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Request for audit
Regional Airlines Funding Assistance Program
Response provided
Responded: Wednesday 19 August 2020
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The Auditor-General responded on 19 August 2020 to correspondence from the Hon Catherine King MP dated 28 July 2020, requesting that the Auditor-General conduct an investigation to examine the design and administration of the Regional Airlines Funding Assistance Program.
Auditor-General's response
19 August 2020
Hon Catherine King MP
Shadow Minister for Infrastructure, Transport and Regional Development
By email: catherine.king.MP@aph.gov.au
Dear Ms King
Thank you for your letter of 28 July 2020 requesting that I consider examining the design and administration of the Regional Airlines Funding Assistance program.
In my letter to you on 24 July 2020 I noted that the Australian National Audit Office (ANAO) intends to undertake further consideration of COVID-19 related topics as the government response to this pandemic is implemented. The ANAO’s COVID-19 multi-year audit strategy outlines how the ANAO is planning to respond to the evolving impact of the government’s response to COVID-19. Audit topics developed as part of this strategy will be informed by emerging risks, new announcements made by government and early findings from the four COVID-19 audits the ANAO initiated in 2019–20 (for tabling in 2020–21). Your request for an audit of the Regional Airlines Funding Assistance Program will be taken into account as part of my consideration of COVID-19 related audits during 2020-21.
The ANAO is continuing to monitor emerging risks and challenges that impact on the public sector due to COVID-19.
Yours sincerely
Grant Hehir
Auditor-General
Correspondence from the Hon Catherine King MP
Transcript of letter from the Hon Catherine King MP
Mr Grant Hehir
Auditor General
By email: grant.hehir@anao.gov.au
28 July 2020
Dear Auditor General
Thank you for your letter of 24 July 2020 advising me that you have finalised the 2020-21 Annual Audit Work Program (AAWP).
I was pleased to read that the final AAWP will include Administration of the Drought Communities Program and Drought Communities Program Extension and the Design and Delivery of the Building Better Regions Fund. I am also pleased that the AAWP will also include a potential audit on the Administration of the Urban Congestion Fund, and that you also intend to undertake further consideration of COVID-19 related topics as the Government response to this pandemic is implemented.
In this regard I write now to draw your attention to the Government’s response to the situation facing the aviation sector as a result of the pandemic. As I am sure you are aware, the aviation sector has been hit very hard by the movement restrictions put in place as part of the COVID-19 response. However, the Government’s response has been patchy and inconsistent in its application. I draw your attention to the Regional Airlines Funding Assistance program.
In March and early April 2020 as the pandemic restrictions rapidly hit the aviation sector, the Government rejected repeated requests for financial assistance (in the form of a loan or equity stake) from Virgin Australia on the basis that it was a majority foreign owned airline. However, on 28 March the Government made available funding support for regional airlines, including majority foreign-owned Regional Express, and made an untied cash grant of $54 million available to this airline under the Regional Airlines Funding Assistance Program.
The Government’s description of the Regional Airlines Funding Assistance program was that “The funding is a ‘last resort’ option when a range of other strategies to manage an airline’s financial position have been undertaken.” However, following receipt of the grant, Regional Express Airlines announced plans to raise additional capital to expand its operations into capital city routes. This announcement suggests that all funding options were not explored prior to the Government providing the $54 million grant. I therefore believe that the design and administration of this program needs to be examined.
Yours sincerely
Catherine King MP