Bridget McKenzie sports rorts
(Image: AAP/Lukas Coch)

A key participant in the sports rorts scandal has so far received little attention: the Department of Health, which oversees the Australian Sports Commission and which was Bridget McKenzie’s advising department in her role of sports minister in 2018.

It’s clear from the auditor-general’s examination of the Community Sport Infrastructure Grants Program that the department played an important role in facilitating McKenzie’s abuse of the $100 million program — but also wanted to stay as far as possible from it.

As Crikey revealed yesterday, the Department of Health, along with the Infrastructure Department, should have been the agency administering the program. It was already providing grants under sports programs around the country, and was one of the first departments to join the whole-of-government “Grantconnect” grant delivery platform. But the government wanted an agency not bound by grants guidelines, and which did not use Grantconnect. That was the Sports Commission, an independent Commonwealth corporate entity.

Health still had a role. The commission was not hooked up to the ministerial paper system through which briefings and correspondence are shuttled back and forth from bureaucrats to the minister’s office, so the department had to receive and then send on the commission’s paperwork to McKenzie.

But Health’s sports area also worked with the commission on developing the guidelines for the program and one of its officers sat on a review panel that examined the commission’s assessment of the first round of applications. And Secretary of the Department of Health Glenys Beauchamp is also a board member of the commission.

Beauchamp, by the way, announced her retirement today. Her last day in the position will be right before the next round of Senate estimates commences, which means she won’t be able to be questioned about the program.

Most of all, Health played the role of enforcer for McKenzie’s demands that she be given control of the program. When McKenzie’s office demanded a blank application form for the third round of grants so it could organise its own application, the commission hesitated, but Health told them to hand it over, saying “it was for the Minister to then decide how it will be used”. And while the guidelines were being developed, the Australian National Audit Office (ANAO) says, “the Department of Health reminded Sport Australia that the Minister wanted to approve CSIG funding”.

The commission, which operates under its own act, had noted in June 2018 that it had to approve the grants, rather than the minister. The minister could direct the commission, under Section 11 of the act, on their approval. But if McKenzie was going to direct the commission, she would first have to discuss it with the commission, then table the direction in parliament — the worst kind of publicity for a porkbarreller.

There was also a legal issue about using Section 11. Most ministers have some sort of “directions power” over agencies in their portfolios, but how detailed can those directions be? The Australian Sports Commission Act says the minister can direct the commission “with respect to the policies and practices to be followed by the commission in the performance of its functions, and the exercise of its powers, and the commission shall comply with the directions”.

Did that mean McKenzie could direct the commission about how to allocate individual grants? Or to delegate to her the power to decide? Legal advice would be needed on how to use the Section 11 power to enable McKenzie to control the grants. But what if the advice came back that Section 11 didn’t allow her to control something as specific as a grant allocation process, or placed some procedural hurdle on it?

An important rule in the public service is never ask for legal advice unless you know what you’re going to get. This was a classic example: Health’s lawyers or the Australian Government Solicitor might indicate that McKenzie couldn’t control the grants. And once advice is provided, it can’t be unprovided. It will sit there on file, waiting for an auditor to find it down the track. So it’s best not to ask for it. That’s what Health did. “The Department of Health advised the ANAO in November 2019 that this legal advice was not sought.”

But that left Health with a problem. The commission said it had to allocate the grants. Health had told the commission that McKenzie was going to allocate the grants whether it liked it or not. But the only way to make sure that was OK — Section 11 — was both legally problematic and would draw attention. Health officials decided on Jim Hacker’s strategy of masterly inaction. “There are no records that evidence that the Department of Health or Sport Australia advised the Minister on the legal basis on which the Minister could undertake an approval role for the CSIG program.”

That’s now the attorney-general’s problem. The government is very worried about the fact that McKenzie doled out $100 million without legal authority, especially if unsuccessful grant applicants decide to join litigation that would test that. The masterly inaction approach of Health — a quick fix to deal with the problem of a minister demanding to rort a program — may yet come back to bite the government.

If there is litigation, then McKenzie’s staff may be compelled to give evidence. And it won’t be the first time. The ANAO says it had to resort to using its powers of compulsion to force McKenzie’s staff to give evidence to it “using the powers provided by Section 32 of the Auditor-General Act 1997 (Auditor-General Act) from two key individuals from within the Minister’s Office at the time funding was awarded”.

A check of ANAO audits shows the last time Section 32 powers appear to have been used on ministerial staff was during the ANAO investigation of the Godwin Grech affair, which ended up entirely exonerating Kevin Rudd, Wayne Swan and their staff. McKenzie’s staff have had quite a different outcome.

Health’s response to the audit was brief. “The Department of Health notes there are no recommendations directed to the department”. Its response to detailed questions from Crikey was almost as brief. “The Australian Sports Commission (Sport Australia) rather than the Department of Health was responsible for the administration of the Community Sport Infrastructure Program and the provision of advice to the Minister,” a spokesperson said. “Sport Australia has acknowledged the report prepared by the Australian National Audit Office, accepts the Auditor-General’s three recommendations in the report that relate specifically to them and is already acting to implement the recommendations.”

Health seems to want to keep as far as possible from the program. But it can’t heap all the blame on the Sports Commission. There may yet be consequences from the legal issues it decided to overlook.