A controversial $37m New South Wales grants program which began as a 2023 election slush fund available to Labor candidates and members to offer to local community groups has revealed weaknesses in the state’s grants making guidelines.
The NSW auditor general, Bola Oyetunji, found that he was unable to review how Labor had administered the Local Small Commitments Allocation (LSCA) grants prior to winning government.
Oyetunji concluded in his report that the grant guidelines should be overhauled as “a matter of priority” to deal with election promises that later led to allocations of government money.
The LSCA program gave $400,000 to each electorate, but the projects were nominated by Labor candidates only.
When it became known about after the 2023 election, won by Labor, it sparked outrage from the opposition and minor parties because they had no opportunity to nominate projects, even if they were the sitting members.
The LSCA is now the subject of a parliamentary inquiry, amid allegations that some Labor MPs were on the boards of, or had ties to, organisations that they recommended for funding.
Oyetunji noted that once the bureaucracy took over the program, after the election, the program was largely run “effectively”. Earlier, it was largely not transparent, he said.
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The auditor general found the Program Office which took over the grants program had reviewed the potential conflicts of interest of just 17 candidates out of 93, which were put forward by the special minister of state.
“The Program Office was told that NSW Labor had put in place conflict of interest processes to make sure the candidate did not have any issues, but the office did not seek any documentation supporting NSW Labor’s conflicts of interest assessments,” Oyetunji said.
He said there was little he could do, because the NSW Labor party was not within his remit.
“These activities fall outside the scope of the auditor general’s mandate,” Oyetunji said.
Instead he recommended: “The guide [on administering grants] could be clearer about how the public sector is to administer grants involving election commitments.”
The LSCA program began as a policy proposal of NSW Labor prior to the March 2023 election. It involved an allocation of $400,000 to each NSW electorate to fund the election commitments of local Labor candidates in accordance with program guidelines.
After the election, the scheme was handed to the NSW government’s Program Office, which engaged a probity adviser on 25 July 2023. But the adviser was not involved in any events before this date.
The premier’s office provided the Program Office with a list of election commitments and the Program Office invited the nominated organisations on the list to submit applications to deliver small local projects.
The auditor found that once Labor won the election and handed to the Program office within the government, it was mostly run “effectively”.
The audit identified two exceptions: 54 assessment panel members’ conflicts were not identified and managed from a total of 644 approved projects, and there were some other minor administrative errors.
Oyetunji said the NSW government should consider updating the Grants Administration Guide to include additional guidance on how the public sector is to address financial accountability, probity, record keeping and administrative obligations when a grants administration process has been initiated as an election commitment.
He also recommended the Program Office should ensure conflicts of interest processes are implemented as intended for all future grant programs.
