Australia's Department of Defence failed to appropriately manage the expenditure of taxpayer funds in a range of defence government grants, according to a previously confidential audit.
ABC's 7.30 can reveal that a major audit undertaken by the department's grant program in June 2020 identified a series of failings in how taxpayer funds were being spent as well as finding numerous breaches of grant rules.
Legal experts believe the findings further highlight the need for a national integrity commission that can independently scrutinise the way that taxpayer funds are spent.
The department's Audit Branch reviewed a sample of seven grants across a range of different programs, including ad hoc grants and grants that required ministerial approval.
The findings, which were obtained under freedom of information laws, revealed a series of problems in how the grants were administered.
Conflict of interest records were "either not provided to the audit, or were inadequate."
Grant approval documents, including briefings to relevant ministers, were either not provided to auditors or didn't include enough information.
The audit found the department also had poor record-keeping habits and was unable to locate documents, including financial assessments. Most grants identified also failed to provide updates to the department to ensure it had visibility that grant funds were being spent appropriately.
"The majority of grants sampled did not document their grant-monitoring activities," the audit found.
"The [grant rules] require officials to develop policies, procedures and documentation necessary for the effective and efficient governance and accountability of grants administration.
"In these instances, written evidence of any day-to-day meetings or interactions between the relevant defence grant management area and the grantee could not be provided."
It concluded that it was unclear how the audit's findings aligned with the defence department's priorities.
"For the majority of grants sampled, a clear link between the activity and defence's overarching strategic goals and priorities appears not to have been established during the initial stages of the grants' life cycle," the audit stated.
"A failure to align grants with defence goals and priorities reduces transparency, making it harder for defence to ensure grant programs have met intended policy outcomes."
New framework introduced
The audit described these problems as being "in general administration" and that no "serious wrongdoing" was identified. It characterised the level of risk as "moderate."
The root cause of these problems was attributed in the audit to "grant managers not understanding the expected standards and/or a perceived absence of any accountability for their actions or lack thereof."
"Appropriate measures including the monitoring, measuring and reporting of compliance to ensure that individual grant managers are meeting expected standards were not prevalent at the time of the audit," it said.
The audit added that a new grant management framework had been introduced that, if implemented, should ensure grant rules were more appropriately followed.
A spokeswoman for the Department of Defence told 7.30 it had implemented a new framework in July 2019 to strengthen its compliance with grant rules.
"The audit also made it very clear that the instances of non-compliance were related to general administration issues only and no serious wrongdoing was identified.
"Defence has implemented all of the recommendations from the audit and undertakes an annual compliance assessment."
Failure to follow grant procedures 'very disturbing'
The audit noted that the Department of Defence had approved grants totalling $196 million between 2017 and 2019.
A range of new grant initiatives have been created to support the defence industry, including Capability Improvement Grants, Skilling Australia's Defence Industry Grants and Defence Global Competitiveness grants.
Former Victorian Supreme Court Justice David Harper told 7.30 that the findings of the audit showed a disturbing series of problems with how the agency administered grants.
"Because so much money is spent on defence and so much hangs on who gets what contracts, it is in a very vulnerable position."
The federal government has faced heavy scrutiny over how it administers government grants.
A series of audits conducted by the Australian National Audit Office have identified shortcomings in grant programs.
Mr Harper said there was an urgent need for a new national integrity agency that could oversee integrity issues in federal parliament, across the public service and ensure government funds were spent appropriately.
"It is very important that systemic or serious corruption be properly investigated in ways which are simply impossible in the federal sphere today," he said.
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