and Vodafone.

“It is appropriate that ministers be able to overturn the decisions of public servants. Public servants will not always get things right,” she said.

Ms Twomey said it was unclear what the Finance Minister actually did with the letters, and whether he actively sought to question any of the grants he was notified of by ministers, or the reasons ministers gave.

A spokesman for Finance Minister Simon Birmingham told 7.30:

“Given the nature of their position, Australians expect ministers to consult extensively with local communities, non-government organisations and other stakeholders. Ministers often have greater insights into emerging issues and localised needs in communities.

“It is long-standing practice by governments of all persuasions to use ministers as final decision-makers for some grants programs. The Commonwealth Grant Rules and Guidelines ensure that ministers consider official advice, and record and report instances where they award grants contrary to such advice.

“Since becoming Minister for Finance, I have written to all ministers within the Government to reinforce their requirements to follow the established rules and guidelines in relation to applicable grants programs.”

See the story on 7.30 tonight on ABC TV and iview.