Background

1. The Murray–Darling Basin (the Basin) is a system of interconnected rivers and lakes in the south-east of Australia with significant environmental, cultural and economic value.

2. The Murray–Darling Basin Plan (the Basin Plan) was developed in 2012 in response to a significant period of drought in the Basin in the early 2000s (the Millennium Drought), which resulted in a recognition across the governments that a plan was needed to manage the Basin’s water resources carefully and protect the Basin for future generations. The Basin Plan sets limits on the amount of water that can be taken from the Basin for consumptive purposes by communities, farmers and businesses, while maintaining environmental sustainability, known as the Sustainable Diversion Limits (SDLs).

3. The establishment of the SDLs was accompanied by a water recovery target to ‘bridge the gap’ between the SDLs and how much water was taken from the Basin before the introduction of the Basin Plan. At the time the Basin Plan was agreed in 2012, the ‘Bridging the Gap’ target was set at 2,750 gigalitres. This was amended in 2018 to 2,075 gigalitres. As at 31 December 2022, the Murray–Darling Basin Authority (MDBA) estimated that a gap of 49.2 gigalitres of water remained in seven catchments to reach the ‘Bridging the Gap’ target.

4. The Department of Climate Change, Energy, the Environment and Water (the department) is the Australian Government entity responsible for recovering water to bridge the gap through: monitoring water recovery programs; funding, implementing and managing water infrastructure projects and efficiency measures; and undertaking purchases of water entitlements.

5. In March 2023, the department commenced an open tender process to purchase water entitlements to recover 44.3 gigalitres of water against the remaining gap of 49.2 gigalitres. The 4.9 gigalitres of surface water located in the ACT that also needed to be recovered to achieve the Bridging the Gap target was not included in the procurement process as water rights in the ACT are held and owned by a government entity. Separate arrangements were established with the ACT Government to bridge the gap in the territory.

6. The procurement process was finalised in January 2024. As at 17 January 2025, approximately 21.62 gigalitres of water has been recovered, fully bridging the gap in two of the six target catchments, with a gap of approximately 23.07 gigalitres remaining in the other four catchments.

Rationale for undertaking the audit

7. This audit examined the effectiveness of the department’s strategic procurement of water entitlements to meet the Bridging the Gap target under the Basin Plan. It followed on from Auditor-General Report No. 2 2020–21 Procurement of Strategic Water Entitlements to provide assurance to Parliament over the arrangements in place to support the procurement process, and the conduct of the procurement process to achieve value for money.

8. Water recovery is a topic of parliamentary and public interest. The Joint Committee of Public Accounts and Audit (JCPAA) identified the audit as a priority of the Parliament for 2023–24.

Audit objective and criteria

9. The audit objective was to assess the effectiveness of the department’s strategic procurement of water entitlements to meet the Bridging the Gap target under the Basin Plan.

10. To form a conclusion against the objective, the following high-level criteria were adopted.

• Did the department establish appropriate arrangements to support strategic water procurement?
• Did the department conduct an effective procurement process to achieve value for money?

11. The audit focused on the 2023 Bridging the Gap procurement process, including arrangements to support the procurement and whether value for money was achieved. It also examined whether the recommendations from Auditor-General Report No. 2 2020–21 and the JCPAA Report 492 were implemented.

12. The audit did not examine: water recovery initiatives for targets other than the 2,075 GL/y Bridging the Gap target; compliance with water trading rules in the Basin Plan; activities of related bodies such as the MDBA or state water regulatory authorities; or the socioeconomic impacts of water recovery on local communities, except to the extent considered by the department as part of the procurement process.

Conclusion

13. The department’s strategic procurement of water entitlements to meet the Bridging the Gap target under the Murray–Darling Basin Plan was largely effective. While the department conducted an effective procurement process and demonstrated how it assessed value for money in accordance with its value for money framework, it was not able to meet the intended policy objective of fully bridging the gap through the procurement process. The current evaluation framework requires revision to enable an accurate measurement of the program’s impact on intended policy objectives, including in the context of broader evaluation activities planned for the Basin Plan. Further improvements are being made for subsequent tender processes to incorporate lessons learned, increase efficiency, and ensure better management of probity risks.

14. The department has established largely appropriate arrangements to support strategic water procurement. There are appropriate procurement frameworks in place, including a Strategic Water Purchasing Framework developed specifically for the water purchasing program outlining the scope of the program and the investment principles that would underpin water purchasing. The department has established appropriate oversight mechanisms to oversee the program and is managing program and procurement risks. An evaluation framework to monitor, report on and evaluate the strategic water purchasing program has been established. The evaluation framework does not enable an accurate measurement of the program’s impact on intended policy objectives, and requires revision to ensure that outcomes are appropriately defined, including in the context of other evaluation activities planned for the Basin Plan.

15. The department established a value for money framework for the procurement, specifying the key factors that would inform its purchasing decisions. The department documented and demonstrated how it assessed value for money in each of the six SDL resource units in accordance with its value for money framework. The procurement was compliant with the Commonwealth Procurement Rules (CPRs), except in relation to minor errors in reporting contracts on AusTender. Negotiations were undertaken to maximise value for money outcomes, and revised value for money assessments were undertaken where negotiated prices differed from the delegate’s original approved figure. Relevant information and clear recommendations were provided to the delegate to enable them to make an informed procurement decision. The department provided sound advice to the minister on options to bridge the gap in the ACT and in SDL resource units with remaining gaps to bridge.

Supporting findings

Arrangements to support procurement

16. The department has established a procurement framework that aligns with the PGPA Act and the CPRs. This framework includes Accountable Authority Instructions providing guidance on the duties of officials when conducting a procurement, and departmental policies and guidance on key aspects of procurement. The department developed a Strategic Water Purchasing Framework specific to the water purchasing program, outlining the scope of the program and the investment principles that would underpin water purchasing. (See paragraphs 2.3 to 2.14)

17. The department has established appropriate oversight mechanisms for the water purchasing program, with clearly documented roles and responsibilities. The department is managing risks to the program and there is an appropriate level of oversight over program and procurement risks. (See paragraphs 2.15 to 2.52)

18. The department has established an evaluation framework to monitor, report on and evaluate the strategic water purchasing program. The evaluation framework is focussed on short- and medium-term program outputs and does not enable an accurate measurement of the program’s impact on intended policy objectives or link the program to evaluation activities planned for the Basin Plan. Monitoring and reporting arrangements have been established, and process improvements are being made following a lessons learned review of the 2023 Bridging the Gap procurement process. (See paragraphs 2.53 to 2.85)

Procurement process and value for money

19. The procurement process was compliant with the Commonwealth Procurement Rules (CPRs), except in relation to minor errors in reporting contracts on AusTender. The department complied with the requirements relating to procurement planning and approach to market, and the tender evaluation process was conducted in accordance with the tender evaluation plan. Management of conflicts of interest was impacted by deficiencies in the declaration process. Manual tender screening and assessment processes resulted in some process inefficiencies and errors that were later discovered and corrected. (See paragraphs 3.3 to 3.46)

20. The department established a value for money framework for the strategic water purchasing program, specifying the relevant financial and non-financial factors it would consider in assessing value for money. The Tender Evaluation Panel’s value for money assessments were conducted in accordance with the approved value for money framework, and its discussions and recommendations were clearly documented in the tender evaluation reports and briefs to the delegate. Of 57 tenders approved for negotiation, the department negotiated reduced prices for 33 tenders. Revised value for money assessments were undertaken where negotiated prices differed from the delegate’s original approved figure. All tenders that were accepted or counteroffered were those recommended to the delegate as representing value for money. (See paragraphs 3.47 to 3.82)

21. The advice provided to the delegate contained relevant information to enable them to make an informed procurement decision. The department provided sound advice to the minister on options to bridge the gap in the ACT, including on whether the ACT’s proposal would contribute to bridging the gap and achieve value for money, and on strategies to bridge the remaining gap following the conclusion of 2023 Bridging the Gap procurement process. (See paragraphs 3.83 to 3.107)

Recommendations

Summary of entity response

22. The proposed audit report was provided to the department. The department’s summary response to the audit is provided below and its full response is at Appendix 1.

The Department of Climate Change, Energy, the Environment and Water (the department) welcomes the ANAO’s audit report on the Strategic Water Purchasing – Bridging the Gap 2023 procurement. The department appreciates ANAO’s recognition that administration of the Strategic Water Purchasing program for the 2023 procurement process was largely effective, with appropriate procurement frameworks and oversight mechanisms in place to support an effective procurement process, undertaken in accordance with the value for money framework.

The department agrees with the ANAO’s two recommendations identified in the audit report. Implementation of the recommendations has already commenced. The department is committed to providing meaningful evaluation of the program outcomes and has commenced a review of the evaluation framework. The department has also implemented strengthened arrangements to improve the oversight of conflict-of-interest requirements for its water purchasing programs.

Background

1. The Bureau of Meteorology (the Bureau) is responsible for providing weather, water, climate, and ocean services for Australia. The Bureau’s weather forecasts, warnings, and analyses support decision-making by governments, industry, and the community. Australian sectors that are supported by timely and accurate weather services include emergency management, agriculture, aviation, land and marine transport, energy and resources operations, climate policy, water management, defence and foreign affairs.¹

2. The Bureau is established by the Meteorology Act 1955 (Meteorology Act). Since 2002, it is an Executive Agency under the Public Service Act 1999. The Director of Meteorology has the powers and responsibilities of an accountable authority under the Public Governance, Performance and Accountability Act 2013. The Bureau’s accountable authority reports to the minister or ministers responsible for administering the Meteorology Act and the Water Act 2007 (Water Act). Since June 2022, the Director of Meteorology has reported to the Minister for the Environment and Water.

3. The Meteorology Act and the Water Act define the Bureau’s functions and the powers of the Director of Meteorology. Broadly, these are to:

• take and record meteorological observations and supply information such as forecasts, warnings, and advice on meteorological matters²; and
• collect, hold, manage, interpret, and disseminate Australia’s water information.³

Rationale for undertaking the audit

4. The Bureau manages more than $1.3 billion in non-financial assets. The Bureau estimates that observing network assets including observing network instruments and other items and systems that support the instruments’ proper functioning make up approximately 28 per cent of the Bureau’s total asset base.

5. Effective management of assets in the observing network is fundamental to the Bureau’s ability to provide services to the community. Meteorological instruments are highly specialised, geographically dispersed, and can require significant levels of investment to purchase, maintain, and repair to effectively support weather and climate forecasting, warnings, and research.

6. The audit was conducted to provide assurance to the Parliament over the Bureau’s management of assets in its observing network.

Audit objective and criteria

7. The objective of the audit was to assess whether the Bureau of Meteorology is effectively managing assets in its observing network.

8. To form a conclusion against the objective, the following high-level criteria were applied.

• Does the Bureau of Meteorology have effective frameworks and systems governing assets in its observing network?
• Does the Bureau of Meteorology have appropriate arrangements to manage the lifecycle of assets in its observing network?
• Does the Bureau of Meteorology effectively monitor, measure, and report on its management of assets in its observing network?

9. This audit focused on the Bureau’s assets in its observing network including operational maintenance practices and records, and relevant plans, policies, and frameworks for managing assets that take observations. The ANAO reviewed the Bureau’s activities from 2018 to October 2024.

10. This audit did not assess:

• the accuracy or security of the measurements taken by the Bureau’s observing network meteorological instruments;
• the quality or accuracy of the Bureau’s forecasting in the delivery of general and extreme weather services, including the ‘downstream’ processing of data and the models used to develop and inform forecasting;
• the quality or accuracy of the Bureau’s maintenance of the climate record;
• supporting infrastructure systems and items, such as air-conditioners, fencing, and small buildings;
• the procurement of observing network assets where the procurement represented expenditure other than operational maintenance; or
• the Bureau’s provision of services to the Department of Defence and related stakeholders for civil defence exercises and operations.

Conclusion

11. The Bureau is partly effective in managing assets in its observing network. The Bureau has been implementing an asset management framework and supporting elements since 2020 however the asset management framework is not fully implemented. While the Bureau has continued to deliver weather services, key areas for further improvement include reviewing asset management planning documents, establishing medium to long term financial planning arrangements to support long term strategic planning, and establishing and embedding more extensive monitoring and reporting arrangements.

12. The frameworks and systems governing the Bureau’s management of assets in its observing network are partly effective. Not all policies and plans have been completed, reviewed, and embedded as planned. The Bureau has not reviewed or updated the Strategic Asset Management Plan to reflect its current practices and does not have a financial forecast for asset intensive areas to enable long term strategic planning. Roles and responsibilities are clearly identified. The Bureau’s Enterprise Asset Management System is in place and largely being used as planned. Development of asset management processes and training pathways is not complete.

13. The Bureau’s arrangements to manage the lifecycle of assets in its observing network are partly appropriate. The Bureau’s asset management plans include lifecycle management activities and related cost estimates. The Bureau’s budget planning process for 2024–25 did not incorporate the predicted costs presented in the asset management plans. All types of maintenance are recorded in the Bureau’s Enterprise Asset Management System and triaged based on priority. The Bureau’s asset management plans include outcomes to report against, however target and actual performance levels are not complete. The Bureau’s guidance surrounding disposals is not complete. The Bureau’s Fixed Asset Register and Enterprise Asset Management System each record assets and disposals differently and the Bureau does not have guidance to ensure records are aligned.

14. The Bureau’s monitoring, measuring, and reporting on assets in its observing network is partly effective. Information on observing network asset data availability is being recorded in Bureau systems and reported to established governance bodies. The Bureau is not reporting against the achievement of sustainability funding commitments. Three of the Bureau’s newly developed observing network performance measures report whether risks have eventuated and two report whether risk controls are being implemented. Since November 2020, the Bureau has been reporting against out-of-tolerance risks relating to ‘unviable’ asset capabilities. Monitoring and reporting is not being undertaken to regularly review asset management maturity, as proposed in the Strategic Asset Management Plan.

Supporting findings

Governance and planning

15. The Bureau has developed an Enterprise Asset Management Policy and a Strategic Asset Management Plan. The Bureau has not reviewed or updated the Strategic Asset Management Plan in the required timeframes. The Enterprise Asset Financial Overview has not been implemented, and the Bureau does not have a financial forecast for ongoing and capital funding requirements for asset intensive areas to enable long term strategic planning. (See paragraphs 2.3 to 2.30)

16. The Bureau has established governance bodies that support asset management. The Bureau has established asset management roles identified as needed in the Strategic Asset Management Plan. Responsibility and accountability for asset lifecycle management is defined. Maintenance and operations responsibilities of each observing network sub-network are documented in asset management plans. (See paragraphs 2.31 to 2.45)

17. The Bureau’s procedures and systems to support the management of assets are incomplete. The Bureau’s Enterprise Asset Management System is in place and largely being used as originally planned. The Bureau does not have a plan to develop all asset management processes identified as necessary in 2022. Development is not complete for training and competency frameworks for three sub-networks and two asset classes. (See paragraphs 2.46 to 2.84)

Asset lifecycle

18. The Bureau’s asset management plans include a section on lifecycle strategies, which describes the types of activities to be undertaken within each sub-network across the lifecycle, and a five- or ten-year investment profile that includes cost estimates and key activities. The Bureau’s budget planning process for 2024–25 did not incorporate the predicted costs presented in the asset management plans. Planning for renewal and disposal is not complete for all asset management plans. (See paragraphs 3.3 to 3.37)

19. All types of maintenance are structured through work orders in the Bureau’s Enterprise Asset Management System. Maintenance tasks are assigned priorities and triaged in accordance with these. For each sub-network, between 52 per cent and 79 per cent of target preventative maintenance work orders were achieved in 2023–24. The outcomes to measure performance throughout the 11 sub-networks are not complete. (See paragraphs 3.38 to 3.69)

20. The Bureau has established policies and procedural guidance that acknowledge the necessity of disposal. This guidance is not complete as there is no guidance to support operational decision-making about when disposal is appropriate. The Bureau’s Fixed Asset Register and Enterprise Asset Management System each record assets and disposals differently. The Bureau does not have a process or guidance to ensure records are aligned between the two systems. (See paragraphs 3.70 to 3.83)

Monitoring and reporting

21. The Bureau’s performance measurement strategy measures the output of the observing network through information on observing network asset data availability. This supports reporting on the achievement of corporate outcomes identified in the Bureau Strategy 2022–2027 and Data and Digital Group Plan. The Bureau is not reporting against the achievement of sustainability funding commitments. Without a strategy for investment in asset maintenance and monitoring and reporting of the impacts of investment, the Bureau cannot know whether investment is effective. (See paragraphs 4.2 to 4.23)

22. The key performance indicator for observing network assets is data availability which is based on the risk of weather information not being available to stakeholders. Three of the Bureau’s newly developed observing network performance measures report whether risks have eventuated and two provide insight into whether risk controls are available and being implemented. Since November 2020, the Bureau has been reporting against out-of-tolerance risks relating to ‘unviable’ asset capabilities. The addition and completion of treatment plans and controls has not reduced the reported risk level. (See paragraphs 4.24 to 4.58)

23. The Bureau has identified corrective actions to take against assets or the asset management approach when observing network asset performance monitoring targets are not met. Monitoring and reporting is not being undertaken to regularly review asset management maturity, as proposed in the Strategic Asset Management Plan. The Bureau has not addressed the risks identified within internal audit recommendations. (See paragraphs 4.59 to 4.76)

Recommendations

Summary of entity response

24. The proposed audit report was provided to the Bureau. The Bureau’s summary response is reproduced below. The full response from the Bureau is at Appendix 1. Improvements observed by the ANAO during the course of this audit are listed in Appendix 2.

Thank you for providing the Australian National Audit Office’s report on the Bureau of Meteorology’s Management of Assets in its Observing Network.

The observing network, consisting of almost 15,000 individual assets, distributed across Australia and its territories, is one of the nation’s largest and most complex data gathering endeavours. The meteorological information gathered by the observing assets, 24 hours a day every day of the year, consists of observations of the atmosphere, space weather, terrestrial waterways and oceans.

Together, they form the information base which is vital for the provision of public weather services, the specialist needs of industry and national security, the integrity of the national climate record, and Australia’s contribution to international meteorological data and science.

I recognise the Bureau’s significant reforms and investment in the observing capabilities over the last decade, including improvements to logistics and maintenance practices through automation of manual observations and new observations maintenance hubs, the introduction of consistent asset management and technology competency and training frameworks, and the recent implementation of a new enterprise asset management system.

The Bureau agrees with the ANAO’s recommendations as further contributions to the maturity of its observing network asset management and operations, and commits to relevant actions.

Background

1. In September 2022 the Australian Energy Regulator reported that over the course of 2022, the war in Ukraine resulted in price volatility and price hikes for energy on international markets.¹ Due to the links between domestic and export markets this affected domestic customers and the wider economy. Simultaneously, domestic factors contributed to wholesale energy price increases.

2. The Department of the Treasury (Treasury) and the Department of Climate Change, Energy, the Environment and Water (DCCEEW) were lead entities in the development of policy options to seek to address energy price increases. On 9 December 2022, the Prime Minister, the Treasurer, and the Minister for Climate Change and Energy announced the Energy Price Relief Plan (the plan) — a package of measures designed to ‘shield Australian families and businesses from the worst impacts of predicted energy price spikes.’

Rationale for undertaking the audit

3. The budget for the package of measures under the Energy Price Relief Plan was estimated between $3 billion and $3.5 billion over five years. The government sought urgent advice on options to seek to address energy price increases.

4. The audit provides assurance to Parliament on whether the Energy Price Relief Plan was effectively designed and the effectiveness of planned frameworks for implementation and evaluation.

Audit objective and criteria

5. The objective of this audit was to assess the effectiveness of the design process for the Energy Price Relief Plan.

6. To form a conclusion against the objective, the following criteria were adopted.

• Was the development of the plan informed by sound policy advice?
• Was implementation effectively planned?
• Are the arrangements to assess the achievement of outcomes of the plan effective?

7. The audit did not assess:

• the design or implementation of the Capacity Investment Scheme which was also included in the 9 December 2022 announcement;
• the design of the Australian Domestic Gas Security Mechanism reforms agreed to by government in September 2022; or
• the implementation of the extension of the energy bill rebates announced in May 2024.

Conclusion

8. The design process for the Energy Price Relief Plan was largely effective. The design process could have been improved with earlier engagement with delivery agencies. The Energy Price Relief Plan would benefit from a plan to assess the achievement of outcomes.

9. The development of the Energy Price Relief Plan was informed by sound policy advice. Roles and responsibilities, relevant guidance and risk management processes were in place to support the development of the Energy Price Relief Plan. Benefits of policy options were assessed and were supported by evidence. During the design process industry stakeholders were consulted on the gas market interventions. Stakeholders within the APS were consulted in the development of policy options, except for: Services Australia; the Department of Infrastructure, Transport, Regional Development, Communications and the Arts (DITRDCA); and the Department of Veterans’ Affairs (DVA). Earlier engagement with APS delivery agencies would have improved the consideration of implementation within the policy advice provided to government. Treasury and DCCEEW did not document risks associated with rapid policy development and risk mitigation strategies. Activities that can assist in reducing risks were undertaken, including seeking expert advice, engaging industry stakeholders, and establishing fit-for-purpose governance and coordination arrangements.

10. Arrangements established to support implementation of the Energy Price Relief Plan were largely effective. Policy advice to government identified risks for all measures. Risks related to the Australian Domestic Gas Security Mechanism reforms were considered when the reforms were initially developed in 2022, however risks specific to bringing forward the commencement of the reforms were not incorporated with other risks included in policy advice. Treasury and DCCEEW monitored risks for three of the five measures — targeted electricity bill rebate, mandatory gas code of conduct, and coal price cap. The department responsible for the implementation of the targeted electricity bill rebate was not identified in policy advice provided to government in December 2022 and was not confirmed by government until August 2023. Treasury had not established a risk assessment and an implementation plan for the targeted electricity bill rebate and the gas price cap. Treasury’s progress reports to government on the targeted electricity bill relief included elements of implementation planning.

11. Arrangements to assess the achievement of outcomes for the Energy Price Relief Plan were largely effective. While activities to assess the achievement of outcomes for individual measures have been planned or undertaken, plans to assess the collective impacts of the five measures under the Energy Price Relief Plan were not established. Monitoring arrangements have been established for four of five measures and implemented — the Australian Domestic Gas Security Mechanism has not been activated. Treasury and DCCEEW have produced reporting on the collective impacts of select measures. DCCEEW has conducted a review of the coal price cap. Planning has commenced for reviews of the targeted electricity bill rebate, mandatory gas code of conduct and Australian Domestic Gas Security Mechanism.

Supporting findings

Development of the plan

12. Roles and responsibilities were defined for the development of policy options. Treasury and DCCEEW have largely relevant guidance on developing policy advice available for staff. The departments did not document risks, and associated mitigation strategies, related to policy development. Activities that may reduce risks were undertaken: Treasury and DCCEEW sought expert advice; the Australian Competition and Consumer Commission (ACCC) engaged with select industry stakeholders; and the Department of the Prime Minister and Cabinet (PM&C) established fit-for-purpose governance and coordination arrangements. (See paragraphs 2.3 to 2.19)

13. During the development of policy advice, APS stakeholders — except for Services Australia, DITRDCA and DVA — were engaged in the design of all measures. Select industry stakeholders were engaged on the gas market interventions prior to policy advice being provided to government. (See paragraphs 2.20 to 2.81)

14. Market modelling and data and advice from relevant government entities was used to support advice to government on policy options. Potential impacts of the proposed policy options included in policy advice were supported by evidence. Treasury and DCCEEW’s impact analysis included an assessment of regulatory burden costs and benefits for three measures — gas price cap, mandatory gas code of conduct and bringing forward the commencement of the Australian Domestic Gas Security Mechanism reforms. While DCCEEW had undertaken a preliminary assessment, an impact analysis was not undertaken for the remaining two measures — targeted electricity bill rebate and coal price cap. (See paragraphs 2.82 to 2.94)

Planning for implementation

15. Advice to government identified risks for four of the five measures. Risks related to the Australian Domestic Gas Security Mechanism reforms were considered as part of an earlier impact assessment process and specific risks related to bringing forward the commencement of the reforms were not highlighted in policy advice. Advice did not document the risk that payments may be made to ineligible recipients under the targeted electricity bill rebate measure. DCCEEW undertook risk assessments for two of the five measures — the mandatory gas code of conduct and the coal price cap. Risks were monitored for three of the four measures led by Treasury and DCCEEW — the targeted electricity bill rebate, mandatory gas code of conduct, and coal price cap. Risk reporting was undertaken by Treasury for the targeted electricity bill rebate and by DCCEEW for the mandatory gas code of conduct. Risks related to the gas price cap and coal price cap measures were not reported. (See paragraphs 3.3 to 3.16)

16. Advice to government included information on implementation of all five measures under the plan. Policy advice on the targeted electricity bill rebate and the coal price cap measures did not identify which department would be responsible for implementation. Implementation plans were established for three measures — mandatory gas code of conduct, coal price cap and bringing forward the commencement of the Australian Domestic Gas Security Mechanism reforms. Implementation planning activities were undertaken for the remaining two measures. For the targeted electricity bill rebate, Treasury had not established an implementation plan. Elements of implementation planning were included within progress reports provided to government. Implementation planning was discussed in governance meetings co-chaired by Treasury and Services Australia. (See paragraphs 3.17 to 3.38)

Monitoring and assessing the achievement of outcomes

17. Subsequent to the announcement of the Energy Price Relief Plan in December 2022, oversight and monitoring frameworks have been established and implemented for four of five measures — the Australian Domestic Gas Security Mechanism has not been activated and therefore monitoring arrangements have not been implemented. Monitoring activities are being undertaken in accordance with the frameworks which have been established. (See paragraphs 4.3 to 4.29)

18. Treasury and DCCEEW outlined the objectives and estimated impacts of the Energy Price Relief Plan. Plans to assess the collective impacts of the five measures under the plan were not established. Entities have developed plans to assess the achievement of outcomes for the individual measures, except for the gas price cap. Treasury and DCCEEW have reported collective impacts of the Energy Price Relief Plan and DCCEEW has conducted a review of the New South Wales coal price cap. Statutory reviews of the mandatory gas code of conduct and the Australian Domestic Gas Security Mechanism reforms are due to be undertaken during 2025. (See paragraphs 4.30 to 4.70)

Recommendations

Summary of entity responses

19. The proposed report was provided to the Department of the Treasury and the Department of Climate Change, Energy, the Environment and Water. Extracts of the proposed report were provided to the ACCC, AER, DVA, Services Australia, DITRDCA, DISR, and PM&C.

20. Treasury, DCCEEW, the AER and DISR provided summary responses and these are below. Full responses from these entities are included at Appendix 1.

Department of the Treasury

Treasury welcomes the report, in particular the reflection that the policy was based on sound advice and that both policy and implementation development were largely effective to achieve the desired policy outcomes. Treasury also welcomes the report’s key messages, especially regarding the need to adapt risk appetite to short timeframes and urgent delivery. This aligns with Treasury’s risk management policy, noting our higher appetite for risk in these circumstances while still balancing potential consequences.

Treasury agrees with the recommendation presented in the report. Treasury accepts the ANAO’s evidence regarding the risk assessments and implementation planning during the development of the Energy Price Relief Plan. Treasury considers the recommendation recognises the ANAO’s findings and Treasury acknowledges it could develop guidance on how the risk management framework should be applied in situations where timeframes are short and delivery is urgent.

Treasury has engaged an external review of the implementation of the first round of the Energy Bill Relief Fund and will leverage findings from this review in drafting further risk management guidance.

Department of Climate Change, Energy, the Environment and Water

The Department of Climate Change, Energy, the Environment and Water (the department) welcomes the ANAO report and the conclusion that the design process for the Energy Price Relief Plan was largely effective, with no recommendations made for the department.

The Government’s Energy Price Relief Plan was a package of measures developed to shield Australian families and businesses from the worst impacts of predicted energy price spikes. This rapid policy development occurred within complex electricity and gas markets and required engagement across multiple agencies and other parties during its development and implementation.

The ANAO’s observations including areas of improvement applicable in the unique setting of rapid policy development are valuable insights that will inform and influence the department’s continual improvement practices in stakeholder engagement and program governance.

Australian Energy Regulator

The AER was provided with extracts from the proposed report.

The AER notes that there are no findings or recommendations relating to the AER.

The AER notes the contents of the report, including the key messages. The key messages reflect the experience and approach of the AER.

Department of Industry, Science and Resources

The Department of Industry, Science, and Resources (the department) acknowledges the Australian National Audit Office’s proposed audit report on the Design of the Energy Price Relief Plan.

The department acknowledges the report’s key findings on policy design, governance and risk management. The department strives to achieve meaningful stakeholder engagement to ensure feedback is accounted for in policy design. In the design and implementation of the Australian Domestic Gas Security Mechanism (ADGSM) reforms, two public consultation processes were conducted – on the design of policy and on the draft guidelines – to inform the development of effective policy that contributes to the delivery of positive outcomes for our stakeholders.

The department is committed to establishing and improving robust governance and risk management practices, and notes these principles are particularly important when designing and implementing policy initiatives in constrained timeframes.

Background

1. The Public Service Act 1999 (PS Act) requires that Australian Public Service (APS) employees, agency heads and statutory office holders abide by the APS Code of Conduct.¹ The APS Code of Conduct, consistent with duties under the Public Governance, Performance and Accountability Act 2013 (PGPA Act), require officials to declare the receipt of gifts, benefits and hospitality. Collectively, these requirements establish obligations for officials and Commonwealth entities in relation to how they manage the provision and receipt of gifts, benefits and hospitality.

2. Section 27 of the PGPA Act states that an official must not improperly use their position to gain, or seek to gain, a benefit for themselves or another person, or to cause, or seek to cause, detriment to the entity, the Commonwealth, or any other person.² The National Anti-Corruption Commission Act 2022 also contains provisions against conduct that adversely affects (or could adversely affect) the honest and impartial exercise of any public official’s powers, functions or duties.³

3. The Australian Public Service Commission (APSC) publishes Guidance for Agency Heads – Gifts and Benefits. The principles underpinning this guidance are that:

• agency heads are meeting public expectations of integrity, accountability, independence, transparency and professionalism in relation to gifts and benefits; and
• there is consistency in relation to agency heads’ management of gifts and benefits across APS agencies and Commonwealth entities and companies.⁴

4. The Murray–Darling Basin Authority (MDBA) is a corporate Commonwealth entity established under the Water Act 2007 (the Water Act) and comprises:

• an eight-member Authority (the Authority) with functions and responsibilities defined under the Water Act and conditions set by the Remuneration Tribunal⁵; and
• a statutory agency of staff engaged under the Public Service Act, with an average staffing level of 367 for 2024–25.⁶

5. The MDBA is responsible for coordinating how water resources are managed in the Murray–Darling Basin.⁷

Rationale for undertaking the audit

6. Section 27 of the PGPA Act states that an official must not improperly use their position to gain, or seek to gain, a benefit for themselves or another person, or to cause, or seek to cause, detriment to the entity, the Commonwealth, or any other person. Public service entities must meet public expectations of integrity, accountability, independence, transparency, and professionalism. Acceptance of a gift or benefit that relates to an official’s employment can create a real or apparent conflict of interest that should be avoided.⁸

7. Public confidence in Commonwealth entities and the APS can be damaged when gifts and benefits that create a conflict of interest are accepted or not properly declared. The APSC states in its publication, APS Values and Code of Conduct in practice, that the risk of the appearance of a conflict can damaging to public confidence:

The appearance of a conflict can be just as damaging to public confidence in public administration as a conflict which gives rise to a concern based on objective facts.⁹

8. This audit was conducted to provide assurance to the Parliament that the MDBA has complied with gifts, benefits and hospitality requirements.

Audit objective and criteria

9. The objective of the audit was to assess whether the MDBA had complied with gifts, benefits and hospitality requirements.

10. To form a conclusion against the objective, the ANAO adopted the following two high-level audit criteria.

• Did the MDBA have effective arrangements in place to manage gifts, benefits and hospitality?
• Were the MDBA’s controls and processes for gifts, benefits and hospitality operating effectively in accordance with its policies and procedures?

11. The audit examined the management of gifts, benefits and hospitality within the MDBA over the period 1 July 2021 to 31 March 2024.

Conclusion

12. The MDBA has been partly effective in complying with gifts, benefits and hospitality requirements. While the MDBA has policies and procedures for managing gifts, benefits and hospitality, the implementation of its controls and processes for ensuring compliance with gift, benefit and hospitality requirements have not been effectively operationalised.

13. The MDBA has established largely effective arrangements for managing gifts, benefits and hospitality. The MDBA has not considered conflict of interest risks associated with gifts, benefits and hospitality within its risk management framework. While the MDBA has developed policies and procedures for the acceptance and provision of gifts, benefits and hospitality, there are opportunities to improve the consistency between policies and procedures. Whole of government training on integrity and fraud and corruption is mandatory for MDBA staff. Limited guidance is provided to Authority members. The MDBA maintains an internal register of gifts and benefits accepted by MDBA officials, and has published a register of gifts and benefits received by the Chief Executive.

14. The MDBA’s controls and processes are partly effective in supporting its compliance with gift, benefit and hospitality requirements. Deficiencies were identified with preventative controls relating to reporting on mandatory training completion and the compliance with policy and procedural requirements for the acceptance and provision of gifts, benefits and hospitality. While the MDBA does not have specific detective controls relating to acceptance of gifts, benefits and hospitality, since 2022–23 it has included a question on provision of hospitality in its biannual financial compliance survey. The MDBA has not established processes for managing non-compliance or assurance activities for gifts, benefits and hospitality.

Supporting findings

Arrangements for managing gifts, benefits and hospitality

15. The MDBA has articulated risks and controls related to bribery and corruption in a 2024 fraud and corruption risk assessment. Existing controls related to acceptance or provision of gifts, benefits and hospitality were not referenced in the 2024 assessment. Two integrity-related risks were identified in the MDBA’s November 2021 Enterprise Risk Management Plan. The MDBA developed a revised suite of enterprise risks in August 2023, which no longer includes integrity-related risks. (See paragraphs 2.6 to 2.21)

16. The MDBA has developed policies and procedures for the acceptance of gifts, benefits and hospitality through its Accountable Authority Instructions, Instrument of Delegation, Official Hospitality, Gifts and Benefits Guidelines and Declaration of Interests Policy. There were inconsistencies between these documents in relation to instructions for accepting ‘token gifts, benefits or hospitality’ (valued at $50 or below). In addition, the guidelines do not specify timeframes for obtaining delegate approval and reporting on acceptance of gifts, benefits or hospitality or sanctions associated with failure to comply with the requirements. (See paragraphs 2.22 to 2.37)

17. The MDBA has developed policies and procedures for the provision of gifts, benefits and hospitality through its Accountable Authority Instructions, Instrument of Delegation, Official Hospitality, Gifts and Benefits Guidelines and other policy documents. There were inconsistencies between these documents in relation to the distinction between official hospitality and business catering. (See paragraphs 2.38 to 2.56)

18. The MDBA has a mandatory training package which includes responsibilities and expectations for officials relating to gifts, benefits and hospitality. The relevant modules are whole of government modules on integrity and fraud and corruption. Members of the Authority have not been provided specific guidance on policy and procedural requirements for gifts, benefits and hospitality. ( See paragraphs 2.57 to 2.67)

19. The MDBA has published a register of gifts and benefits received by the Chief Executive. It updated the register in October 2024 to comply with the requirement to annually report gifted airline lounge memberships. In August 2024 the MDBA decided to commence publishing gifts and benefits received by MDBA officials, including Authority members. The MDBA maintains an internal register of gifts, benefits and hospitality accepted by officials from external parties. It expanded the register in August 2024 to cover provision of official hospitality. There were no internal reporting mechanisms in place for the Chief Executive or management committees to have oversight of gifts, benefits and hospitality accepted or provided by MDBA officials. As a result of the inconsistencies in the treatment of official hospitality and business catering events by the MDBA, and the absence of a register, the MDBA has not been well placed to accurately report to Parliament on instances of official hospitality. (See paragraphs 2.68 to 2.80)

Controls and processes for managing gifts, benefits and hospitality

20. The MDBA has implemented preventative controls for the receipt or provision of gifts, benefits and hospitality through its policies and procedures, mandatory staff training, delegations and approval requirements. The MDBA does not provide reporting on the completion of mandatory training to the Chief Executive or relevant governance committees. Requirements set out in policies and procedures prohibiting the acceptance of gifts, benefits and hospitality from contractors were not adhered to. There was inconsistent treatment of business catering and official hospitality events, and instances of non-compliance with controls for official hospitality. (See paragraphs 3.6 to 3.50)

21. The MDBA has not implemented detective controls specifically for the purpose of identifying non-compliance with requirements for the receipt and provision of gifts, benefits and hospitality. The MDBA’s biannual financial compliance survey is a detective control than can support the identification of non-compliance with requirements. Officials responding to the survey identified one instance of non-compliance with business catering or official hospitality guidelines in 2023–24, which was included in summary reporting provided to the Chief Executive. (See paragraphs 3.51 to 3.57)

22. The MDBA has not documented or implemented processes for managing identified instances of non-compliance relating to management of gifts, benefits and hospitality. The ANAO identified instances of non-compliance that had not been identified or reported by the MDBA. (See paragraphs 3.58 to 3.62)

23. The MDBA has not developed an evidence-based assurance framework that considers management of gifts, benefits and hospitality. (See paragraphs 3.63 to 3.68)

Recommendations

Summary of entity responses

24. The proposed report was provided to the MDBA. Extracts of the proposed report were also provided to Callida Indigenous Consulting, Chartertech, eWater, Hudson, Paxus, Scyne Advisory and Xaana.ai. Summary responses to the report, where provided, are below and the MDBA’s full response is at Appendix 1. Improvements observed by the ANAO during the course of this audit are listed in Appendix 2.

Murray–Darling Basin Authority

The MDBA welcomes the ANAO’s findings and agrees with the three recommendations in the Report. We are pleased that no non-compliance with our legislative obligations (including PGPA Act) were identified.

We are committed to upholding the highest standards of integrity. Currently, we are working to improve consistency in policy requirements and control operating effectiveness over the management of gifts, benefits, and official hospitality.

Our actions in response to the ANAO audit include frequent reporting and increased oversight on our internal gifts, benefits, and hospitality register to identify potential conflicts of interest. We are also embedding processes to ensure compliance with mandatory staff training and internal procedures, and reviewing internal policies for consistent treatment of gifts and benefits.

The MDBA also has progressed significant work in relation to improving its risk management practices over the past 18 months and is currently focused on integrity related risks and appropriate controls, including in relation to gifts, benefits and hospitality.

The MDBA appreciates the ANAO’s approach in conducting the audit, including regular engagement, progress updates, and efforts to understand our agency’s policy and practices.

Chartertech

Chartertech’s Conflict of Interest Policy and Declaration outlines the policy for receiving gifts and benefits. This policy requires declaration of any gifts, benefits or hospitality received valued at over $100, this threshold is applied to the Chartertech Gifting Register, which was referenced in the ANAO response. Chartertech can confirm that there are no records of gifts, benefits or hospitality provided for any MDBA personnel in accordance with this policy.

Background

1. The Growing Regions Program was announced in May 2023 as an open, competitive grants program that provides grants to local government entities and eligible incorporated not-for-profit organisations for capital works projects that aim to deliver community and economic benefits across regional and rural Australia.¹ The Australian Government committed $600 million to the program over two rounds with $300 million available in each round.

2. Grants between $500,000 and $15 million were available to eligible applicants to deliver priority community and economic infrastructure projects. The objectives of Round 1 of the program are:

• constructing or upgrading community infrastructure that fills an identified gap or need for community infrastructure.
• contributing to achieving a wide range of community socio-economic outcomes; and
• is strategically aligned with regional priorities.

3. The Department of Infrastructure, Transport, Regional Development, Communications and the Arts (Infrastructure) is responsible for the Growing Regions Program. Infrastructure engaged the Department of Industry, Science and Resources, through the Business Grants Hub, to administer the program.

4. The program used a two-stage application process. Applicants were required to submit an Expression of Interest (EOI) application which would first be assessed by the Business Grants Hub to ensure projects met eligibility, project readiness and program suitability requirements before a multi-party parliamentary panel (the panel) assessed how closely all eligible projects aligned with regional priorities. The panel then recommended to Infrastructure which projects should be invited to submit a full application. EOI applications that were assessed as meeting requirements and approved to proceed were invited to submit a full application in stage two. Infrastructure made the final decision on which applicants would be invited to progress to stage two and submit a full application.

5. Round 1 of the Growing Regions Program opened on 5 July 2023 and received 650 EOI applications seeking a total of $2.7 billion in grant funding, of which 443 applications ($1.81 billion) were found suitable by the panel to progress to stage two.

6. Full applications opened on 27 November 2023 and closed on 15 January 2024. The Business Grants Hub assessed 311 projects for funding worth $1.5 billion. Of these projects, Infrastructure recommended 54 projects for funding up to the value of $300 million. On 16 May 2024 the Minister for Infrastructure, Transport, Regional Development and Local Government announced funding for 40 successful projects to the value of $207 million.²

7. This audit is the second of two reports on the effectiveness of the Growing Regions Program. The first audit, Auditor-General Report No. 31 2023–24 Design of the Growing Regions Program, was presented to the Parliament on 29 May 2024 and examined the effectiveness of Infrastructure’s design and planning for the Round 1 of the Growing Regions Program.

Rationale for undertaking the audit

8. The Growing Regions Program was a new grants program and one of the largest programs administered by Infrastructure. The program also contained a new design feature — a two-stage assessment process with an EOI stage assessed by a multi-party parliamentary panel.

9. Previous ANAO performance audits have identified deficiencies in Infrastructure’s implementation of regional grants programs including program design, providing information to the delegate, and transparency of decision-making.³

10. This audit provides assurance to the Parliament on the implementation and award of funding for Round 1 of the Growing Regions Program and whether Infrastructure implemented lessons learned from previous grants programs.

Audit objective and criteria

11. The objective of the audit was to assess the effectiveness of the implementation and award of funding for Round 1 of the Growing Regions Program.

12. To form a conclusion against the objective, the following high-level audit criteria were applied.

• Were applications assessed in accordance with the grant opportunity guidelines?
• Were funding recommendations and decisions made in accordance with the Commonwealth Grants Rules and Guidelines?

Conclusion

13. The implementation and award of funding for Round 1 of the Growing Regions Program was largely effective. Effectiveness was diminished by Infrastructure undertaking an additional assessment process which was not specified in the grant opportunity guidelines.

14. Assessment of applications for the Growing Regions Program was partly in accordance with the grant opportunity guidelines. The Business Grants Hub assessed EOI applications against the grant opportunity guidelines despite eligibility requirements for projects not being clearly defined in the guidelines. After the Business Grants Hub had completed its eligibility assessment, the minister through their office, advised Infrastructure of their preference for all 163 applicants found ineligible to be given the opportunity to correct any administrative errors or omissions with their applications. While the panel scored and ranked applications as required under the grant opportunity guidelines, panel members noted difficulty with the definition of what constituted ‘regional priorities’. Infrastructure did not consider in its development of the panel assessment process, the implications on a project’s average score by having a different number of panel members scoring applications.

15. Full applications were assessed partly in line with the grant opportunity guidelines. In its assessment of full applications, the Business Grants Hub correctly applied the three merit criteria from the grant opportunity guidelines. Infrastructure then completed a further geographical assessment of projects which was not set out in the grant opportunity guidelines. This resulted in Infrastructure removing three projects from the merit list and adding seven. By altering the results of the Business Grants Hub’s merit assessment, Infrastructure recommended projects to the minister which were not assessed as the most meritorious under the grant opportunity guidelines.

16. Infrastructure’s advice to the minister outlined the assessment process and risks relating to the approval of applications for the Growing Regions Program. The advice did not state how value for money was determined following Infrastructure’s additional analysis of the results of the Business Grants Hub’s merit assessment. Based on an initial, high-level assessment from the Australian Government Solicitor, Infrastructure advised that there was no lawful authority for the proposed expenditure under the program and proposed that to address that, funding could be awarded under a Federation Funding Agreement rather than as grants. Funding decisions were appropriately documented by the minister and the minister did not approve any projects that were not recommended by Infrastructure. The announcement of successful projects occurred two months after the original timeframes provided to applicants. As at 16 October 2024, the Growing Regions Program Federation Funding Agreement Schedule had been executed with the Western Australian, South Australian, Queensland, Tasmanian, New South Wales and Victorian governments.

Supporting findings

Assessment of applications

17. The Business Grants Hub assessed EOI applications against the grant opportunity guidelines despite eligibility requirements for projects not being clearly defined in the guidelines. After the Business Grants Hub had completed its eligibility assessment, the minister, through their office, advised Infrastructure of their preference for all 163 ineligible applicants to be given an opportunity to correct any administrative errors or omissions. The Business Grants Hub then completed another eligibility assessment on the 58 applications that had been resubmitted. Conflict of interest declarations were completed by all assessors undertaking the EOI assessment. Panel members received training from the Business Grants Hub and attended probity briefings delivered by an external probity advisor engaged by Infrastructure. (See paragraphs 2.3 to 2.33)

18. The panel scored and ranked applications as required under the grant opportunity guidelines, noting difficulty with the definition of what constituted ‘regional priorities’. Recommendations were made based on average scores and followed the requirements set out in the guidelines. Decisions were documented and probity requirements were followed. All panel members were originally required to score each application except where projects were in their electorate or jurisdiction. To assist in managing the panel’s workload, part-way through the assessment process there was a change in the scoring approach from having panel members score all applications, to a minimum of three scorers per application. Infrastructure did not consider in its design of the assessment process how different numbers of panel members scoring each application would impact on a project’s average score. (See paragraphs 2.34 to 2.66)

19. The Business Grants Hub assessed full applications against the three merit criteria as outlined in the grant opportunity guidelines and awarded each project a final score. The design of the eligibility requirements in the grant opportunity guidelines resulted in projects that potentially did not meet the program’s policy intent progressing through the assessment process. The minister did not fund 14 recommended projects which they identified as not suitable for funding as they would be better suited for funding under a different program. (See paragraphs 2.67 to 2.83)

20. Applications were ranked by the Business Grants Hub based on its assessment against the three criteria set out in the grant opportunity guidelines. The Business Grants Hub reported all highly suitable and suitable projects for funding. Following the Business Grants Hub’s merit assessment, Infrastructure completed further analysis and assessment of projects for geographical spread and socio-economic outcomes. This further assessment was not approved when the program was designed or set out in the grant opportunity guidelines. This resulted in Infrastructure removing three projects from the Business Grants Hub’s full assessment merit list and adding a further seven. (See paragraphs 2.84 to 2.101)

Award of funding

21. An initial high-level assessment by the Australian Government Solicitor obtained by Infrastructure prior to briefing the minister stated that lawful authority for proposed expenditure for the program was not in place. Infrastructure proposed an approach that sought to mitigate this risk. Infrastructure recommended that the minister approve 54 applications up to the limit of the available funding. The recommendation did not state how value for money was determined following an additional analysis of project applications and adjustment of results by Infrastructure. Funding recommendations for Round 1 of the Growing Regions Program did not meet the original timeframes as planned by Infrastructure primarily due to the need to seek legal advice on the lawful authority matter. (See paragraphs 3.1 to 3.22)

22. Reasons for all funding decisions were appropriately documented and informed by written recommendations from Infrastructure. The minister did not award funding to any projects that were not recommended by Infrastructure. All 40 applicants that the minister approved for funding were found to be highly suitable or suitable through the merit assessment process. The minister did not award funding to 14 projects that were recommended by Infrastructure. (See paragraphs 3.23 to 3.33)

Recommendations

Summary of entity response

23. The proposed report was provided to the Department of Infrastructure, Transport, Regional Development, Communications and the Arts, and the Department of Industry, Science and Resources. Extracts of the proposed report were provided to the Attorney-General’s Department. The summary responses are provided below and the full responses are at Appendix 1.

Department of Infrastructure, Transport, Regional Development, Communications and the Arts

The department welcomes the overall conclusion that the implementation and award of funding for Round 1 of the Growing Regions Program was largely effective. The department notes there have been some additional challenges in implementing the Growing Regions Program, including as a result of external factors.

While the department has asked the ANAO to consider the factual basis and emphasis given to some of the findings and commentary in the report, the department acknowledges that aspects of the program could have been improved.

The department agrees to both recommendations in the report and notes they are being implemented in the administration of Round 2 of the program.

Department of Industry, Science and Resources

The Department of Industry, Science and Resources acknowledges the Australian National Audit Office’s report on the implementation and award of funding for the Growing Regions Program.

The department notes this audit is the second of two reports on the effectiveness of the Growing Regions Program.

As a provider for Australian Government grants through the Business Grants Hub we will consider the key messages from the audit that are applicable for all Australian Government entities in the co-design and administration of future granting programs.

Attorney-General’s Department

The Attorney-General’s Department (“the department”) notes the extracts of Chapter 1 and Chapter 3 of the proposed ANAO report on the Implementation and award of funding for the Growing Regions Program.

The department has no comments on the audit findings in the extract it has viewed. Responsibility for administering the Growing Regions Program rests with the Department of Infrastructure, Transport, Regional Development, Communications and the Arts.

Background

1. The National Anti-Corruption Commission’s (NACC’s) 2022/2023 Integrity Outlook states:

Conflicts of interest are also a prevalent source of corruption issues. Many types of corrupt conduct – such as breaches of public trust, abuse of office and misuse of information – originate from conflicts of interest. Such conflicts therefore pose a substantial risk for government agencies, parliamentarians, and public officials. This is why identifying, disclosing and managing potential conflicts of interest is a critical pillar of integrity architectures.¹

2. The Public Governance, Performance and Accountability Act 2013 (PGPA Act) sets out general duties of accountable authorities and officials of Australian Government entities.² The general duties related to conflicts of interest for an official include:

• not improperly using their position or information obtained through their position to gain or seek to gain a benefit or advantage for themselves or others, or to cause detriment to the entity, Commonwealth or others³; and
• disclosing the details of any material personal interests that relate to the affairs of the entity.⁴

3. The Public Governance, Performance and Accountability Rule 2014 (PGPA Rule) provides further detail on requirements for managing conflicts of interest.⁵ Under the PGPA Act, accountable authorities have a duty to establish and maintain appropriate systems of risk oversight and management and internal control.⁶ In addition, the PGPA Rule establishes a requirement for the accountable authority to take all reasonable measures to prevent, detect and deal with fraud and corruption relating to the entity.⁷

4. Boards of corporate Commonwealth entities (CCEs) are the accountable authority unless otherwise prescribed by an Act or the rules. Membership of boards can consist of both executive directors and non-executive directors. CCE boards are responsible for the operations of their entities.

5. The Department of Finance states:

Corporate Commonwealth entities generally have enabling legislation that establishes the scope of their activities and a multi-member accountable authority (such as a board of directors).

6. Specialist skills and expertise may be required to provide a suitable composition for a CCE board. The board members that are appointed to CCE boards in respect of their specialist skills or expertise can have inherent interests that exist as a consequence of their specialist experience. For example, they may be involved in industry associations or have duties to other organisations. These interests can conflict with their duties as a board member of a CCE.

7. The operations of boards for four CCEs were selected for examination as a part of this audit:

• the Australian Sports Commission (ASC);
• Food Standards Australia New Zealand (FSANZ);
• Infrastructure Australia (IA); and
• the National Portrait Gallery of Australia (NPGA).

Rationale for undertaking the audit

8. According to the Australian Public Service Commissioner, the public is entitled to have confidence in the integrity of public officials, and to know that the personal interests of public officials do not conflict with their public duties.⁸ Apparent conflicts can be just as damaging to confidence in public administration as real conflicts, so disclosures and effective management of real, apparent and potential conflicts of interest is an important element of the Australian Government’s integrity framework.

9. Section 29 of the PGPA Act provides a duty to disclose material interests. CCE board members may have material personal interests that relate to their role as a member of an accountable authority. Board requirements for specific qualifications, skills and experience pose the risk that domain knowledge and industry familiarity may lead to conflicts of interest.

10. This audit was conducted to provide assurance to the Parliament that the boards of the four CCEs are effectively managing conflicts of interest.

Audit objective and criteria

11. The objective of the audit was to assess the effectiveness of the operations of the boards of four CCEs in managing conflicts of interest.

12. To form a conclusion against the objective, the ANAO examined:

• Have the boards developed appropriate arrangements to manage board conflicts of interest?
• Have the boards effectively managed board conflicts of interest consistent with their own policies?

13. The audit examined the operations of the boards of four CCEs in managing conflicts of interest over the period 1 July 2021 to 31 December 2023. The appointment process for board members was not examined as part of this audit.

Conclusion

14. The operations of the boards in managing conflicts of interest were largely effective. Arrangements for managing conflicts of interest were implemented by the boards in accordance with legislative requirements and documented by some of the boards in policies and procedural guidance. The effectiveness in implementing these arrangements were inconsistent across the boards which resulted in deficiencies in declaring and managing conflicts of interest by the boards. This reduced the overall effectiveness of the boards in their management of conflict of interest risks.

15. The boards have developed largely appropriate arrangements for managing conflicts of interest. All boards have implemented arrangements to support the declaration of interests by board members, including following their appointment and during the term of their appointment. The arrangements implemented by the boards were aligned to requirements in the Public Governance, Performance and Accountability Act 2013 (PGPA Act) and Public Governance, Performance and Accountability Rule 2014 (PGPA Rule). The board of the NPGA did not have a conflict of interest policy that included managing conflicts of interest related to its board. The boards of the ASC and FSANZ had not developed conflict of interest management plans for board members holding other roles within the Australian Government. The boards have largely relied on board induction processes to provide training and education in relation to managing conflicts of interest. The boards had implemented varying arrangements to obtain assurance over the management of conflicts of interest relating to board members.

16. The boards were partly effective in implementing arrangements for managing board conflicts of interest consistent with their own policies. There were shortcomings in the operating effectiveness of processes for declaring and managing conflicts of interest across all boards. This included instances where: declarations of interest were not obtained from newly appointed board members in a timely manner; declarations of interests were not implemented as a standing agenda item at board meetings; and boards’ assessments of declarations of interest were not sufficiently documented to record whether the board had determined declarations to be material personal interests.

Supporting findings

Arrangements to manage conflicts of interest

17. The boards had identified and assessed fraud and corruption risks within their risk management frameworks. The board of IA had identified conflict of interest controls for its then board within its operational and fraud risk registers. (See paragraphs 2.3 to 2.14)

18. All boards had arrangements for board members to declare interests following appointment and at board meetings. The arrangements implemented by the boards were aligned to requirements in the PGPA Act and PGPA Rule. The ASC, FSANZ and IA boards had policies and procedural guidance to manage board conflicts of interest. The NPGA board did not have a conflict of interest policy that provided coverage of the board, with the exception of a policy for declaring, managing and overseeing board conflicts of interest related to the acquisition of works. The boards for ASC and FSANZ had not developed management plans for potential conflicts of interest relating to ex-officio board members that held other roles within the Australian Government. (See paragraphs 2.15 to 2.60)

19. The boards largely relied on board induction processes and related resources from the Department of Finance for promoting compliance with conflict of interest requirements. The boards for the ASC and FSANZ had developed guidance specific to managing board conflicts of interest. The FSANZ board provided board members with access to its learning management system, which included training related to conflicts of interest. The IA board had delivered training for board members that included a module on conflicts of interest. None of the boards had documented training plans for board members or arrangements for monitoring training undertaken by board members. The Department of Finance’s resources on managing conflicts of interest are not specific to boards of corporate Commonwealth entities. (See paragraphs 2.61 to 2.84)

20. None of the boards had implemented an assurance strategy or framework that was specific to, or provided coverage of, board conflicts of interest. All boards had developed some form of arrangement to obtain assurance over board conflicts of interest.

• The ASC board obtained attestations from its board members on compliance with section 29 of the PGPA Act and provided reporting to its audit committee.
• The FSANZ board maintains a centralised register of interests declared by board members that is published on its website.
• The IA board undertook an internal audit in 2018–19 that covered board conflicts of interest and conducted Australian Securities and Investments Commission register searches of board members’ interests in 2021 to confirm declarations.
• The NPGA board had undertaken a specific review of board declarations to update its register of interests for board members. (See paragraphs 2.85 to 2.105)

Effectiveness of conflict of interest arrangements

21. There were instances across all boards where processes for declaring interests were not operating effectively.

• The ASC, FSANZ and NPGA boards had instances where they held board meetings where declarations of interests were not included in agendas or obtained during board meetings.
• The ASC and NPGA boards had instances where they did not obtain declarations of interests from newly appointed board members in a timely manner.
• All boards did not sufficiently document their assessment of declared interests and whether they were considered to be material personal interests. (See paragraphs 3.3 to 3.24)

22. All boards had implemented induction processes for their board members that covered conflict of interest. The ASC’s board induction processes were updated to provide coverage of conflicts of interest for board members commencing from March 2022, but not all current members had received the guidance. The FSANZ, IA and NPGA boards had implemented additional training and education arrangements on conflict of interest obligations for board members. (See paragraphs 3.25 to 3.35)

Recommendations

Summary of entity responses

23. Extracts of the proposed report were provided to the ASC, the Department of Finance, FSANZ, IA and the NPGA. The summary responses are provided below, and the full responses are included at Appendix 1. Improvements observed by the ANAO during the course of the audit are listed in Appendix 2.

Australian Sports Commission

Thank you for providing the Australian Sports Commission (ASC) with the opportunity to comment on the Australian National Audit Office (ANAO) proposed audit report on Management of Conflicts of Interest by Corporate Commonwealth Entity Boards.

The ASC acknowledges and accepts the key findings, recommendations and the opportunities for improvement presented in the Section 19 Report.

Department of Finance

The Department of Finance agrees the recommendation and findings provided in the report extract.

Food Standards Australia New Zealand

FSANZ acknowledges the importance of this audit to provide assurance to Parliament that the operations of Boards effectively manage conflicts of interest. In this context it is noted FSANZ is one of four entities (out of 74 CCE’s) assessed over the period July 2021 to December 2023.

The Board notes the audit’s findings that our arrangements for managing conflicts of interest align with the relevant legislation and are largely effective. As the independent agency responsible for the development of draft food standards for Australia and New Zealand, trust and confidence of decision-makers and stakeholders is important. The FSANZ Board takes a very conservative approach to managing conflicts of interest and, for transparency, we maintain and manage a register of all interests of Board members, regardless of whether they are classified as a material personal interest or not.

Infrastructure Australia

As the Australian Government’s independent adviser on nationally significant infrastructure investment planning and project prioritisation Infrastructure Australia values accountability, acting with integrity and upholding the highest ethical standards.

We appreciate the work of the ANAO which found that the boards of the four CCEs were largely effective in their management of conflicts of interest.

Infrastructure Australia accepts the recommendation that we strengthen our recording of the assessment and consequences of declared conflicts of interest. We have also commenced work to reflect the ANAO feedback on opportunities for improvement in administrative and management practices to strengthen our governance framework in relation to conflicts of interest.

National Portrait Gallery of Australia

The National Portrait Gallery (NPGA) welcomes the Australian National Audit Office’s (ANAO) report and accepts the recommendations made for the agency.

The report finds that the NPGA has developed largely effective arrangements for managing conflicts of interest for its the Board in accordance with legislative requirements.

The report identifies areas for improvement and makes two recommendations where the NPGA can take steps to strengthen its processes and assurance activities through update of its existing Conflict of Interest policy and processes. The NPGA agrees with, and is already taking steps to implement, these recommendations.

The NPGA also recognises the other areas of improvement identified in the Report, notably the expansion of assurance activities and the implementation of a Board training workplan. This will ensure that the NPGA is operating in alignment with government best practice in conflicts of interest management.

The NPGA thanks the ANAO audit team for their professionalism during the audit process.