Last week’s release of the Australian National Auditor’s Office (ANAO) Report garnered some media attention, but what was most interesting is what didn’t get a run. Buried in Volume 3 of the 1000+ page report are details of some of the companies that received public money in the form of Regional Partnerships funding.
One of the least – on the face of it – deserving recipients was applicant RP00908, Teys Bros, operators of network of abattoirs and a feedlot. While the Teys Bros group has an annual turnover in excess of $A1 billion, their Rockhampton plant had been closed since 2002 after extended industrial disputation rendered it unprofitable. In March 2004, the Rockhampton business sought $A660,000 of regional partnerships (including GST) to upgrade and reopen the meatworks.
The ANAO report indicates that at the time the Teys Bros’ Rocky meatworks was cap in hand seeking public funding, it was a company ultimately controlled by Consolidated Press International Holdings Pty Ltd, a company at the time controlled by Mr Kerry Packer (RIP).
Teys Bros eventually received their $A660,000, despite a Department of Transport and Regional Services (DOTARS) recommendation to the contrary. However, on 1 July 2004, then DOTARS Parliamentary Secretary De Anne Kelly overruled the departmental assessment and approved the entire grant sought by the company, subject to an independent viability assessment.
This assessment was never made. On 14 July 2004, a letter was sent to Teys Bros advising that the grant had been approved. The next day, then Minister for Transport and Regional Services, John Anderson, publicly announced the grant in a media release. Neither the letter to the applicant or the media release indicated that this funding was subject to an external viability assessment. Further, DOTARS made no effort to commission or arrange this assessment; likewise the funding agreement between Teys Bros and the Regional Partnerships Office, signed on 31 August 2004, made no mention of this condition.
The ANAO Report found that this oversight was caused by email advice about the approval of the funding issued by the then Departmental Liaison Officer, which reported on the funding but omitted to communicate the external viability assessment condition. The Regional Office executed the funding agreement without first obtaining the exact details of Parliamentary Secretary’s written approval.
Alarm bells first rang when Australian Meat Holdings Pty Ltd (AMH), operators of a Rockhampton meatworks, wrote to the Minister (CC’ing Mrs Kelly) on 26 July 2007, querying the grant of on the grounds that Lakes Creek project will compete directly for cattle and labour with their own business in contravention of guidelines requiring that funding should only be provided if it has a neutral impact on competition.
AMH did not receive a response to their letter until 20 October 2004 (after that year’s Federal election). The response stated that the “decision to fund the project was based on advice from the central Queensland ACC that the “reopening of the Lakes Creek plant will have significant social and economic benefits” for Rockhampton.
However, there’s no evidence that Mrs Kelly received any such advice. In her written reasons for overruling DOTARS and approving the grant, she indicated that “Ministers office has spoken with other meatworks and been advised that reopening the plant would not affect job security in the short term.”
There were a significant number of other abnormalities in the application process:
- DOTARS’ due diligence fell short in respect to: identifying the corporate entity that owned the assets that were the subject of the Regional Partnerships application for funding; and obtaining the information in relation to that entity and other relevant entities in the corporate group necessary to appropriately inform its assessment.
- Requests for additional information made by the DOTARS Regional Office were not substantially met. Nonetheless, the application process was still fast-tracked;
- The application for funding involved retrospective funding of a project that had already commenced, in direct contravention of both Regional Partnership Guidelines and ANAO Grants Best Practice guidelines;
- The funding is available for partnerships, which means arrangements between applicants, other businesses and other levels of government. However, 48 per cent of the funding was to come from DOTARS, with the remainder provided by Teys Bros. There were no other contributions, yet DOTARS assessed that teys Bros had partially satisfied the partnerships criterion.
- Given that the operation has closed in 2002 because it was unprofitable, you’d think that DOTARS would rigourously assess the viability of both the applicant and the project. However, ANAO found that there was inadequate scrutiny of the project costings provided by the applicant and no external viability assessment was commissioned despite being required by the Internal procedures manual that applied at the time;
- The Regional Partnerships Guidelines applying to this application make it clear that funding should not be granted to projects that “compete directly with existing businesses, unless it can be demonstrated that there is an unsatisfied demand for the product or service, or the product or service is to be provided in a new way.” Advice from the Department of Agriculture, Fisheries and Forests (DAFF) stated that no significant benefits to the Australian beef processing sector would accrue from the project, because of cattle shortages caused by the drought.
So why was the Tey Bros project approved? DOTARS’ shoddy assessment processes aside, there are substantial questions about why billion dollar businesses like Teys Bros – sorry, Consolidated Press International Holdings – are deserving of grants of public monies intended to stimulate economic growth in regional Australia and assist communities in adjusting to the demands of social, economic and environmental change.