Auditor General’s overview
From March 2020, the Western Australian (WA) State Government announced a range of stimulus initiatives to support the State’s financial and social recovery from the COVID-19 pandemic. Although WA has not experienced a significant outbreak, financial and social recovery was considered necessary to mitigate the impact of policy measures taken to manage the threat of COVID-19.
This report summarises how well 19 State government entities rolled out a mix of 30 financial relief and stimulus funding initiatives, with a total budget of $2.144 billion, over the period 1 July 2020 to 31 March 2021.
Initiatives included financial relief targeted to support individuals and groups that were economically impacted, as well as stimulus funding intended to support jobs and generate new or additional economic activity. To be effective, financial relief and stimulus funding needs to be provided quickly, to the intended recipients.
It is a credit to the responsible entities that in unique and somewhat difficult circumstances all 30 initiatives we examined were rolled out, at least in part, and entities had a strong focus on maintaining sound governance and risk management frameworks.
However, 47% of the initiatives have not substantially used their allocated budgets.
In total, 61% of the total $2.144 billion budget was delivered through the 30 initiatives – the vast majority as financial relief funding to citizens and businesses. This means, for a number of reasons outlined in the report, a total of approximately $800 million remains unspent.
Of particular concern are the Department of Communities’ social housing initiatives, which as of 31 March 2021, only $6.42 million (2%) of the $319 million budget was spent. Although planned to be rolled-out over 2 years, these initiatives are now competing for resources in a building and construction boom in WA that’s been driven by other pandemic-induced stimulus measures (including federal and state building grants) aimed at the private housing sector. It is relevant to also recognise that the economy is now larger than it was
This leads me to a key recommendation of the report. When deciding on any future stimulus funding and relief measures, State government entities should consider predictable events in their planning such as market limitations (including reduced contractor and builder availability.) It’s also important they improve their planning and coordination when initiatives are competing with one another, as is the case with social housing, to ensure all initiatives reach the relevant beneficiaries.
This audit also reinforces a key message from my recent Local Government COVID-19 Financial Hardship Support report – the importance of entities applying a common sense and balanced approach to probity. Both reports are a timely reminder for both State and local government entities that an overarching principle in emergency and stimulus responses should be to provide prompt relief and reduce the burden on eligible applicants at their time of need.
This report provides valuable insights into some of the factors that slowed progress of select initiatives. I hope it provides useful lessons for State government entities for their future emergency and program planning to ensure they are well placed to best assist the Western Australian public they serve.
From March 2020, the Western Australian (WA) State Government announced a range of stimulus initiatives to support the State’s financial and social recovery from the COVID-19 pandemic. Although WA has not experienced a significant outbreak, financial and social recovery is still required due to the impact of measures taken to manage the threat of COVID-19.
In July 2020, the Government announced the WA Recovery Plan which committed $5.5 billion to a wide range of initiatives, including those already announced since March 2020. Various State government entities are responsible for the roll-out of the initiatives which include infrastructure upgrades, grants, small business support, housing stimulus programs, rent and mortgage relief, and other assistance payments. The budget was subsequently increased to over $5.8 billion.
The 30 initiatives we audited cover a mix of financial relief ($1.392 billion) and stimulus funding ($752.2 million) delivered by 19 entities over the period 1 July 2020 to 31 March 2021. Financial relief is targeted to support groups that were economically impacted while stimulus funding is intended to generate new or additional economic activity and support jobs. Both intend to minimise the social impact of the pandemic response measures. To be effective, financial relief and stimulus funding needs to be provided quickly, to the intended recipients.
The Government’s first funding initiative was the COVID-19 Relief Fund. Our Office audited and reported1 to Parliament on Lotterywest and the Department of Local Government, Sport and Cultural Industries’ management of phase 1 of this fund. It has therefore not been considered again as part of this audit.
The 30 audited initiatives have all been implemented but not all are fully delivered. The budget of the selected initiatives was $2.144 billion of which $1.3 billion (61%) was rolled out to beneficiaries by 31 March 2021.
Although the roll-out occurred quickly, there was a strong focus on maintaining a sound governance and risk management framework. The governance arrangements and internal controls established by the responsible entities were largely sound.
We found nothing that would suggest funds and relief were not being used for their intended purpose. However, in some instances, it is too early to draw such a conclusion, in this respect, due to the limited roll-out of initiatives.
Some of the factors that have slowed progress could be useful lessons for future emergency and program planning. For instance:
- consideration of balancing eligibility criteria between reducing the risk of money going to people that may not need or be entitled to it, versus making it easier for those that do to access the program quickly
- administrative demands and resources, including demands on senior executive oversight and decision-making, required to implement initiatives
- the risk and impacts of having multiple initiatives in the same sector.
What we did
The objective of the audit was to assess the extent to which, and how effectively, COVID-19 stimulus initiatives were implemented by State government entities.
We targeted 30 (Appendix 1) of the 44 initiatives announced between 16 March 2020 and 15 July 2020, that extended beyond 30 June 2020. Nineteen entities were responsible for implementing the initiatives, with an approximate budget of $2.144 billion.
We assessed if the initiatives were implemented, progress on the roll-out to 31 March 2021, reasons for under performance (less than 90% of the budget spent) and, where applicable, the effectiveness of entities’ distribution of the initiatives and their related internal controls.
To measure how effectively entities distrubuted the stimulus initiatives, we assessed if a responsible entity:
- appropriately communicated the initiative to potential beneficiaries
- used the funds for the intended purpose of the initiative
- allocated the correct amount of funds/relief to approved and eligible beneficiaries
- allocated the funds in a timely manner and in accordance with legislation and policy.
Our detailed findings have been reported to entity management. Entities should act on our recommendations as soon as possible to address all weaknesses and ensure a robust control environment and reliable accounting records.
This audit did not assess if the initiatives achieved the State Government’s desired outcomes or if the spending of funds or provision of relief was done in the most efficient manner to ensure value for money.
This was an independent performance audit, conducted under section 18 of the Auditor General Act 2006 and in accordance with Australian Standard on Assurance Engagements ASAE 3500 Performance Engagements. We complied with the independence and other ethical requirements related to assurance engagements.
What we found
Most entities had appropriate internal controls in place to roll-out initiatives
Based on the limited assurance audit work we performed, we found no significant internal control weaknesses to indicate that funds or relief were being misappropriated. However, in 41 instances the eligibility criteria of applicants were not always met nor adequately supported to confirm their eligibility. Of these 41 instances, 28 related to free and reduced fee courses at the South Regional TAFE. Entities with these findings need to improve their internal controls to ensure a sound, robust and sustainable control environment.
All audited initiatives were rolled out but 47% were not fully delivered
All 30 initiatives examined were rolled out by the responsible entities. However, the budgeted relief and funding was not always fully delivered to targeted beneficiaries by 31 March 2021 (Table 1).
|Financial relief||Stimulus funding||Total examined|
|Budget||$1.392 billion||$752.2 million||$2.144 billion|
|$ amount rolled out||$1.1 billion||$217.6 million||$1.3 billion|
|% rolled out||79%||29%||61%|
Table 1: Amount of financial relief and stimulus funding delivered
Overall, more financial relief was delivered to citizens and businesses than funding of initiatives. In part this was due to it being quicker for a government entity, such as a water and power utility, to apply credit or stop charging for something, or to not increase a cost, than to go through procurement and contracting processes to deliver new projects. Some relief initiatives have been more effectively rolled out than others due to having clearer eligibility criteria and simpler processing.
The delay in delivery of funding initiatives has been due to complexity of procurement and contract management processes, reduced contractor and builder availability, and insufficient interest for some initiatives which are demand driven. In addition, the impact of COVID-19 in WA has not been as significant as was expected when the initiatives were planned, budgeted and approved. This contributed, in some instances, to the under delivery of announced stimulus funding.
Sixteen initiatives used more than 90% of their budget
Sixteen of the initiatives had used more than 90% of the budgeted amount by 31 March 2021 (Figure 1). Four of these initiatives have been extended and additional funding redirected from within the responsible entity. Where an initiative has been fully implemented but budgeted funds remain, the funds will be reallocated internally within the entity if initially funded internally, otherwise transferred back to the consolidated account.
Of the 16 initiatives which utilised more than 90% of the budgeted amount, 12 (75%) were relief initiatives which did not require physical spending or transfer of funds and therefore were easier to roll-out.
For the other 14 initiatives, named in figure 1 and further outlined in Appendix 2, where less than 90% of the budget has been spent, this was largely due to:
- procurement and contract management processes being complex and/or time consuming
- reduced contractor and builder availability across metropolitan and regional areas. This resulted in higher quotations due to highly competitive market forces and increased material costs
- some initiatives were demand driven and did not receive interest from potential beneficiaries
- universities and local government entities had sufficient cash reserves not to require use of the funding
- some initiatives will stretch over more than 1 financial year and will only be paid out once all conditions are met
- some rebates were not commercially attractive for the beneficiaries as the cost (including administration time) exceeded the benefit
- processing delays due to high volumes of applications, extensive eligibility criteria and incomplete documentation being submitted
- clean-up of databases as the information used for planning and budgeting was different to that which was ultimately used for grant payouts, which resulted in actual benefits being lower than anticipated, as the grant benefits were only earmarked for specific beneficiaries.
Case study 1 – Balancing application criteria with the need for quick relief
Multiple entities commented that initiative roll-out was slow due to having extensive application criteria that caused lengthy review processes.
An overarching principle in emergency and stimulus responses should be to provide prompt relief and reduce the burden on eligible applicants at their time of need. This means ensuring that application requirements are proportionate to the value of relief available and are balanced with internal controls to identify possible fraud.
Internal controls could include high-level checks such as confirming an applicant’s identity and income through RevenueWA or the Australian Business Register, further verification procedures on a risk-based sample basis, and using feedback and findings to inform ongoing monitoring controls.
Appendix 2 provides further details for the initiatives, including explanations for any budget underspend. We did not verify each individual explanation but given the nature and intent of the programs, and based on our knowledge of the entities involved and the evidence we did examine, there is nothing to indicate that the explanations are not reasonable.
Slow roll-out of some initiatives means Government objectives might not be met
Nine of the 14 initiatives, with an overall allocated budget of $719.3 million, had less than 30% roll-out by 31 March 2021. The objective of these initiatives may not be achieved at all or within the original timeframe.
Of particular concern are the Department of Communities’ social housing initiatives (building and maintenance). As of 31 March 2021, only $6.42 million (2%) of the $319 million budget was spent. These initiatives are competing for resources with initiatives aimed at the private sector and were not in place when the rent and eviction moratoria were removed.
Furthermore, there was limited uptake of the regional affordable land initiative intended to drive growth in regional WA. Only $22.4 million (13%) of the $166.3 million was used to 31 March 2021. This measure was also not clearly related to COVID-19 relief or funding.
- The WA economy has proven itself to be relatively resilient to recent global economic crises including COVID-19 and the 2008 financial crisis. In both of these instances, our economy went against the trend and strengthened. The State Government should consider this history when deciding on any future stimulus funding and relief measures. Audited State government entities should:
- improve their planning and coordination when initiatives are competing against one another (as is the case with social housing) to ensure all initiatives are rolled out to relevant beneficiaries
- consider predictable events in their planning such as market limitations (including reduced contractor and builder availability)
- to deliver quick relief to eligible applicants, balance application requirements with risk-based compliance monitoring to prevent payments being made to ineligible recipients.
- As the WA economy is now larger than before the pandemic, the audited State government entities should consider if any outstanding initiatives are still required. Where stimulus initiatives are continued:
- the implementing entity needs to understand the reasons why all initiatives were not fully rolled out and consider if changes to eligibility criteria are needed and/or whether the relief provided is aligned to the beneficiaries needs
- consider if initiatives are stimulus measures or just normal business as usual matters and make necessary adjustments to the initiatives.
- In addition, entities should refer to, and adopt where appropriate, our Office’s better practice guidance on grants administration. This is available on our website at www.audit.wa.gov.au/better-practice-guidance.
Response from audited entities
Entities with findings generally accepted the recommendations and confirmed that, where relevant, they have amended policies, practices or systems for administering the roll-out of COVID-19 stimulus initiatives. Their responses included the following to our findings and recommendations:
- The increase in applications, which is significantly higher than initial estimates, and complexity of assessing eligibility along with the short implementation timeframe required additional staff. Since the audit findings were issued, entities have updated work instructions on eligibility assessment and document retention, and introduced training sessions.
- Eligibility criteria was complex, and each application must be validated against all those criteria before it can be approved and paid, which resulted in application processes taking longer than initially anticipated.
- Entities identified fraudulent applications and consider that without any legislative power to recover the grant funds once they are paid, all applicants must be judiciously checked before making payments/providing funding relief to ensure that only those that are eligible receive funding/relief. This important due diligence process ensures integrity in the stimulus benefits process but does add to the processing and approval timeframes.
- For some initiatives progress in processing applications was communicated to applicants through the wa.gov.au website. Correspondence was also sent to applicants in January 2021 asking them to check that they submitted all supporting information as part of their application as 90-95% of processed applications had required the team to follow-up missing documents. This means that officers spend extra time requesting information from applicants and are double handling applications as additional documents are submitted.
- Entities will continue to review resourcing and administrative and approval processes, and implement any initiatives identified to pay the funds more efficiently without compromising the integrity of the grant schemes.
Appendix 1: Audited initiatives
Appendix 2: The 14 initiatives with reasons for the underutilisation of allocated budget
1 Western Australian Auditor General’s Report, COVID-19 Relief Fund, Report 11: 2020-21 21 December 2020