'Congestion busting' and 'deliberate' breaches: ANAO's report into the Health Department $2b local health and hospitals scandal

The Australian National Audit Office report, released on Monday, revealed 45 per cent of funded projects were located in marginal electorates while 24 percent were granted in "fairly safe" electorates and 31 per cent were given to safe electorates.

It also showed the Department of Health's administration of the grants was inappropriate and ineffective, "involving deliberate breaches of the relevant legal requirements and the principles underpinning them".

But at the centre of the issues raised in Monday's report were failures by the bureaucracy.

In one case study, outlined by the top audit agency, it was determined there was a "conscious decision" by senior Health officials to not comply with finance laws on at least three occasions.

In another instance, senior Health officials boasted about pushing through red tape in a term they called "congestion busting".

Integrity advocates warn the report is just the latest in a line of "deeply concerning" audits into government grants programs, prompting calls for substantial reform.

The audit report ultimately concluded the multibillion-dollar program was "undermined by deliberate breaches" of the grants rules, adding the Health Department failed to advise the then-government there was no legal authority for some of its decisions.

Its probe revealed of the 171 grants delivered as part of the Community Health and Hospitals Program, seven were awarded without the appropriate grant opportunity guidelines being drafted.

Three of those seven were determined to be a "deliberate decision" against finance laws, the report said.

In an email, sighted by auditors, a first assistant secretary told a deputy secretary in September 2019 there was a risk several mental health-related grants would be delayed due to the rules and guidelines.

Following a meeting between the deputy secretary and former department secretary Glenys Beauchamp among others, the first assistant secretary was then informed that "payment should proceed ... the drafting and approval of [grant opportunity guidelines] should not delay prompt execution".

Ms Beauchamp, in her response to audit excerpts before its publication, said she did "not recall" a meeting where the issue of non-compliance was raised directly with her.

There is also no mention of the conversation in the executive board meeting's minutes.

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"This conclusion is not supported by the records of that meeting and this should be made clear in the report," Ms Beauchamp said.

"Indeed, in my submission the fact that the minutes of the meeting do not record that any such endorsement or approval was sought or given weighs heavily against such a conclusion."

The first assistant secretary later wrote to the deputy secretary on October 28, 2019, proposing grants to 22 recipients.

Of those, four were offered despite not having grant opportunity guidelines already written. Three proceeded where one did not.

Health sought advice from the Finance Department regarding its grant opportunity guidelines for mental health grants.

The guidelines are supposed to offer those interested in applying for grants with all information required to understand the purpose of the grant and how to make an application.

Finance offered its advice to Health officials, noting it wasn't clear why certain grants projects had been identified, that eligible grant activities were "very broad and potentially open to various interpretations" and that information around how and why proposals could be shortlisted should be improved.

Finance added that although the required elements in line with the rules were there, it partially lacked in certain areas - the planning and design; and probity and transparency.

But the feedback and advice was ultimately knocked back by the Health Department as "decisions of government" with one official saying it was not a "value add".

Health officials told the audit office the remark did "not reflect on Health's culture".

However, the audit report pointed to another, unrelated email exchange between senior Health officials where Finance's advice was described as "a pretty outrageous set of accusations which points to a pretty deep-set culture of mistrust".

Another email from a deputy secretary said: "[It] would be nice if [their] concerns related to some sort of outcome measure. I can feel some congestion busting coming on."

The audit office said the term "congestion busting" was subsequently used to justify several internal performance awards to the officials involved in the program process.

Senior Health officials were also rapped over the knuckles for not accurately conveying legal advice to the then-health minister Greg Hunt, and acting "contrary" to the rules.

The department sought legal advice from the Australian Government Solicitor for 44 projects that had been pre-approved by the minister in June 2019 on the basis they're lawful.

The government's top legal adviser said 11 of the projects were likely no lawful and for six of those, there was no legislation to legally support their authorisation.

The department advice then passed on to Mr Hunt about the government solicitor's advice was imprecise, "lacked detail" and led the minister to progressing the grants despite the "high" risk warnings.

Health then told the minister it would execute the projects on the grounds they were "one-off grants, legal challenge was unlikely, funding for each project had already been agreed by government, the projects had been announced, and stakeholders were committed".

Advice noted by Mr Hunt indicated Health had consulted the Department of the Prime Minister and Cabinet, who offered the decision to go ahead with the projects was ultimately up to the minister.

The audit office ruled this advice incorrect but said Health did not have any "appropriate records" showing what advice it sought from PM&C or the response it received.

The audit office's report this week marks the latest in a series of damning report cards on federal grants programs delivered under the former Coalition government.

Centre for Public Integrity head researcher Catherine Williams said the latest report has reinforced the need for more timely disclosure of information.

"This continues a line of ANAO reports that make damning findings about the administration of Commonwealth grants programs, and adds to an already compelling case for substantial reform to be made in this area, and urgently," Dr Williams said.

"What we would like to see is that departments be required to periodically table in Parliament, documents relating to grant administration, so issues of this nature could be revealed and rectified before an entire program has been maladministered."

Teal MPs Monique Ryan and Sophie Scamps both applauded the work of the audit office, calling for it to be adequately funded for years to come.

"I urge the major parties to keep funding this vital office - its reports will become even more important in upholding democratic principles, good governance and transparency once the National Anti-Corruption Commission comes into operation," Dr Ryan said on Tuesday.

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