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RUBY:

From Schwartz Media, I’m Ruby Jones, this is 7am.

As the government grapples with the growing fallout from the sports grants scandal, questions are also being asked about other, larger grant programs.

In this episode, Karen Middleton looks at whether the federal grant system is broken.

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RUBY:

So Karen, you first started reporting on the whole issue of government grants during the election in May last year.

KAREN:

Yes, that's right. I did a couple of stories on government grants in the last three weeks of the election campaign, looking mostly at some really big funds that have been set up, different programs in different federal departments, but with a bit of crossover in what they were offering.

RUBY:

Karen Middleton is The Saturday Paper's chief political correspondent.

KAREN:

There was a giant commuter car park fund that had been added to in the budget, which was just before the election was called.

Archival Tape -- Unidentified Man #1:

“Minister, we’ve already got $4 million for new car parking at Hampton train station, what have you got for us today?”

KAREN:

It was a sort of a half billion dollar fund. And I think something like almost 400 million dollars of that car park fund was allocated in the eight days between when the budget was handed down and when the parliament was prorogued on the morning of April the 11th.

Archival Tape -- Unidentified Man #2:

“Well today we’re announcing, Tim, $10 million for an additional, about 100 additional car parks at each of three stations…”

KAREN:

And there was no eligibility criteria for that fund set at all at the time. So I thought that was puzzling, to say the least, and a lot of those were being set up in marginal seats.

Archival Tape -- Unidentified Man #1:

“This is part of the critical delivery that this government can provide because it’s running a strong surplus and getting the budget back in black…”

KAREN:

I was looking also at the Safer Communities Fund, which was a fund that was being set up through the Home Affairs Department. And that was everything from security at a religious school to upgrading a scout hall or a lot of things that came in under that banner. And again, it was a fund that was allowing a lot of discretion to the minister in the portfolio to make those allocations.

Archival Tape -- Unidentified Man #1:

“And what I’ve done today is I’ve announced $300,000 in funding from the Federal Liberal government for the stage two of the lighting for East Victoria Park laneways…”

KAREN:

So there were questions starting to be raised about how these funds were working. There was another one with a very strange name of the Mutual Understanding, Support, Tolerance, Engagement and Respect Initiative, which was known as MUSTER. That was another multi-million dollar fund, I think it was 60 million, which was also a facilitating election campaign announcements through the Social Services Department.

Archival Tape -- Unidentified Man #1:

“So I’m very pleased to announce today, having worked with the minister, $100,000 for the Sudanese Homework and Learning Club...”

KAREN:

So a whole lot of these funds and programs, and it was getting very difficult to keep track of them, that were basically handing out money all over the place and allowed to be announced by liberal and national candidates and members.

RUBY:

And so was there any sort of clear criteria there?

KAREN:

Well, in some of the funds, it was very unclear. And in one case, just before the parliament was dissolved, just before the election was announced, there was a fuss over one particular announcement that the then Liberal MP for the seat of Dunkley in Victoria, Chris Crewther, had made.

He had announced some money under a program called Communities Environment Program for his electorate. And it turned out that that program had not even opened yet, and applications had not been called for. So, you know, there were some strange things going on around the whole system of government grants in the lead up to the election.

RUBY:

And so when you were reporting on these grants back then, were they attracting much attention? Were they causing much of a stir?

KAREN:

No, not really. Not beyond that example I gave that caused a fuss in parliament for a day or two about Chris Chrewther. The government said, oh, sorry, that was a mistake. And then the caravan moved on and we didn't see a great deal of focus on government grants other than the stories that we did through the campaign.

RUBY:

But then obviously, two weeks ago, the Bridget McKenzie story broke.

KAREN:

That's right.

Archival Tape -- Unidentified Man #1:

“The Deputy Nationals leader can’t escape questions about her handling of the contentious community sports grants program.”

Archival Tape -- Unidentified Woman #1:

“Pressure is mounting on Deputy Nationals leader Bridget McKenzie to stand down…”

Archival Tape -- Unidentified Man #2:

“There is no doubt Bridget McKenzie needs to go. You can’t get a report like that and remain a minister in the commonwealth.”

KAREN:

So Bridget McKenzie, the former sports minister who's now in the agriculture portfolio, she's the deputy leader of the Nationals, she's in trouble now over the $100 million sports grants program that was administered through Sport Australia. It's a statutory authority that's supposed to operate slightly at arm's length from government, and Bridget McKenzie oversaw that program.

Now, the issue here is that the Auditor-General, the Australian National Audit Office, has published a report, just back on January the 15th, looking at this program and it found a whole lot of problems with the way it was administered. It found the minister effectively ran a parallel approval process to the one that the Sport Australia was running. She effectively took over the approval process.

Bridget McKenzie has argued she's done nothing wrong in this, despite the fact that the Auditor-General has found that there was a distributional bias in the program and that it was focused on marginal seats and targeted seats that the coalition was trying to win. The auditor has found that 300 of those 684 grants that were approved were not recommended by Sport Australia, so she overrode the organisation.

RUBY:

So Bridget McKenzie was making the call on who got the grant.

KAREN:

Yes. In the end, her office was making the call and they were using criteria that were not in the guidelines for how this grant system should be administered. Now, she has been under a lot of pressure in the last couple of weeks to resign over this, but the prime minister has dug in behind her. The Nationals leader, Michael McCormack, has dug in and at the moment she's staying put.

Archival Tape -- Bridget McKenzie:

“The auditor general’s report is really, really clear. No rules were broken, every single one of those 684 projects that was funded was eligible, and I would have loved to have nearly $400 million to have funded every single eligible project across the country.”

RUBY:

We’ll be back in a moment.

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RUBY:

Karen, when we're talking about these sports grants, what exactly are we talking about? What sorts of things are being funded?

KAREN:

Well, all kinds of things at local sporting facilities. So it might be an upgrade to the local football ground or golf club facilities. Grants went to both coalition and Labor held seats, and some other seats as well. And in fact, the government has argued that more grants went to Labor held seats than would have if Bridget McKenzie hadn't overridden the process, to which Labor says, well, of course they did because you're trying to win them from Labor.

So you've seen examples like the then member, Tony Abbott's seat of Warringah, where the Mosman Rowing Club got the biggest possible grant, half a million dollars and a yacht club in Health Minister Greg Hunt's electorate got $30,000 dollars. So there's an argument about whether every grant was deserving of approval and whether some grants that were rated very highly by Sport Australia were overlooked in favor of some that were ranked much lower that the minister wanted to approve.

RUBY:

And the grant to the gun club?

KAREN:

Yes. So there was a toilet block approved as part of a grant to the Wangaratta Clay Target Club, and they've proudly displayed photographs of that on their website - how pleased they were to get $36,000. That's where things got really particularly difficult for Bridget McKenzie last week.

What we discovered after that grant emerged was that Bridget McKenzie actually joined that club and was a member of it, but hadn't disclosed that on her register of interests. And there was a suggestion, therefore, of a conflict of interest and that she should have disclosed that.

RUBY:

Yeah, was that kind of the tipping point?

KAREN:

Yes, it's effectively taken this criticism to another level. And what we then learnt part way through last week, late on Wednesday, was that the prime minister had actually asked Phil Gaejtens, the secretary of the prime minister's department, to look into this whole situation, whether, in fact, there'd been any breach of the ministerial code of conduct by Bridget McKenzie.

Archival Tape -- Scott Morrison:

“Last Friday, I referred the matter of the Auditor General's report to the Secretary of Prime Minister and Cabinet to consider any matters there that were relevant to the statement of ministerial standards.”

KAREN:

And that was a bit of an indication that Bridget McKenzie was actually in some political difficulty and the prime minister's tone started to change after that, too.

Archival Tape -- Scott Morrison:

“I'll let him do his job and then I will look at that advice and take whatever action is necessary.”

RUBY:

So Karen, what's the bigger question with all of these various grant programs?

KAREN:

Well, I think it's a question about how taxpayers money is being used. I mean, we're just seeing increasingly these huge funds, tens of millions, sometimes hundreds of millions of dollars for grant programs right across government with pretty general eligibility criteria and guidelines for applications.

And more and more, these funds are now being structured so that the local MP, who's the member of parliament for that local area, has to approve applications before they can actually be lodged. So you can't lodge an application for a number of these funds unless your local member has recommended you. And then the ministers have discretion through their departments to determine who ends up being eligible. So there's a question about the transparency of all of these funds and whether merit is really a principle.

RUBY:

Tell me about the critics to this.

KAREN:

Well, the Labor opposition has been very critical. The Greens and the minor parties have been critical of this.

Archival Tape -- Cathy McGowan:

“Hello. Yes, I can hear you.”

Archival Tape -- Karen Middleton:

“Oh, great. Thanks Cathy.”

KAREN:

I spoke last week to Cathy McGowan who's the former member for Indi, a former independent member of parliament who has long been focused on governance and integrity issues within the public domain. And she was very concerned about the way all of these grants are handled and how they favor the incumbent government, in particular, but incumbent MPs…

Archival Tape -- Cathy McGowan:

“It gives the local member of parliament a photo opportunity and a way to support their supporters. But I think it’s not good governance, I think it’s a very shoddy way of doing business, quite frankly.”

KAREN:

She's really concerned that it's effectively just pork barreling and that there isn't enough accountability, there isn't enough transparency.

Archival Tape -- Cathy McGowan:

“And we’ve had numerous examples over the last couple of years where members of parliament have said, look, this looks very suspicious, if we had our machinery of government in place, we could send it to the ICAC, get their advice on it…”

KAREN:

And she was the MP that put forward a private member's bill on a national integrity commission.
And she says if we had an integrity commission, then there would have been a number of issues that have emerged in the last couple of years that would warrant looking at. But we just haven't had the mechanism to do it.

Archival Tape -- Cathy McGowan:

“So we get caught in these terrible situations which many times could have been addressed much earlier.”

KAREN:

The government didn't want to endorse her proposal wholeheartedly. But it has come up with a draft integrity commission of its own, which we’re supposed to be seeing details of very soon. It seems that that may have been delayed by this whole Bridget McKenzie scandal.

RUBY:

So what happens to Bridget McKenzie now then?

KAREN:

Well, that's a good question. At the moment, she is saying that she has done nothing wrong and she isn't going to resign. A number of her colleagues are putting pressure on her. There is complication in the whole situation at the political level because her resignation would also leave vulnerable Michael McCormack, the leader of the Nationals. And of course, waiting in the wings is Barnaby Joyce, the former leader who remains very unhappy and no longer being in the ministry. He's got some supporters in the Nationals who are critical of Bridget McKenzie and Michael McCormack and would like him to return and would like themselves to be promoted, too. So there is some internal dynamics going on in the Nationals that are complicating this whole situation.

And the fact that she's not a liberal means the prime minister's struggles to directly sack her because that's in the purview of the Nationals. So we wait to see what Phil Gaetjens comes up with from the prime minister's department. And I expect that that will be used as leverage by the prime minister and some senior ministers around him to try and persuade Bridget McKenzie to go, because it's going to be very difficult politically when parliament resumes if she is still in her portfolio. And Scott Morrison will be hoping, I think, that she comes to a decision of her own volition and steps down.

RUBY:

Karen, thanks so much for your time today.

KAREN:

Thanks, Ruby.

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RUBY:

Elsewhere in the news:
Centre Alliance Senator Rex Patrick has called on Foreign Affairs Minister Marise Payne to assist with the repatriation of roughly 400 Australians. They’ve been stranded in the Chinese province of Hubei since the outbreak of the Coronavirus. 106 people have now died and over 4,000 people world-wide are reportedly infected, including five confirmed cases in Australia. Senator Patrick called for the Royal Australian Air Force to be deployed saying “the government does need to do better on this.”
And in Washington, President Donald Trump’s impeachment trial is likely to call on more witnesses and be extended after revelations that former national security adviser John Bolton has written a manuscript saying Trump directly tied military aid to politically motivated investigations.

I’m Ruby Jones. See ya tomorrow.

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