Scott Morrison is facing new questioning over the sports rorts affair, after former cabinet minister Bridget McKenzie issued a statement denying she had made last-minute changes to a list of grants.
Evidence to a Senate estimate committee from the Audit Office this week reinforced allegations the Prime Minister’s Office – which exchanged numerous emails with McKenzie’s office during the $100 million grants process – was more deeply involved than Morrison has admitted. He has sought to portray its role as just passing on representations.
McKenzie, then sports minister and the decision-maker for the program, signed off on a list of grants on April 4 2019, and she sent this to the Prime Minister’s Office on April 10.
But in an email from McKenzie’s office to Sport Australia early on April 11, the day the election was called, one project was taken off the list and one added. According to the Audit Office’s evidence, this change was at the request of the PMO. This email was sent minutes after the parliament was dissolved.
Several hours later, with the government in caretaker mode, one project was removed and nine added, in another email from McKenzie’s office to Sport Australia. The Audit evidence about these was that “none were evident as being at the request of the Prime Minister’s Office rather than the minister’s office”.
In her statement, McKenzie said she had “become aware” through the Senate estimates process this week “of changes made to a Ministerial decision brief that I signed in Canberra on 4 April 2019” for the final round of the program.
“The brief authorised approved projects for the third round – this included nine new and emerging projects which, it must be emphasised, had been identified and sent to Sport Australia in March for assessment in line with program guidelines.
“I did not make any changes or annotations to this brief or its attachments after 4 April 2019. My expectation was that the brief would be processed in a timely and appropriate manner,” she said.
“Nevertheless, changes were made and administrative errors occurred in processing the brief.
“I have always taken responsibility for my actions and decisions as a Minister, and this includes actions by my office.
“I was the Minister for Sport and therefore ultimately and entirely responsible for funding decisions that were signed off under my name, including and regrettably, any changes that were made unbeknown to me.”
When a reporter tried to ask Morrison about the McKenzie statement at his Friday news conference, which was about the coronavirus, he cut her off before she could get her words out. He finished the news conference without taking questions on general issues.
McKenzie is due to appear before the Senate committee that is examining the sports rorts affair.
The Audit Office found she had allocated grants on a politically skewed basis, but she and Morrison have always defended the substance of the decisions made.
She was forced to resign from cabinet on the more technical ground she did not declare her membership of sporting organisations that benefited from the scheme. It is well known she feels badly done by, because it was clear Morrison wanted her resignation to try to limit the political damage of the affair.
The secretary of the Prime Minister’s department, Phil Gaetjens, has criticised “significant shortcomings” in Bridget McKenzie’s decision-making in the sports rorts affair, while outlining his argument that her allocation of grants was not politically biased.
Gaetjens has made his first public comments in a submission to the Senate inquiry set up to investigate the affair, which cost McKenzie her cabinet job and the deputy leadership of the Nationals.
The government has been under intense pressure to release his report, commissioned by Scott Morrison, which was used to determine McKenzie’s fate. Gaetjens, a one-time chief of staff to Morrison, exonerated her from any breach of ministerial standards on the substance of her decisions but found she had breached them by not disclosing membership of gun organisations.
While his report remains confidential Gaetjens has set out his findings in detail, which were at odds with the Audit Office conclusion the allocation of grants had a political bias.
At a bureaucratic level, the sports affair has become something of a head-to-head between the Auditor-General and the country’s most senior bureaucrat.
Gaetjens says in his submission his advice to Morrison was based on information from Sport Australia, McKenzie, and her staff.
He says there were “some significant shortcomings” in McKenzie’s decision-making role, as well as in the way Sport Australia administered the assessment process.
These included “the lack of transparency for applicants around the other factors being considered, and the disconnect between the assessment process run by Sport Australia and the assessment and decision-making process in the Minister’s Office”.
“This lack of transparency, coupled with the significant divergences between projects recommended by Sport Australia and those approved by the Minister have given rise to concerns about the funding decision-making,” he says.
“The discrepancy between the number of applications recommended by Sport Australia and the final list of approved applications clearly shows the Minister’s Office undertook a separate and non-transparent process in addition to the assessment by Sport Australia”.
Gaetjens says McKenzie informed him her approvals were designed to get “a fair spread of grants according to state, region, party, funding stream and sport, in addition to the criteria assessed by Sport Australia”.
He rejects the Audit claim McKenzie’s approach was based on the much talked about spreadsheet of November 2018 that was colour coded according to party, and says she told him she had never seen that spreadsheet.
“The ANAO Report … asserts that the Adviser’s spreadsheet is evidence that ‘the Minister’s Office had documented the approach that would be adopted to selecting successful applicants’ before funding decisions were made. However, there is persuasive data that backs up the conclusion that the Minister’s decisions to approve grants were not based on the Adviser’s spreadsheet,” Gaetjens writes.
The evidence included the significant length of time between the spreadsheet and the approvals. Also, 30% of the applications listed as successful on the adviser’s spreadsheet did not get funding approval .
“So, on the evidence available to me, there is a material divergence between actual outcomes of all funded projects and the approach identified in the Adviser’s spreadsheet. This does not accord with the ANAO Report”, which found funding reflected the political approach documented by McKenzie’s office.
Gaetjens says had McKenzie just followed Sport Australia’s initial list, 30 electorates would have got no grants. In the final wash up only five missed out (no applications had come from three of them).
“I did not find evidence that the separate funding approval process conducted in the Minister’s office was unduly influenced by reference to ‘marginal’ or ‘targeted’ electorates. Evidence provided to me indicated that the Adviser’s spreadsheet was developed by one member of staff in the Minister’s Office, using information provided by Sport Australia in September 2018, as a worksheet to support an increase in funding for the Program.
“Senator McKenzie advised me in response to a direct question that she had never seen the Adviser’s spreadsheet and that neither she nor her staff based their assessments on it.
“Her Chief of Staff also told the Department of the Prime Minster and Cabinet that the Adviser had categorically stated she had not shown the spreadsheet to the Minister.”
Rejecting the Audit Office conclusion of a bias to marginal and targeted seats, Gaetjens says “180 ‘marginal’ and ‘targeted’ projects were recommended by Sport Australia, and 229 were ultimately approved by the Minister, representing a 27 per cent increase. This is smaller than the percentage increase of projects recommended (325) to projects funded (451) in non-marginal or non-targeted seats which was 39 per cent.”
“The evidence I have reviewed does not support the suggestion that political considerations were the primary determining factor in the Minister’s decisions to approve the grants”. So he had concluded she did not breach the section of the ministerial standard requiring fairness, Gaetjens writes.
While Sports Minister Bridget McKenzie has been forced to resign over the “sports rorts” affair, the matter is far from settled. It’s likely to feature heavily in parliamentary debate in the coming days.
One of the outstanding issues is the very different findings by the Audit Office report and by the review undertaken by the head of the prime minister’s department, Phil Gaetjens. Scott Morrison has said he will not release the Gaetjens report, so we can only go on the quotes Morrison read from it in his press conference announcing McKenzie’s resignation.
Gaetjens found McKenzie had breached the ministerial standards due to her conflict of interest in failing to disclose her membership of a gun club that received funding. At the same time, he absolved the government, as he “did not find evidence” the allocation of grants was “unduly influenced by reference to marginal or targeted electorates”.
In contrast, the auditor-general concluded that the “award of grant funding was not informed by an appropriate assessment process and sound advice”, and was contrary to principles of merit.
So, what is the status of the prime minister’s department compared to the auditor-general? And how would this have played out differently with a federal Independent Commission Against Corruption (ICAC)?
How was the affair handled by government?
The auditor-general is an independent officer of parliament, with the mandate to audit government finances. The position is independent from government and reports to parliament.
Alongside other integrity officers, such as the ombudsman and information commissioner, the auditor-general forms an important part of the Australian integrity framework. Their job is to hold government to account. They have significant coercive powers to compel documents and persons, which is essential to expose government wrongdoing.
The integrity officers have brought to light many examples of government maladministration. Yet they cannot compel government to change its practices – they only have the power of publicity and recommendation.
By referring the sports rorts affair to the prime minister’s department to investigate, the government is essentially conducting an internal investigation.
The department is under the full control of the prime minister. Like all senior public service executives, the department’s secretary, Gaetjens, is on a fixed-term contract without employment security.
The heyday of the mandarin is over. Departmental secretaries in the 1950s and 1960s had permanent tenure. By contrast, recent governments have been in the habit of sacking departmental secretaries and installing their allies in the positions.
This means an investigation by the auditor-general is far more independent than one by the secretary of the prime minister’s department. The auditor-general is independent of government. Unlike the Gaetjens report, his report is publicly published and tabled in parliament.
What would have happened with a federal ICAC?
A former NSW auditor-general has claimed a federal ICAC would have investigated the sports grants scandal.
So, how might this incident have played out if there was a federal ICAC?
First of all, it depends which version of a federal ICAC we are talking about. Federal Attorney-General Christian Porter has proposed a watered-down model of a Commonwealth Integrity Commission (CIC).
The threshold for investigation by Porter’s CIC model is high. It requires a reasonable suspicion of corruption amounting to a criminal offence before an investigation can even begin. It is doubtful the sports rort affair can meet this very high bar of suspected criminality.
So it is unlikely the proposed CIC will even have the power to investigate this issue.
Even if the CIC could investigate, it would not have the power to conduct public hearings or make findings of corruption.
On the other hand, if a federal ICAC “with teeth” is implemented, it is more likely to have the power to investigate this alleged maladministration of public funds.
A strong federal ICAC would have the power to hold public hearings. It could more fully ventilate all issues surrounding this matter.
There have been broader questions about the alleged involvement of the prime minister’s office in the handling of the grants that remain unanswered. The prime minister has denied any such involvement.
A strong federal ICAC would have been able to compel ministers, public servants and ministerial advisers to give evidence. This would paint a better picture of political interference in Sports Australia’s decision-making.
A strong ICAC investigation would be far more independent than that of a departmental secretary, and its final report would be public. It would also be able to make findings of corruption, which could then be prosecuted in the courts.
How can things be improved?
McKenzie has resigned, which is emblematic of ministerial responsibility. The minister has taken the hit based on her failure to declare her conflict of interest.
But the Gaetjens finding that there has been no political interference in the sports grant allocation is rather convenient for the government.
Gaetjens’ conclusion was also flawed in stating that political considerations were not “the primary determining factor”.
The question was never whether partisanship was the primary determining factor: political considerations should not have been a consideration at all in awarding the grants. As the ministerial standards say: ministers must not take into account irrelevant considerations.
It would have been better if a truly independent body, such as a strong federal ICAC, conducted the investigation to assuage all doubts.
Another major issue is the interaction between the minister and Sports Australia, an independent statutory corporation.
Some jobs have been taken out of the hands of politicians and given to government corporations such as Sports Australia. This is to avoid the partisan interference and short-termism that characterises modern politics. An example is letting the Reserve Bank set interest rates, rather than politicians.
Yet, in this situation, the minister interfered with Sports Australia’s legal decision-making.
My research has shown government corporations set up by statute, such as Sports Australia, are subject to a high level of parliamentary, financial and legal accountability. They should thus be given the freedom to operate in keeping with their statutory mandate.
We still have work to do to tighten up rules to ensure the probity of procurements and grants. We also need to clarify the roles of ministers in relation to statutory corporations like Sports Australia. Only then can we say we have resolved the issues arising from the sports rorts affair.
When Australians pay their income tax, they assume the money is going to areas of the community that need it, rather than being used by the government to shore up votes for the next election.
This is why the findings of the Australian National Audit Office into the awarding of community sporting grants by cabinet minister Bridget McKenzie are serious. Not merely for the grant funding process, but also for trust in our system of government.
The Audit Office was asked to examine this grant program to assess whether the award of funding “was informed by an appropriate assessment process and sound advice”. The focus was therefore on whether proper procedures were followed.
The report was extremely critical of the way in which the A$100 million in sporting grants were awarded by Minister McKenzie ahead of last year’s election campaign.
It found successful applications were “not those that had been assessed as the most meritorious” and that there was “distributional bias” in the way projects were approved. The problem is many of the grants were awarded to bodies within marginal seats or seats the Coalition wanted to win.
This is a serious matter because it represents a politicisation of a grant system which is supposed to be undertaken on merit.
What does this mean for the government?
The fact the Audit Office has made this finding is important. But what happens now and what will the consequences be? Will there be an investigation? If so, by whom?
Importantly, the Audit Office is an independent body. In the absence of a federal integrity commission, it has a significant role to play in ensuring government funds are spent for proper purposes. A central part of the role of the Audit Office is to uncover and report on fraud and corruption in government decisions. But it does not have coercive powers and its report does not have any direct legal effect on Senator McKenzie.
If there is to be a further investigation of this matter, it’s likely to be taken up by a parliamentary forum such as Senate Estimates. What is more significant are the consequences of the Audit report.
The first point to understand is that the direct legal consequences of the Audit Office finding are minimal. The report made four recommendations for future reform of the sporting grant procedure. While the Audit Office is very well-regarded by decision makers and commands respect, it is not a court. Therefore its recommendations are not binding and can be ignored by government.
What is more significant are the legal implications of the Audit report.
Here the problem is the Audit Office found the minister did not have legal authority to approve the grants in the first place. This is because the legal power to approve the sporting grants is actually given to Sport Australia (under the Australian Sports Commission Act 1989).
That legislation says the minister can give written directions to Sport Australia in relation to the exercise of its powers. But Senator McKenzie actually made the decisions on the grants (rather than merely give written directions to Sport Australia).
This is, however, somewhat of a theoretical argument as it is unlikely anyone will be able to bring this matter to court to invalidate the grant decisions made. Given community sporting groups who were disadvantaged by the improper grant process are community groups in need of funding, it’s unlikely they will be in a position to bring an expensive legal action.
It’s therefore likely the consequences of this report will be political rather than legal.
Here the political convention of “ministerial responsibility” should, ideally, come into play. This gives effect to the broader principle that the Australian people give authority and power to elected politicians and those politicians must be accountable for their actions.
This means McKenzie could be asked to resign. However, the Senator has indicated she will not resign, saying “no rules were broken” and she was given discretionary powers “for a purpose” in the program’s guidelines.
And this is one of the problems with ministerial responsibility today: it largely depends on whether the relevant party feel it’s politically necessary to pressure the relevant minister to stand down.
The current strength of this principle in modern Australia has been questioned, with many saying it’s no longer effective. For instance, journalist Tony Wright wrote in 2019:
Ministerial responsibility in Canberra appears to have all but decayed to no responsibility.
So, there may be no political consequences in this matter at all.
Implications for Australian democracy
The Audit Office of Australia is a respected, independent institution and its findings this week should have consequences.
Trust in government, which should be central to a healthy democracy, is at an historical low in Australia. Governments need to make decisions which are transparent and fair. A government that bends the rules is a danger to the rule of law and to democracy.
The Nationals have elected Victorian senator Bridget McKenzie as deputy leader to replace Fiona Nash, who was disqualified from parliament by the High Court.
The win will propel McKenzie, 47, from the backbench into the cabinet when Malcolm Turnbull announces a ministerial reshuffle after the December 16 Bennelong byelection.
Promoted by cabinet minister Darren Chester, also from Victoria, McKenzie beat several other candidates, including Resources Minister Matt Canavan, a cabinet member.
This is the second consecutive time the party has chosen a female senator as deputy leader.
The Nationals have had five spots in cabinet and there has been some talk about whether the loss of Nash from the party’s parliamentary numbers will affect their entitlement, which is based on an arithmetic formula.
But Nationals sources say the arithmetic can be cut more than one way, depending on what date is used for comparison, and also that Malcolm Turnbull and Barnaby Joyce will not want to disturb the Coalition relationship.
Joyce’s strong win in the New England byelection on Saturday provided Turnbull with a fillip going into the final week of parliament. Joyce was sworn back into parliament on Wednesday and his vote ensured Labor failed to be able to refer a “job lot” of MPs, including four Liberals, to the High Court.
The euphoria surrounding the byelection win has soothed some Coalition tensions, including over the rebel Nationals forcing the government’s hand last week to set up a royal commission into the banks.
Much interest in the coming reshuffle will centre on George Brandis. After months of speculation that Brandis would leave parliament, the attorney-general, who has recently performed well after earlier political missteps, said this week he intended to stay.
It earlier had been an open secret that Turnbull saw the likely departure of Brandis as an opportunity to elevate Mathias Cormann, now deputy Senate leader and a conservative ally of Turnbull, to Brandis’ position of Senate leader.
Brandis has recently been active in asserting the positions of the Liberal moderates; he has been a vocal backer of the same-sex marriage legislation, which is set to pass on Thursday.