Coalition ministers overruled departmental advice to approve nearly $80 million worth of grants, including two projects in the ultra-marginal seat of Gilmore, the Australian National Audit Office has found.
The Regional Jobs and Investment Packages was a 2016 election promise, designed to create jobs in regional Australia.
It provided more than $220 million in grants to areas including the NSW South Coast, on the proviso the business or council making the application would match the funding.
More than 700 applications were received across the 10 regions, with 233 grants doled out.
But while the program did allow nearly $670 million of projects to get off the ground, there were concerns about pork barrelling early on.
Labor MP Mike Kelly asked Auditor-General Grant Hehir to investigate the South Coast grants in particular last April, pointing out that $18.5 million had been given to the then-Liberal-held seat of Gilmore, and just $1.5 million to his seat of Eden-Monaro.
The audit did find that Gilmore got three-quarters of the projects funded on the South Coast, but it also had three-quarters of the applications.
However, two projects on the South Coast were approved by the ministers, despite the department recommending against them. Both were in Gilmore.
The auditor also reported that the ministers knocked back three projects in Gilmore that were recommended by the department based on its project ranking.
They also rejected four projects in Eden-Monaro that had been recommended by the department.
The auditor has not named the projects recommended but not funded, nor the projects that the ministers funded despite the department recommending against them. So the two Gilmore projects which won funding against the department's recommendation have not been divulged.
Twenty-three projects were funded in the electorate, many of them involving the expansion of existing businesses.
Among the biggest grants went to private businesses, including:
- Cottee Jersey Group got $2.8 million to install an automated milk processing plant at Bomaderry, a Japanese tea house and a museum dedicated to the history of the family business;
- Shoalhaven Starches got $2.95 million for robotics for flour packing at Bomaderry;
- Kalizma received $1.5 million for 10 new luxury guest suites and other facilities at its Cupitts Ulladulla accommodation;
- Milton District Meats was given $1.12 million to build a new chiller and boning room;
- Essence Group for $1.07 million for "health bar and beverage manufacturing equipment" in South Nowra
- Off Road Camping Accessories was given $760,000 for a project involving design and manufacture of a "lightweight entry level compact camper" that can be assembled at speed.
There were also startling shortfalls in how the department and the ministerial panel assessed applications.
Ministers rejected 64 projects that were assessed as suitable by the department seeking $75.9 million in grants, but signed off on 68 projects asking for $77.4 million against departmental advice.
Unlike other regional grants programs though, the ministers did not re-score the applications when overruling the department. This meant the reasons the department's advice was cast aside are not clear.
In the Wide Bay-Burnett region, for example, none of the top eight projects (which the department scored between 81 and 87 out of 100) received funding. Instead, the ministerial panel approved a project that the department had given a score of 58 out of 100 and ranked 56th out of 61 projects.
One grant was even given to a project which was deemed ineligible for the program because the applicant was a registered training organisation.
Asked to explain, the infrastructure department told the audit office the project was "merit assessed" because "the minister's office showed a strong preference to fund this project as it deemed the registered training organisation element of the proponent's business to be incidental to the project".
There were other issues with the way the department managed the grant program too.
Claims about job creation from applicants were taken at face value, without any proper scrutiny from the department.
There was errors and missing information in the conflicts of interest register, and there was nowhere for grant applicants to declare any conflicts, despite the guidelines saying there would be.
Contractors were never asked about conflicts of interest either, and this absence of declaration was deemed "sufficient evidence" that no conflict existed.
A spokeswoman for Regional Development Minister Michael McCormack said the department had already cleaned up its processes, after a separate review in July last year.
"It is worth noting the report concluded there was no bias evident in the assessment and decision making process concerning funding of projects in [participating] regions over others," she said.
But Labor's infrastructure spokeswoman Catherine King said Mr McCormack needed to explain why ministers overruled the department on so many occasions.
She also accused the Morrison government of attempting to bury the audit, by tabling it an hour before the Melbourne Cup.
"If the deputy prime minister fails to provide an adequate response to this scathing audit, Labor will pursue the Morrison Government through the Parliament," Ms King said.