Former premier Gladys Berejiklian, her deputy, John Barilaro, and other ministers made grant decisions which "lacked integrity", according to the NSW Auditor-General.
Margaret Crawford's report into the $252 million Stronger Communities Fund and $100 million Regional Cultural Fund was scathing of ministerial involvement in funding decisions and a lack of transparency.
"We cannot rule out that the lack of information about accountabilities in the program guidelines, coupled with a lack of formal documented approval from the former Premier and Deputy Premier, was a purposeful attempt to avoid transparency and accountability over the involvement of the former Premier and Deputy Premier in approving grant allocations," Ms Crawford's report concluded.
Ninety-six per cent of money handed out under the Stronger Communities Fund went to councils in Coalition seats before the 2019 election. In one instance, the report quotes a staff briefing note prepared for Ms Berejiklian which indicates the government's rationale for allocating grants.
"We have continued to work on how we allocate this funding to get the cash out the door in the most politically advantageous way," the briefing note reads.
Ms Crawford said Ms Berejiklian and Mr Barilaro had made 22 of the 24 SCF funding decisions, which were "communicated by their staff through emails to OLG [Office of Local Government] with little or no information about the basis for the council or project selection".
"There was no merit assessment of identified projects," Ms Crawford said.
The report found Arts Minister Don Harwin did not follow an independent panel's recommendations 56 times during two main funding rounds for the cultural fund.
He did not approve 34 applications recommended for funding and approved 22 applications that were not recommended by the panel.
Ms Crawford singled out several examples of lowly ranked projects which received ministerial approval.
An application from Mr Barilaro's electorate of Monaro was "added by the former Deputy Premier to the list of projects approved for funding in the first round". It was ranked 65th out of 81 applications but received $999,000.
A project in the Nationals seat of Coffs Harbour was ranked 139 out of 152 in round two, did not meet any of four selection criteria yet received $2.7 million, one of the largest grants forked out.
"The majority of the occasions in which the Minister did not follow the panel recommendations were in the second funding round," Ms Crawford noted. "The results of this round were announced one month prior to the 2019 NSW Election."
Newcastle and Wollongong were ruled ineligible for the Regional Cultural Fund, though the NSW government last month agreed to give Newcastle Art Gallery $5 million for its expansion project.
In the program's two main funding rounds, Tilligery Arts Group was the only Hunter organisation among six Labor seats to receive funds, to the tune of $3800.
Four projects in Muswellbrook, Scone and Singleton, in the Nationals' seat of Upper Hunter, received more than $3 million in total, and two projects in independent Greg Piper's Lake Macquarie electorate received more than $2 million.
City of Newcastle chief executive Jeremy Bath said Newcastle had been ineligible for the Stronger Communities Fund, which was intended to help amalgamated councils and those affected by merger proposals.
The Auditor-General said in her report that NSW ministers were under no legal obligation to follow agency funding recommendations or document reasons for variations, but failing to do so "introduces the risk of unchecked political bias".
The Coalition has been battling perceptions of pork barrelling since the sports rorts affair cost former federal minister Bridget McKenzie her job in early 2020.
The Newcastle Herald reported in June 2020 that another federal program, Community Development Grants, had all but ignored Labor seats while throwing cash at Coalition electorates.
Ms Berejiklian's successor as premier, Dominic Perrottet, announced in November that his government would review its grants programs "to ensure that public money is spent fairly, effectively and transparently".
Mr Perrottet faced more pressure over the issue on Tuesday after a Sydney Morning Herald report found more than three quarters of a $100 million gambling revenue grant program had gone to Coalition electorates and battleground seats over almost a decade.
"Grants are important. People criticise grant programs. I've seen on my visits to regional NSW a number of playgrounds and netball courts that never would have been built without grants," he said on Tuesday.
"There is zero tolerance for pork barrelling. I've made it abundantly clear to every one of my ministers that they are responsible for those grant programs."
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