A NSW South Coast caravan company awarded a grant under a controversial regional jobs program was believed to be trading insolvent six months before the money was handed out.
A Sydney factory which was awarded $1.6 million to move to the North Coast under the same program also went bust less than a year after receiving the grant.
Moruya company Off Road Camping and Accessories was awarded a $760,000 grant under the Coalition government's Regional Jobs and Investment Packages in December 2017 to design and manufacture a "lightweight entry level compact camper" that could be assembled at speed.
The company was placed under external administration in October 2018. it was placed into liquidation in December 2018 and the directors have since gone bankrupt.
However a liquidator report indicates the company had negative asset to liability ratios since at least June 30, 2017.
"Following my investigation into the affairs of the company, it is my view that the company appears to have traded whilst insolvent," liquidator Tim Heesh wrote.
Minutes from its creditors meeting on December 12, 2018, also revealed an employee alleged the company withheld superannuation payments while it was developing a new model of camper van.
A quarter of that superannuation was outstanding at the time of the meeting.
The company was deemed to owe its employees more than $800,000, including more than $50,000 in unpaid super.
One of the largest creditors was also the Australian Tax Office, with more than $124,000 outstanding.
It is unclear whether this grant was one of 68 projects the panel of ministers overruled departmental advice to award, as revealed in a scathing Auditor-General report released last week.
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Mr Heesh told The Canberra Times last week the company didn't have the capital to match the federal grant as required and took up little or none of the funding before it went under. Eagle Outdoors group took over the company late last year and had used around half of grant.
A spokesperson from the Department of Infrastructure said the application from Off Road Camping Accessories had been assessed against the criteria outlined in the Regional Jobs and Investment Packages program guidelines.
"This includes an assessment of the applicant's capacity, capability and resources to carry out the project and the evidence provided to support their application," the spokesperson said.
"This assessment also included a review of the project and business plans, which includes key risks and mitigations strategies, delivery milestones, project budget and funding sources and how the proponent would manage matters such as key resources and approvals from relevant authorities."
But the audit said there were deficiencies in how the applications were assessed, with claims about job creation take at face value. The standard of proof about the ability of companies to pay for projects was also relaxed in some cases.
The Canberra Times has uncovered yet another company that ran into financial trouble not long after receiving the grant.
Sydney company Adaptapack had planned on using its grant to move to the NSW North Coast.
This was despite having only moved to new premises in Seven Hills in January 2018.
But an administrator was appointed in November 2018.
Liquidator Alan Hayes found the company suffered from poor strategic management and poor management accounting.
"The director decided to expand operations by manufacturing in Australia through Adaptapack and in doing so incurred significant costs and ultimately losses which were probably funded by creditors," the report from December 2018 said.
The report also said the move to Seven Hills had been a "costly and disruptive process".
The company itself blamed fraud of nearly $240,000 uncovered in the 2018 financial year, and a dispute with a customer over around $1 million of unpaid invoices.
Mr Hayes said as the company never moved, it did not draw down on the government grant.
The Senate has now ordered the government to table all written briefings and responses to and from the ministerial panels about the grants on Thursday.
It also asked for the reasons that ministers gave when they ignored the department's recommendations to fund projects in some cases and refuse funding in others. The auditor found that ministers decided to fund 68 projects which had not been recommended by the department - and highlighted the Wide Bay Burnett region of Queensland where none of the projects that were ranked highest by the department, with scores in the 80s, were funded by the ministers, who instead gave money to a project that was placed 56th out of 61 application and other scored 58 points.
The Senate asked for information on the six late or ineligible projects that were nevertheless awarded funding, and the four projects that were exempted from having to match the government funding dollar for dollar. The auditor found that requests for exemptions from having to match funding were not properly considered.
The Senate has also asked for the contract with the private firm which did the project assessments at a cost of $3.15 million. The auditor found the grants had not been properly assessed, with claims about job creation taken at face value.