Introduction

1. The $650 million Jobs Fund was one of the fiscal measures implemented by the Government in 2009 to support employment and economic recovery in response to the global financial crisis. It was announced on 5 April 2009 as part of a Jobs and Training Compact with Australians affected by the global recession that promised training, support and local initiatives to help them get back to work.¹ The Jobs Fund comprised a $150 million Infrastructure Employment Projects (IEP) stream², a $200 million Get Communities Working stream and a $300 million Local Jobs stream.

2. The Local Jobs stream related to the delivery of commitments made to the Australian Greens in the context of securing passage of the legislation relating to the Nation Building and Jobs Plan in February 2009. Of the $300 million announced as being allocated to the Local Jobs stream, $100 million was to be quarantined to satisfy specific aspects of the commitments the Government had made to the Greens. As a result, $60 million was specifically set aside for heritage-related projects and $40 million³ was quarantined for the construction of bike paths. Both quarantined components were to be restricted to the 2009-10 financial year, while the non-quarantined component of the Local Jobs stream would be a two-year program to 30 June 2011.

3. Although the three streams of the Jobs Fund each had their own particular focus, in each case the primary objective was the support and creation, through the delivery of funded projects, of jobs and employment opportunities in communities affected by the global recession and for disadvantaged job seekers. This was reflected in one set of guidelines initially being developed, encapsulating all three funding streams. These guidelines were published in April 2009. They stated that, to be considered for funding under any of the streams, a project needed to meet at least one of four target areas⁴, as well as meeting each of three gateway criteria, which were:

• projects must be in areas experiencing high unemployment, a significant rise in unemployment or vulnerability;
• projects must be viable and ready to start; and
• funding would not extend past 2010–11.⁵ Projects were expected to be self-sufficient and/or not require Australian Government funding beyond 30 June 2011.⁶

Priority Employment Areas and Local Employment Coordinators

4. The Jobs Fund was one of two major initiatives under the 'local communities' element of the Jobs and Training Compact announced by the Government in April 2009.⁷ The other major initiative was the engagement of Local Employment Coordinators in nominated Priority Employment Areas. The Local Employment Coordinators were engaged to promote the take up of Commonwealth, state and territory education, training, infrastructure and other stimulus initiatives at the local level to ensure rapid responses to emerging unemployment pressures in their regions. In total, 20 Priority Employment Areas were identified based on analysis undertaken by the Department of Education, Employment and Workplace Relations (DEEWR) of a range of labour market indicators in order to identify and provide assistance to those regions across Australia with labour markets which were likely to experience disadvantage and deterioration as a result of the global recession.

5. In June 2009, the Government decided to develop a whole of government strategy to build on existing initiatives to support Australian jobs. The strategy was entitled 'Keep Australia Working'. An interim Keep Australia Working report released in July 2009 recommended, amongst other things, that consideration be given to how to best focus the Jobs Fund on projects in Priority Employment Areas that would produce local jobs for local people, training and apprenticeships and pathways to long-term employment.⁸

Administration and implementation of the bike paths component

6. Administration of the Jobs Fund was shared between four agencies. DEEWR was the lead agency, and it was also responsible for administering the Get Communities Working stream and the non-quarantined component of the Local Jobs stream. Up until 14 September 2010, the then Department of Infrastructure, Transport, Regional Development and Local Government (DITRDLG) administered the quarantined bike path projects component of the Local Jobs stream. This function was transferred in full to become the responsibility of the Department of Regional Australia, Regional Development and Local Government that was created through the machinery of government changes which took effect on 14 September 2010.⁹ December 2011 machinery of government changes saw this department become the Department of Regional Australia, Local Government, Arts and Sport (Regional Australia). Throughout this report, the department responsible for administering the bike paths component of the Jobs Fund at the relevant point in time is referred to as the 'responsible department' or 'the department'.

7. The then Minister for Employment Participation announced a public call for applications to the first round of the Jobs Fund on 18 April 2009, with applications to close on 22 May 2009.¹⁰ The application form did not provide applicants with the capacity to nominate which stream (or component within a stream) of the Jobs Fund they wished their project to be considered under. Rather, applications were submitted to DEEWR. That department then either assessed the application under the streams for which it was responsible, or allocated it to another administering department, depending upon the stream (and associated component) DEEWR considered most appropriate to the proposed project.

8. A total of 255 applications, seeking funding of nearly $105 million, were allocated to and assessed under the bike paths component. The various applications sought, on average, $428 561 in Australian Government funding, with the value of the requested grants ranging from $10 500 to $3.82 million. The total estimated cost of the individual projects for which funding was sought ranged from $21 000 to $6.4 million, at an average total estimated project cost of $871 196. This situation reflected the expectation outlined in the program guidelines for partner funding of at least 50 per cent of the project budget.

9. Assessment of these applications was completed in September 2009. Funding decisions were made in October 2009 and December 2009¹¹ by the then Minister for Infrastructure, Transport, Regional Development and Local Government. Funding agreements with successful applicants were signed between December 2009 and May 2010. From September 2010, administration of approved bike path component projects became the responsibility of the Minister for Regional Australia, Regional Development and Local Government. Throughout this report, the Minister responsible for administering the bike paths component of the Jobs Fund at the relevant point in time is referred to as the 'responsible Minister' or 'the Minister'.

Audit objective

10. The objective of this audit was to assess the efficiency¹² and effectiveness of the establishment, implementation and administration of the bike paths component of the Local Jobs stream of the Jobs Fund. A particular focus was on the establishment of program objectives and the extent to which approved grants have demonstrably contributed to the cost-effective achievement of those objectives. The audit approach has been influenced by recent audits of grants administration which have emphasised the importance of transparent and accountable grant decision-making processes to the cost effective achievement of stated program objectives, and having regard for recent government decisions to enhance the framework applying to the administration of grants.

Overall conclusion

11. The bike paths component was established following a government decision that its commitment to the Australian Greens to quarantine a downpayment of $40 million for projects involving the construction of bike paths would be delivered as one element of an integrated Jobs Fund. The objectives of the bike paths component, as stated in the published Jobs Fund guidelines, reflected the policy context that the Jobs Fund was part of the Government’s response to the global financial crisis. In addition to the intention of providing timely economic stimulus, the published guidelines outlined that the bike paths component was expected to assist with the provision and utilisation of an alternative transport option to motor vehicles.

12. In total, 175 projects were approved for bike paths component funding, and the majority (95 per cent) of these proceeded to a funding agreement being signed. By the budgeted program end-date of 30 June 2010, just over half of the 167 contracted projects had been reported by funding recipients as complete, with all but two of the remaining contracted projects being completed during 2010-11. As a result, the bike paths component funding has contributed to the construction, extension and refurbishment of bike path facilities in a number of localities across the country.

13. Nevertheless, for all streams and components of the Jobs Fund, the primary objective related to economic stimulus. The bike paths component of the Jobs Fund fell significantly short of achieving the stated program objectives. Specifically:

• the financial stimulus that occurred was later than that budgeted. Of note was that, whilst funding under the bike paths component was announced as being available only in the 2009–10 financial year, no payments for bike path construction work were made in the first six months of that 12 month program window, and more than a third of the available funding had not been paid to project proponents by the scheduled program end-date of 30 June 2010. In addition, a significant proportion of the contracted funding was not paid to proponents until the second half of the 2010–11 financial year (up to 12 months after the scheduled program end-date of 30 June 2010), with the last program payments not expected to be made until April 2012; and
• the implementation of the program did not focus the available funding on projects that would maximise job creation and retention outcomes in the areas of identified greatest need. Further in this respect, there is no reliable data available on actual employment outcomes achieved through the contracted projects.

14. In addition, the implementation of the bike paths component was inconsistent with key aspects of the enhanced grants administration framework.¹³ A key underpinning of that framework is that Ministers not approve a proposed grant without first receiving agency advice on its merits relative to the relevant program’s guidelines; and report to the Finance Minister all instances where they approve grants that the relevant agency recommended be rejected.¹⁴ However, in respect to the bike paths component of the Local Jobs stream of the Jobs Fund, the responsible department did not provide its Minister with recommendations as to which applications should be approved, and those that should be rejected.

15. The responsible department also did not undertake any value for money analysis in respect to the employment claims made by project proponents in their applications¹⁵, and the iterative process used to select the successful applications was inconsistent with the published Jobs Fund guidelines. Of particular note in this latter respect was that more than one third of applications approved for funding had been assessed by the responsible department as not meeting at least one of the criteria outlined in the published Jobs Fund guidelines. Of greatest significance was the approach taken to the first gateway criterion set out in the published guidelines, which required that funding only be approved for projects located in areas experiencing high unemployment, a significant rise in unemployment or vulnerability. Despite this requirement, projects that had been assessed as not meeting that threshold criterion were not excluded from consideration under the bike paths component. More than one quarter of the approved applications had been assessed as not meeting this key (and mandatory) criterion.¹⁶ This approach was taken notwithstanding that the available funding could have been fully allocated to projects:

• that had been assessed as meeting all published criteria, including the unemployment gateway criterion;
• for which no implementation risks had been identified, or the identified risks were considered to be acceptable and capable of being managed through the funding agreement; and
• where the application had stated at least one job would be created or retained in a Priority Employment Area. In this respect, while projects were not required to be located in a Priority Employment Area to be funded under the Jobs Fund, these Areas had been agreed by government as the areas with labour markets that were most likely to be affected by the global financial crisis, and the July 2009 interim Keep Australia Working report (released some three months before funding decisions were taken in respect to the bike paths component) had indicated that the Jobs Fund would be focused on funding projects located in the Priority Employment Areas.

16. Instead of focusing the selection process on applications with these characteristics, priority was given to those projects assessed by the responsible department as having the lowest post-mitigation project implementation risk level. This approach was adopted on the basis that a 'very low' or 'no risk' rating would be a generally good indicator that a project was ready-to-go, would be successfully implemented and, accordingly, had the greatest capacity to deliver jobs. However, the terms of the published Jobs Fund guidelines did not support the adoption of this approach for selecting successful applications, and the department's approach to risk assessment was not conducted with a view to the results playing a significant role in that process. In this context, shortcomings in the responsible department's identification and assessment of risks and inconsistencies in the allocation of risk ratings had a significant effect on which applications were awarded funding, and those that were unsuccessful. In addition, as demonstrated by the delays in delivery of construction works funded under the program, the risk assessment results did not prove to be a good indicator to use in selecting projects that would provide timely economic stimulus.

17. Regional Australia has acknowledged to ANAO that there were shortcomings in the implementation of the bike paths component and has advised ANAO that its perspective is that this situation reflects that the bike paths component was implemented concurrently with another economic stimulus program (the Strategic Projects component of the Regional and Local Community Infrastructure Program–RLCIP), with program design and delivery being the responsibility of the same department and the same Minister being responsible for both programs. In this respect, an ANAO performance audit of the first round of the Strategic Projects component of the RLCIP, completed in July 2010, had identified significant shortcomings in the application assessment and approval processes which contributed to the Strategic Projects component not achieving the stimulus objectives set for that program.¹⁷

18. It is recognised that departmental advice in relation to the bike paths component of the Jobs Fund had been provided to the responsible Minister prior to the findings of the audit of the Strategic Projects component of the RLCIP being communicated to the responsible department. Nevertheless, program implementation and administration should occur in the context of the guidelines approved and published for the particular program. In this respect, the bike paths component of the Jobs Fund operated under separate and markedly different guidelines to those that had applied to the Strategic Projects component of the RLCIP.¹⁸ The Jobs Fund was also meant to be an integrated fund, but the approach taken to the bike paths component had few similarities to the approaches taken by the departments administering other elements of the first round of the Jobs Fund.¹⁹ It is also relevant to note that the CGGs were issued after funding decisions were taken in respect to the Strategic Projects component of the RLCIP, but some two months before the responsible department provided its assessment advice to the responsible Minister under the bike paths component.

19. A recently tabled ANAO cross-portfolio audit examining the administration of reporting obligations under the enhanced grants administration framework observed widespread variability in the quality of briefing practices across agencies that are subject to the Financial Management and Accountability Act 1997 (FMA Act). Similar to the situation with the bike paths component, a significant proportion of the Ministerial briefs examined in the course of that audit did not clearly identify those proposed grants that the agency recommended be approved, and those that it recommended be rejected.²⁰ That audit included three recommendations aimed at enhancing the quality of advice provided to Ministers and compliance with the associated reporting obligations. Regional Australia, together with all other responding agencies, agreed to those recommendations. In addition, Regional Australia has advised ANAO that its implementation of the Community Infrastructure Grants program and the Regional Development Australia Fund (RDAF) has been informed by the findings of the audit of the Strategic Projects component of the RLCIP.²¹

20. Against this background, this report includes three recommendations relating to:

• adopting application processes and assessment criteria that support, subject to government concurrence, the selection of projects that are likely to best contribute to achieving the objectives of the National Cycling Strategy in the administration of any further funding allocated for bike path construction projects²²;
• value for money and ‘fit for purpose’ considerations being addressed in Regional Australia’s implementation of infrastructure construction funding programs; and
• improvements to risk assessment practices so as to promote the equitable treatment of applicants and effective management of risk.

Key findings by Chapter

Assessment of applications (Chapter 2)

21. Whilst the primary objective of the Jobs Fund was to support and create jobs and employment opportunities in communities affected by the global recession and for disadvantaged job seekers, quarantined funding of $40 million for bike path construction projects was expected to also assist with the provision and utilisation of an alternative transport option to motor vehicles. Similarly, quarantined funding for heritage projects was expected to provide stimulus while also promoting the achievement of improved heritage outcomes.

22. In respect to the quarantined heritage component of the Local Jobs stream, the published guidelines outlined that projects to be funded in 2009–10 would be assessed against both the common criteria that applied across all elements of the integrated Jobs Fund, as well as heritage-specific criteria. By way of comparison, the department responsible for the bike paths component did not, either in contributing to the development of the Jobs Fund guidelines or in advice provided to its Minister, canvass the merits of similarly identifying criteria that would enable it to assess the relative merits of competing bike path project applications in terms of providing alternative transport options (as well as meeting the economic stimulus gateway criteria and target areas). Accordingly, the approach taken to the bike paths component represented a missed opportunity to maximise the contribution the $37.9 million²³ in funding available for bike path construction could make towards achieving the objectives of the then extant National Cycling Strategy.

23. The approach taken to assessing Jobs Fund applications allocated to the bike paths component also did not seek to focus funding consideration on those projects that would maximise job creation and retention outcomes for the funding awarded in the areas of identified greatest need (particularly the Priority Employment Areas agreed by government). In addition, the responsible department did not undertake any value for money analysis in respect to the employment claims made by project proponents in their applications. As a result of the department not assessing applications in terms of the extent to which they could be expected to contribute to achieving the program objectives, a number of applications with relatively limited claimed employment benefits were approved. At the same time, other projects which claimed significant employment benefits that were located in Priority Employment Areas and had been assessed as meeting all other identified criteria were not approved. This was a somewhat perverse outcome in the context of the reasons for establishing the Jobs Fund, and the findings and recommendations of the Keep Australia Working report that was released in the same month (July 2009) in which the responsible department commenced the assessment of applications allocated to the bike paths component.²⁴

24. The department also did not assess the dimensions and functionality of proposed bike path projects and/or the usage the facility was expected to attract in order to assess whether:

• the proposed cost represented value for money when compared with industry standards for the construction of a relevant facility; and/or
• the proposed dimensions accorded with accepted standards for such facilities.

Risk assessment

25. Risk assessment played a relatively limited role in respect to the assessment of applications allocated to the heritage component of the Local Jobs stream. While explicitly provided for in the assessment methodology applied by DEEWR to the general component of the Local Jobs stream, risk assessment did not form part of the scored assessment of a project used to rank projects for funding consideration under that element. In contrast, risk assessment played a key role in the responsible department’s assessment of applications allocated to the bike paths component of the Local Jobs stream. However, the approach taken to identifying and assessing risks lacked rigour, and risk ratings were not consistently applied across applications identified as having similar risk profiles.

26. Neither the published program guidelines, nor the department’s approach to risk assessment, intended that an application’s assessed level of project implementation risk would be used as a primary determinant of whether it would receive funding.²⁵ However, in October 2009 a decision was taken to give funding priority to those projects assessed by the department as having the lowest post-mitigation risk level. This approach was adopted on the basis that a ‘very low’ or ‘no risk’ rating was considered to generally be a good indicator that a project was ready-to-go, would be successfully implemented and, accordingly, had the greatest capacity to deliver jobs. In this context, the shortcomings in the responsible department’s identification and assessment of risks and inconsistencies in the allocation of risk ratings had a significant effect on which applications were awarded funding, and those applications that were unsuccessful.

Assessment advice and funding decisions (Chapter 3)

27. Of the 255 applications assessed for possible funding from the $37.9 million available under the bike paths component of the Jobs Fund, there were 99 seeking $40.67 million that, based on the results of the responsible department’s assessment work:

• were located in a Priority Employment Area (and therefore clearly met the unemployment gateway criterion), as well as meeting each of the other seven criteria derived by the department from the guidelines;
• also met the expectation outlined in the guidelines for partner funding of at least 50 per cent of the project budget;
• had no identified implementation risks, or the identified risks were considered acceptable and able to be managed through the funding agreement; and
• would create or retain at least one job, work experience position or traineeship in a Priority Employment Area.

28. However, the process applied to selecting the successful applications did not focus attention on projects with these characteristics, with 21 of those 99 projects not being approved. By way of comparison, nearly a third of approved projects (32 per cent, 56 projects) had been assessed as not meeting at least one of the eight criteria derived from the guidelines by the department and/or had not met the expectation outlined in the guidelines for partner funding of at least 50 per cent of the project budget.

29. Overall, the way in which assessment advice was provided to the responsible Minister and the process through which applications were selected for approval was inconsistent with key aspects of the grants administration framework. In particular:

• the responsible Minister was not provided with departmental advice as to which applications were recommended for approval, and those that the department recommended should be rejected. In addition to denying Ministers the benefits of comprehensive agency advice, this approach negates the operation of important aspects of the grants administration framework²⁶;
• the requirement under the Financial Management and Accountability Regulations 1997 (FMA Regulations) for the basis of decisions to award grants to be recorded was not met²⁷; and
• the iterative process adopted to select the successful applications was inconsistent with the published program guidelines.²⁸ Under that process, the outcome of the departmental risk assessment was adopted as the primary determinant of the projects to be awarded funding²⁹, rather than the selection process being based on a comparative assessment of the merits of the competing, compliant applications in meeting the program criteria and objectives in order to identify the most meritorious projects. As a result, more than one quarter of the applications that were approved had been assessed as not meeting the mandatory unemployment gateway criterion.³⁰ This was the case notwithstanding that:
• the published Jobs Fund guidelines had not provided any scope to waive any of the gateway criteria; and
• the interim Keep Australia Working report released three months prior to bike paths component funding decisions being made had reiterated that the Priority Employment Areas were those areas with the greatest need for direct assistance and that, in future, Jobs Fund funds should be targeted to those areas.

30. These failings are similar to those evident as a result of an earlier audit of another competitive, applications-based grant program also conducted by the responsible department in calendar 2009 (the first round of the Strategic Projects component of the RLCIP program). Departmental advice in respect to the bike paths component of the Jobs Fund had been provided to the responsible Minister prior to the findings of ANAO’s audit of the first round of the Strategic Projects component being communicated to the department. In response to that audit report, the department indicated to ANAO that it now had a better appreciation of its obligations under the enhanced grants administration framework, and that procedures would be implemented to provide a clear agency recommendation to the Minister concerning whether or not funding should be approved in respect to each application to competitive, merits-based grants programs it administers.³¹ In this context:

• ANAO is currently undertaking an audit of the conduct of the first round of the Regional Development Australia Fund administered by Regional Australia, including the processes by which applications were assessed; recommendations made to the Minister responsible for that program; and successful projects approved for funding. That audit will provide an opportunity to gauge the extent to which Regional Australia’s approach has been informed by the audit of the Strategic Projects component; and
• broader ANAO audit activity, through two audits examining the implementation of key aspects of the enhanced grants administration framework, has shown that it has been relatively common for agencies to not clearly identify in their advice to Ministerial decision-makers those proposed grants that the agency recommends be approved, and those that it recommends be rejected. ANAO concluded that these and related findings showed that there was room for improvement on the part of agencies in respect to implementing the CGG requirements. ANAO also concluded that, without detracting from the clear responsibilities of individual agencies and consistent with the objectives underpinning the 2009 government decision to establish a dedicated grants framework unit within the Department of Finance and Deregulation (Finance), there would be benefits in Finance working collaboratively with agencies to assist them in implementing the grants administration framework, including in relation to more effectively meeting the obligation to advise Ministers on the merits of proposed grants.³²

Distribution of funding

31. Approval rates for bike path component projects were broadly in line with the number of applications received from each state and territory, although the approval rate of nearly 86 per cent for projects located in South Australia was noticeably higher than the national average of some 69 per cent.³³ This was a consequence of a preference evident in the approval outcomes for smaller value grant requests compared with those applicants seeking a higher grant.³⁴

32. Overall, the distribution of funding was largely consistent with the proportion of electorates held by the major parties and Independent members. Nevertheless, as noted, the approach taken was inconsistent with the published guidelines and stated program objectives which intended that funding be focused on projects that would provide economic stimulus where it was needed, rather than allocating funding in accordance with political representation in the House of Representatives. In this respect, had the selection process for the bike paths component focused on those projects located in Priority Employment Areas that been assessed by the responsible department as meeting the published program guidelines, the distribution of funding would have predominantly favoured projects in electorates held by the Australian Labor Party.³⁵ This would have been an unsurprising result given the location of the Priority Employment Areas³⁶, and the characteristics of the applications allocated to the bike paths component for assessment.

Program outcomes (Chapter 4)

Financial stimulus

33. Most (95 per cent) of the projects approved for bike path component funding proceeded to have a funding agreement signed. In total, the funding agreements involved the provision of more than $36.9 million in economic stimulus funding (97 per cent of the total program funding that was available). At the time they were signed, the funding agreements outlined that this funding would be paid principally (93 per cent) within the one year program window of 2009-10 (on which funding eligibility under the program guidelines had been based), with the remaining funds being scheduled for payment no later than November 2010.

34. While contributing to the construction, extension or refurbishment of off-road bike paths, on-road bike lanes and bicycle parking facilities in numerous locations across the country, the bike paths component has not provided the planned level of stimulus in the timeframe that had been budgeted. In particular, as illustrated by Figure S 1:

• reflecting the significant delay that occurred between applications being lodged in May 2009 and funding decisions being made (largely in October 2009), and subsequent further delays in funding agreements being signed³⁷ (between December 2009 and May 2010), no payments for bike path construction work were made in the first six months of the 12 month program window (1 July 2009 to 31 December 2009);
• whilst program payments increased significantly in the last quarter of 2009–10, more than a third (38 per cent) of the $37.9 million in stimulus funding that had been made available for the construction of bike path projects had not been paid to project proponents by 30 June 2010; and
• a significant proportion of the remaining contracted funding was not paid to proponents until the second half of fiscal 2010–11 (up to 12 months after the scheduled program end-date of 30 June 2010), with the last program payments not expected to be made until April 2012.

Figure S.1: Program funding, cumulative contracted payments and cumulative actual program expenditure as at June 2011

Creation and retention of jobs

35. As noted, although the three principal streams of the Jobs Fund each had their own particular focus, in each case the primary objective was the support and creation, through the delivery of funded projects, of jobs and employment opportunities in communities affected by the global recession and for disadvantaged job seekers. Applications submitted to the first round of the Local Jobs stream of the Jobs Fund, including those allocated to the bike paths component for assessment, were required to outline the number of jobs the applicant claimed the project would create or cause to be retained, either in the short or long-term.³⁸ In the case of the bike paths component, this data was provided to the responsible Minister to inform his funding decisions, but without the claims made in the application being scrutinised by the responsible department so as to be satisfied that the employment claims were realistic, and represented value for money for the grant being requested.

36. In that context, whilst recognising that the anticipated employment outcomes for those projects that were approved and contracted for delivery should be treated with some caution, those outcomes were nevertheless expected to be significant. Specifically, in seeking funding, the proponents of the 167 projects that were contracted to receive bike paths component funding had indicated that, in aggregate, their projects would create or retain more than 1 130 short-term jobs and nearly 550 long-term jobs, as well as more than 80 work experience positions and nearly 90 traineeships. However, the funding agreements used for the bike paths component did not make any reference to the claimed employment outcomes that informed the decision to award funding to the contracted projects.

37. Notwithstanding the absence of a contracted benchmark against which to assess performance, the funding agreement required funding recipients to report (in progress reports and a final report upon completion of the project) on the employment outcomes that were achieved, together with evidence to support the reported outcomes. However, compliance with these aspects of the reporting requirements was quite variable, with no employment outcomes being reported in respect to more than 20 per cent of contracted projects, and supporting documentation for claimed outcomes not being provided in respect to 94 per cent of those projects where one or more jobs had been reported as having been created or retained. In addition, for a significant number of projects, the reported outcomes were either significantly less or significantly greater than the employment claims outlined in the application for funding, but this did not cause the responsible department to investigate the reliability of the data being reported to it. In the above circumstances, there is no reliable data available on actual employment outcomes achieved through projects funded under the bike paths component.

Agency responses

38. Having regard for the various administrative arrangements that have applied in relation to the bike paths component of the Jobs Fund over time, the proposed audit report issued under section 19 of the Auditor-General Act 1997 was provided to Regional Australia, Infrastructure and DEEWR and the two Ministers who have had responsibility for the program at various points in time. Whilst no formal response to the draft report was received from the relevant Ministers, Infrastructure and DEEWR, the formal response received from Regional Australia is set out below.

The Department of Regional Australia, Local Government, Arts and Sport has adopted a continuous improvement approach to our grants management priorities and uses this and other audit reports as one of the tools that assists to refine and enhance our grants management practices. The Department notes that the National Bike Paths Program, which commenced in early 2009, was administered across two Departments. The Department of Infrastructure, Transport, Regional Development and Local Government had responsibility for the implementation and delivery of the program until September 2010. Machinery of government changes transferred responsibility for finalising the program to the Department of Regional Australia, Local Government, Arts and Sport. I agree with all three of your recommendations. I note that, where relevant, I have ensured these are in place for all programs developed since the establishment of the Department.

Footnotes

[1]   The Jobs and Training Compact was announced as representing the next step in the Government's response to the global recession and had three elements: a compact with retrenched workers; a compact with young people; and a compact with local communities (of which the Jobs Fund was a major component). See: The Hon Kevin Rudd MP, Prime Minister of Australia, Media Release, Government establishes Jobs and Training Compact, 5 April 2009.

[2]   See further in ANAO Audit Report No.7 2011–12, Establishment, Implementation and Administration of the Infrastructure Employment Projects Stream of the Jobs Fund, Canberra, 22 September 2011.

[3]   Following announcement of the Jobs Fund, it was determined that departmental costs to administer the respective elements of the program would be met from the total funding allocation. As a result, whilst $40 million was allocated to the bike paths component, after $2.1 million was set aside for departmental administrative costs, $37.9 million was available for funding bike path construction projects.

[4]   The four target areas were: create jobs or retain people in jobs at risk due to the downturn; build skills for the future; build community infrastructure or improve community amenity which generates local jobs; and provide seed funding for social enterprises to start up, maintain or expand services, generating jobs and improving community services.

[5]   As noted at paragraph 2, elsewhere, the guidelines outlined that funding under the two quarantined components of the Local Jobs stream was not to extend past 30 June 2010.

[6]   On 5 July 2010, the published guidelines were amended by way of an explanatory note to extend the project completion date for eligibility for funding under the IEP stream to 30 June 2012. On 24 March 2011, the program guidelines were similarly amended to extend the project completion date under the elements of the Local Jobs and Get Communities Working streams administered by the Department of Education, Employment and Workplace Relations (DEEWR) to 30 June 2012 to allow some delayed projects to be completed and deliver the anticipated community benefits. No such changes have been made to the guidelines in respect to either of the quarantined components of the Local Jobs stream, including the bike paths component that is the focus of this audit report.

[7]   See footnote 1.

[8]   The final Keep Australia Working report released on 16 October 2009 identified five outcomes to be achieved through nominated initiatives, three of which were to be funded through a re-targeting of the remaining funding under the Local Jobs and Get Communities Working streams of the Jobs Fund.

[9]   At that time, the then DITRDLG became the Department of Infrastructure and Transport (Infrastructure).

[10]   Media Release, Applications for First Round of $650 million Jobs Fund Open, The Hon Brendan O’Connor MP, Minister for Employment Participation, 18 April 2009.

[11]   Initially, 174 projects were approved for funding. Funding offers for three projects were subsequently withdrawn prior to the relevant funding agreements being signed once it emerged that the projects had either been completed, or were substantially complete. With the funding that then became available, a further project was approved in December 2009.

[12]   As an economic stimulus program, efficiency was assessed with particular attention to whether the application, assessment, decision-making and funding agreement processes were undertaken in a timely manner. This emphasis was consistent with the criterion adopted by the Government for the design of the stimulus packages established in response to the global financial crisis (see further at paragraph 4.20 of the audit report).

[13]   This framework was progressively introduced between December 2007 and July 2009, culminating in Commonwealth Grant Guidelines (CGGs) taking effect from 1 July 2009.

[14]   These requirements, together with other related enhancements to the grants administration framework, do not affect a Minister’s right to decide on the awarding of grants. Rather, they provide for an improved decision-making framework encouraging Ministers to be as well informed as possible when deciding whether to approve grants, and promoting transparency around the reasons for decisions.

[15]   As a result, a number of applications with relatively limited claimed employment benefits were approved. At the same time, other projects with significant claimed employment benefits that were located in one of the Priority Employment Areas agreed by government as having labour markets most likely to be affected by the global financial crisis and had been assessed as meeting all other identified criteria, were not approved.

[16]   In total, 45 of the 175 applications approved for funding (26 per cent), involving 27 per cent of approved funding, had been assessed by the responsible department as not meeting the unemployment gateway criterion.

[17]   See further in ANAO Audit Report No.3 2010–11, The Establishment, Implementation and Administration of the Strategic Projects Component of the Regional and Local Communities Infrastructure Program, Canberra, 27 July 2010.

[18]   For example, whilst the guidelines for the Strategic Projects component of the RLCIP did not include any assessment criteria, criteria for the Jobs Fund components and streams were published in the guidelines applying to that program.

[19]   For example, in respect to the unemployment gateway criterion, DEEWR (the lead agency for the Jobs Fund) prioritised projects with high job creation/retention claims located in Priority Employment Areas for funding (see further at paragraph 3.15 of the audit report). As well as considering the employment disadvantage of the relevant location, the selection process adopted by DEEWR incorporated assessment of the value for money offered by the job creation/retention proposed by applicants.

[20]   See further in ANAO Audit Report No.21 2011–12, Administration of Grant Reporting Obligations, Canberra, 24 January 2012.

[21]   ANAO has commenced a performance audit of the first round of the RDAF.

[22]   In agreeing to set aside $40 million from the Jobs Fund for the construction of bike paths, the Government undertook that Infrastructure Australia would consider more significant investments in bike paths in the period ahead—see further at paragraphs 2.28 to 2.33 of the audit report.

[23]   See footnote 3.

[24]   That report had recommended that Jobs Fund funding be targeted to the Priority Employment Areas (see further at paragraph 3.15 of the audit report).

[25]   Rather, the department intended that its risk assessments would be used to inform its assessments as to: whether projects were viable and ready to start (the second gateway criterion); whether projects would be self-sustaining and not require Commonwealth funding after 30 June 2010 (the third gateway criterion as it applied to the bike paths component); and how well the project proponent could be expected to manage any grant funds it may be awarded.

[26]   In particular, the CGGs require that Ministers report annually to the Finance Minister all instances where they have decided to approve a grant that the relevant agency had recommended be rejected. The absence of any agency recommendation about which proposed grants are recommended for approval, and those that the agency recommends be rejected, means there is no basis to identify any instances of a decision-maker disagreeing with the agency advice.

[27]   FMA Regulation 12 requires that the basis for any decision to approve a grant be documented (that is, the basis on which the approver was satisfied that the proposed grant complied with FMA Regulation 9 – see footnote 28). In the context of a competitive grant program, such as the bike paths component of the Jobs Fund, appropriately recording the basis for decisions to approve certain proposed grants necessarily involves documenting consideration of the relative merits of competing applications in meeting the program criteria and objectives. The absence of agency funding recommendations makes it more difficult for decision-makers to identify those instances in which it will be necessary for them to separately document the basis for any decision to approve a grant, rather than being able to point to the departmental advice and recommendation as meeting that requirement.

[28]   In this respect, FMA Regulation 9 prohibits an approver from approving a spending proposal unless satisfied, after undertaking reasonable inquiries, that giving effect to the proposal would be an efficient, effective, economical and ethical use of the Commonwealth resources that is not inconsistent with the policies of the Commonwealth. The CGGs state that the guidelines applying to a grant program are one of the policies of the Commonwealth for the purposes of Regulation 9.

[29]   See further at paragraphs 2.100 to 2.101 and paragraphs 3.23 to3.24 of the audit report.

[30]   By way of comparison, for the general component of the first round of the Local Jobs stream and the first round of the Get Communities Working stream, DEEWR gave initial priority to projects with high job creation/retention located in Priority Employment Areas and the Victorian Bushfire region.

[31]   ANAO Audit Report No.3 2010–11, op. cit., p. 22.

[32]   See further in ANAO Audit Report No.21 2011–12, op. cit.

[33]   Whilst all applications from the Northern Territory and Australian Capital Territory were approved, very few applications were received for projects located in either territory.

[34]   The preference for approving a larger number of smaller value grants disadvantaged those applicants that had sought larger value grants. Neither the published guidelines nor any other information provided to potential applicants had indicated that the awarding of funding would favour applications seeking smaller grants over those seeking larger grants. Rather, the guidelines had advised that grants of up to $2 million were available under the bike paths component, with funding for individual projects to be determined on a case-by-case basis.

[35]   Specifically, 76 per cent of such projects were located in an electorate held by the Australian Labor Party, involving more than 81 per cent of funding being sought in respect to such projects.

[36]   The 20 Priority Employment Areas had been identified by DEEWR from analysis of 25 labour market indicators. Those 20 Areas encapsulated all or part of the area of 80 of the 150 Federal electorates, of which 52 (65 per cent) were held by the Australian Labor Party. See further in ANAO Audit Report No.7 2011–12, Establishment, Implementation and Administration of the Infrastructure Employment Projects Stream of the Jobs Fund, Canberra, 22 September 2011, pp 58–62.

[37]   The program guidelines stipulated that proponents were not to commence activities dependant on the program funding until the funding agreement was signed.

[38]   Short-term jobs were those expected to be created or retained as a result of the project for less than six months. Long-term jobs were those expected to be created or retained for longer than six months.