Gunner Government’s COVID-19 stimulus spending program raised concerns: Auditor General

by | Sep 16, 2021 | Business, COVID-19 | 0 comments

The Gunner Government’s suite of COVID-19 stimulus programs introduced last year that cost Territory taxpayers hundreds of millions of dollars saw ineligible businesses approved for funding, conflicts of interest, no way to determine if objectives were met and money set aside for senior public servant Shaun Drabsch to award at his discretion, an Auditor General’s report has found.

The bulk of the Jobs Rescue and Recovery Plan stimulus funding – $331 million – was managed by the then-Department of Trade, Business and Innovation and chief executive Shaun Drabsch across seven different programs including the Home Improvement Scheme ($103m), the Business Hardship Package ($108m), the Small Business Survival Fund ($50m) and the Territory Tourism Voucher Scheme ($15m).

Auditor General Julie Crisp found that the department “did not have time to conduct a thorough risk assessment” during the planning and development phase of the stimulus programs.

Due to the quick roll-out of the stimulus funding programs, the team of public servants who approved the funding applications jumped from 13 to 75 grant officers, after public servants were seconded from other departments.

Ms Crisp said while their efforts to oversee more than 27,500 applications across the different stimulus programs were “commendable”, no formal procedures existed to properly train the new grant officers and that “less experienced grant officers were also providing training”.

She also found that nobody was required to sign an over-arching conflict of interest declaration.

“There was no guidance provided to the assessors on what constitutes a conflict of interest,” Mr Crisp wrote.

“The risk that actual and perceived conflicts of interest may exist and not be effectively managed increased significantly with the arrival of a large number of additional personnel not familiar with any pre-existing conflict of interest processes within the Agency.”

While the grant system used by the department had a built-in conflict of interest check at the beginning of each assessment, it did not record the details of any declared conflict or maintain a register and did not have the check in place for others who took over any particular application.

“A number of applications selected for further scrutiny as part of my audit identified the existence of close family relationships between the individuals controlling the businesses registered to provide services and applicants however the use of trust structures impaired easy identification of the individual/s with ultimate control of the business,” Ms Crisp wrote.

Five months after the stimulus programs commenced, only one staff member was conducting “spot checks” on applications for all of the $331 million worth of stimulus programs, who was only able to check 0.3 per cent of all applications and the vast majority of 87 spot checks had only been completed on the Home Improvement Scheme (HIS).

The Auditor General’s report found that based on all 19,575 HIS applications, 1757 contractors were nominated to conduct works under the program. Twenty contractors received $16.6 million or 9.8 per cent of all the funding.

The figures showed 832 contractors received five or less applications, representing $16.4 million of the total $73.9 million in approved funding.

She also found while the department had claimed to be processing 800 to 1000 applications a week, it actually averaged 600 a week.

Ms Crisp also found that there were “numerous instances” of people breaking the rules of the HIS program, including lodging more than one application, transferring it to another person and instances where the applicant was directly related to the business undertaking the works.

There were also instances where “details such as maiden names were omitted from the application preventing the identification of related parties”.

Ms Crisp suggested while some may be genuine errors, some appeared to be deliberate and could be illegal.

“Where my audits have identified such behaviour, I have reported these instances to the appropriate authorities,” she wrote. “In doing so, I have indicated some transactional characteristics which may warrant further investigation.”

No ‘value for money’ assessments undertaken on Home Improvement Scheme: AG

Ms Crisp’s report also highlighted a “design flaw” in the HIS program that was not discovered until after the application deadline closed which allowed applications to be sent in without a quote attached.

The department identified 543 applications without a quote which were declined, however audit testing showed two applications without valid quotes submitted were somehow approved for funding.

“No guidance was provided to the Grant Officers to assist in determining if the proposed works demonstrated value for money,” the report found.

Ms Crisp independently assessed a small sample size of 45 HIS applications and found that 80 per cent of them “were identified to have breached the criteria or assessment process”.

Of those that breached the criteria, but were given exceptions by the department, some had the quote dated prior to the HIS being announced, another application was re-opened by an assessor and approved based on “senior director approval”, another was allowed to be re-submitted after being found to be non-compliant and, in another instance, an applicant was allowed to change the work and the property after the closure date.

The $108 million Business Hardship Package (BHP), which allowed businesses to apply to have payroll tax waived or deferred, utilities bills reduced, reduction of rates and “other relief” was also found to have problems, including commercial landlords receiving relief with no documented evidence of proper assessments being undertaken, the value of subsidies awarded not being known, and more than half of the companies that received hardship benefits did not provide turnover figures.

All 1,091 applications approved for the BHP were done be a single grant officer with no independent review or check conducted.

Ms Crisp found the criteria for including businesses on the hardship register was inconsistent and that applications could be assessed on a case-by-case basis by Mr Drabsch, despite there being no definition in the terms and conditions of the program of what criteria he would use to assess the businesses.

Of 15 BHP applications audited by the Auditor General, nine contained special exceptions applied to them including for insufficient evidence of eligibility, non-Territory businesses being approved, incorrect assessment of hardship being applied, incorrect or outdated information recorded and inconsistent methodologies being applied by assessors.

No requirement to disclose what Small Business Survival Fund money was used for, money set aside for Drabsch to award at his discretion: Auditor General

The $50 million Small Business Survival Fund (SBSF) received 1731 application in the two months it was open, with 1311 approved.

The fund was set up to assist small business with less than 20 employees, which 95.5 per cent of Territory businesses are classified as.

The program provided money to small business to help it survive through partial or full lockdowns by providing money for “unavoidable fixed costs”, expanding online services and delivery and to upgrade premises or upskilling staff to “take advantage of the rebounding economy when the COVID-19 crisis is over”.

The report found 990 SBSF applications that did not fall within the parameters for funding went to Mr Drabsch for his “consideration”. Of those, he approved 709 and knocked back 281.

Department of Industry, Tourism and Trade CEO Shaun Drabsch.

There was also $2 million set aside from the $50 million funding commitment for Mr Drabsch to award at his discretion for businesses that were not eligible under the program’s initial parameters.

There were no requirements for recipients of taxpayer funds provided through the SBSF to declare actual expenditure or provide quotes or invoices.

“Where funds are provided with few or no conditions attached and may be spent at the recipient’s discretion, it may be difficult for the Agency to demonstrate that the funds have been distributed in order to meet an agreed, identified outcome or purpose,” Ms Crisp wrote.

She added that the terms of the program did allow for the department to audit grant spending for a period of up to 12 months but that “no such audit activity had been conducted on any SBSF applications”.

She also found that the entries of the applications “may require further review”, including two applications that had been submitted after the application period had closed.

Ms Crisp also raised concerns that 46 of 67 applications assessed were approved despite being initially flagged as ineligible and that 72 of 105 applicants had recorded more full-time equivalent hours worked after the COVID shutdown than before were also approved with no audit conducted.

The SBSF money was initially targeted at businesses impacted by physical distancing restrictions including, food and retail, beauty and personal care services, entertainment venues and leisure and recreation businesses, but was later opened up to include any business Shaun Drabsch determined needed funding.

“There were no requirements to declare actual expenditure or to provide quotes or invoices,” Ms Crisp wrote.

“As a result (of actual spending not being acquitted) the value of the approved works and estimated economic impact of the initiative is unknown.”

The department patted itself on the back for a job done in a response to the Auditor General’s report.

“The Department of Industry, Tourism and Trade (DITT) believes that the program was a success with few businesses forced to close, unemployment kept well below the national average and broad community and industry recognition of the significant role these programs played in stabilising the Territory in the face of a severe economic shock,” the statement read.

“DITT notes the findings and recommendations of the audit and will incorporate these in future policy documents and programs.”

The Auditor General’s report was tabled in Parliament in late June and ignored.

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