The federal health department “fell short of ethical requirements” and deliberately breached commonwealth grant guidelines in administering a $2bn Morrison government community health program, the audit office has ruled in a blistering report.
The Australian National Audit Office found just two of 63 major projects were assessed as “highly suitable” for the Community Health and Hospitals Program (CHHP), which was meant to be a key benchmark to even be shortlisted.
“The Department of Health and Aged Care’s administration of the Community Health and Hospitals Program was ineffective and fell short of ethical requirements,” the ANAO said.
The health minister, Mark Butler, has savaged his predecessors for announcing projects “without assessment or guidance” and ordered his department to “run the ruler” over remaining projects funded in the program.
The audit office said the CHHP included $1.25bn in the 2018–19 mid-year economic and fiscal outlook and $747m in the 2019–20 budget, both ahead of the May 2019 election.
The ANAO said the CHHP and associated programs comprised 171 projects, including 108 grants and 63 national partnership agreement projects with state or territory governments. The health department did not develop grant guidelines for seven of the 108 grants; the ANAO claimed at least three of those were a “deliberate decision by senior management to not comply with finance law”.
“Health’s administration of CHHP grants was not appropriate, involving deliberate breaches of the relevant legal requirements and the principles underpinning them,” the ANAO said.
“Health recommended funding multiple grants prior to confirming that there was lawful authority for grants, or despite knowing that there was no legislative authority.”
The department established an expression of interest process for potential projects and assessed applicants, but the ANAO said “most approved projects were selected by government outside this process”.
The ANAO alleged: the department did not advise whether selected projects met CHHP objectives or were worthy of funding; that the department developed funding agreements after projects were announced by government; and that initial agreements only had “limited consultation with states and territories” and lacked detail.
Of 63 national partnership agreement projects, the ANAO found 29 were identified in the EOI process and 34 outside it. Of the 29, just two were found to be “highly suitable” by the health department, and 20 “suitable”; the ANAO noted the health department had proposed only “highly suitable” projects should even be short-listed.
Another six of the 29 were found to have insufficient information for assessment and either did not fit program objectives or duplicated existing services, while one project “was never assessed”.
The 34 projects approved outside the EOI process did not have supporting proposals and had not been assessed by health, the ANAO said.
The report found 71% of marginal seats ahead of the 2019 election had at least one project funded under the CHHP, compared to only 30% of safe seats. However, safe seats received 71% of the funding overall.
Case studies provided in the report included claims of inadequate assessments, money provided for items deemed ineligible in the grant guidelines and the department providing advice to the minister of projects not meeting CHHP objectives after funding was already approved.
The ANAO said the department received “requests from the minister” to draft national partnership agreements for specific projects in February 2019, before it had finished assessing the expression of interest process.
“Health received several requests from the minister’s office to draft national partnership agreements once projects were publicly announced,” the report said.
“Following these requests, Health decided to begin drafting national partnership agreements on the basis of public announcements. Health monitored the media to keep track of announcements.”
The ANAO stressed, in a “key message for all Australian government entities”, that it was the administering entity’s responsibility to inform a minister about compliance with grant guidelines, including if projects do not align with objectives or value for money.
In a response, the health department’s secretary, Brendan Murphy, accepted the recommendations and noted the findings, acknowledging “a number of challenges” in the CHHP.
“These challenges are in part due to the rapid genesis and implementation of projects that the former government selected and announced,” Murphy wrote.
In a statement, Butler said: “The former government announced so many projects without assessment or guidance, and at such speed, that the department was forced to monitor the media to know which projects had been selected.”
Glenys Beauchamp, the department secretary between 2017 and February 2020, said in her own response that the department had “strong governance arrangements” during her time in charge and did not agree there were “systemic issues of non-compliance”.
Butler said as of November 2022, just half the $2bn had been spent and more than half of the CHHP projects needing new infrastructure were still in their preliminary stages.
“I’ve directed my department to run the ruler over the remaining projects that have stalled to ensure that Australians get value for money,” he said.