Select Committee on Disability Services Funding

A motion put forward during the Select Committee on Disability Services Funding.

The Hon. J.M.A. LENSINK (16:25): I move:

That the report of the committee be noted.

I rise to make some remarks in relation to this report, which I am very pleased we have been able to report on. At the outset I would like to particularly recognise the hardworking staff of our committee: Mr Guy Dickson; Mr Chris Neale, who has moved on to other pastures; and Ms Margie Morrison, our research officer. I would also like to recognise the other members of the committee: the Hon. Ann Bressington, the Hon. Gerry Kandelaars, the Hon. Ian Hunter, the Hon. Rob Lucas, the Hon. Kelly Vincent and the Hon. Russell Wortley.

The committee arose in light of concerns the Auditor-General raised in the report for the year ended 30 June, which was tabled in September 2010. The report raised some issues which are the subject of the reporting of this committee. The motion to refer this matter to a select committee was moved by myself on 10 November 2010 and received support from honourable members in this chamber on 24 November 2010.

The Auditor-General raised a number of concerns in relation to this particular matter, those being: the use of a non-government organisation to hold government funds, the absence of important information to aid decision making, incomplete financial reporting, the lack of documentation and formal conditions, and that payments were made in variance to a cabinet submission.

The details are that one-off funding was provided to the Julia Farr Association in June 2007 and June 2008 and, while it was used for its original purpose, that being to provide equipment for people with disabilities, the moneys allocated were not actually fully expended until March 2010, some almost three years later in the instance of the first tranche of money.

We received submissions and evidence from a number of organisations: the Auditor-General, obviously; the relevant department, which was previously the Department for Families and Communities and is currently the Department for Communities and Social Inclusion; the Office of the Public Advocate; and the Department of Treasury and Finance. We also received advice from non-government organisations: National Disability Services, the Julia Farr Association, Technical Aid to the Disabled, and from three individuals who had been previously engaged as government employees: Mr Peter Smith, Ms Anne Gale and Ms Victoria Purman.

The majority of submissions presented to the committee did not support the practice of providing one-off funding commitments for disability services; instead, they supported recurrent funding. Some of the community organisations expressed concerns to the committee about the process in choosing the Julia Farr Association to be the recipient of funds. There were also instances where the amounts of funding were changed Clearly that was of some concern to those organisations that had been slated to receive funding and then either they received less or did not receive any at all.

Despite the fact that we had received a lot of evidence about funding issues, what we were unable to determine was who made the recommendation that cabinet decisions be altered; who took that actual decision and what the rationale was for those changes of decisions. The additional one-off funding quantums ($2.92 million in June 2007 and $2.15 million in June 2008) were clearly paid in the final month of those financial years and were allocated specifically for disability equipment. This fund was paid directly to the Julia Farr Association, in spite of the fact that Julia Farr did not have a role in managing, prescribing or providing disability equipment. In the financial years 2007-08, 2008-09 and 2009-10 Julia Farr was invoiced for particular disability equipment and then provided those funds—which was an unusual arrangement.

The Auditor-General observed that the choice of the Julia Farr Association as a non-government organisation was to ensure that the department did not lose that funding before the end of the financial year, so it was effectively parked in those years. The Auditor-General described that practice as unusual, which is why the investigation was undertaken. Part of the evidence from the Auditor-General was that the intention was not to lose the funding, which Mr Andrew Richardson described to the committee in the following terms:

Well, no-one is trying to pocket this money or take advantage.

That was obviously a good thing. He continued:

But, hopefully, as our report says, we still found it not the right way to go about achieving that end.

The choice of Julia Farr was explained to us by Dr David Caudrey, who is the Executive Director, Disability, Ageing & Carers Branch and who I note recently received a gong in the Queen's Birthday awards which he richly deserved as a former colleague and well respected in the disability community. He was unable to specify who had personally advised him that the one-off money was available but he made the comments—given the lapse of time—that it may well have been a number of different sources, whether it was the deputy chief executive above him who he reported to directly, the minister's office or the minister's adviser but, as he put it, it was 'in the wind'.

He also said that at all times he carries a wish list of items if money was available and could be spent because he said that he would hate to be in the position of being asked if there was money available that could be expended and not have an answer as to how that could be provided to people with disabilities. In the evidence Dr Caudrey was asked why Julia Farr was chosen, and he said:

We weren't in a position to give the money to a government agency because to give it to a government agency means that it is not really alienated from government and it is not a form of a non-recourse grant and it kind of folds into next year's budget when it is actually spent.

He asks himself: what is the best non-government adult agency that could provide this service so that we could get—in that case I think it was nearly $3 million in the first year and just over $2 million in the second—which agency could be used in order to be able to pay to get that money for that purpose? He goes on to state:

Julia Farr, really at that moment, happened to have a history, through Julia Farr Services...Over many years, Julia Farr Services, which is a government entity, had been a provider of equipment to its own clients...So, I thought and recommended that Julia Farr Association was probably the best bet in the sense that it had only recently been in this business. It was used to dealing with trust funds because it had dealt with the Residents Benefit Fund and so on—

So that seemed to provide some information in terms of why Julia Farr was chosen.

In relation to the non-recourse grant, which really is a form of grant that is unusual and means that, once it is transferred, the government has no means of forcing that organisation to pay it back, Dr Caudrey said:

I can't quite remember who gave me the concept of the non-recourse grant. They have been around, these types of things, for an awful long time.

We heard evidence from Mr Peter Smith, the former deputy chief executive, who said that he was not directly involved in these decisions, which was not an unusual thing for many of the witnesses to say. His comments in relation to the choice to park the funds with Julia Farr were:

I think the motive was the correct one. I understand this committee's concerns about the process. I would have said to David—

that being Dr Caudrey—

'Can you liaise with the minister's office on this?'

I believe what happened is that the cabinet submission was put together across government, essentially by Treasury. I certainly don't recall seeing the cabinet submission.

In further questioning, Mr Lucas asked him:

Was it him, you or both who advised the minister, and Victoria Purman—

who was the minister's adviser—

'This is the mechanism to get this money.'

Mr SMITH: We both understood that it was a non-recourse grant. I would have asked David to liaise with Victoria on what she needed to support that cabinet bid.

Mr Smith, who I understand has come to South Australia from interstate, found the practice of non-recourse grants 'peculiar', which I think was the word he used, and was somewhat bemused at the practice. We certainly heard from the Auditor-General that, as they went through their investigation, 'no-one could tell us the whole story'. For example, the investigations uncovered a detailed cabinet submission, but the auditors were unable to find any background information to support the submission, and this was a recurring theme. The Auditor-General told the committee:

...we felt that that submission was lacking in the respect that it didn't explain the context of Julia Farr's role as, apparently, a holder of funds. That was certainly the title we described that under and we found that not to be a good way of going about funding that program. That was the criticism that we made there.

The Auditor-General in evidence to us also spoke about accountability principles to be followed with these matters. I quote:

I think that there was this important principle here: that, for a well-intentioned purpose and outcome, one just does not provide funds but one has to provide the appropriate mechanisms for the efficient and effective use of those funds...Those mechanisms have to be provided, and they were provided—in the third cabinet submission, but not in the initial two.

The Department of Treasury and Finance in their evidence described non-recourse grants as not being as common as they were in the past and that they were relatively unusual. I understand from their evidence that this practice is certainly not as prevalent as it may have been in times past.

One of the other matters we considered was the appropriateness of the use of one-off funding, and the regular evidence was that the problem with one-off funding is that there is usually a delay in providing those funds to clients because you do not have the established mechanisms, that is, the relevant professionals to assess people for their particular needs. It is like trying to find that infrastructure and then that infrastructure is only required for a one-off purpose, so that can be quite difficult to engage people on that sort of basis.

Clearly, that was something quite unsatisfactory, but we note that the establishment of DisabilityCare Australia, while it is still some years off for many disability clients, will actually provide a lot of that funding for people with disabilities on an ongoing basis and at the sort of quantum that has probably been beyond most states to provide.

The Disability Services Trust Fund was an issue that had arisen from the Public Advocate's annual report, and I think that matter has been dealt with, so it is probably not something we need to speak about in detail. We also talked about the matter of rights-based funding and the fact that the current Disability Services Act is quite some years old and in need of a revamp. The findings of the committee were as follows:

•Based on the evidence of the Auditor-General, the disbursement of funds may have breached Treasurer's Instructions 2 and 8.

•The use of a non-recourse grant to a non-government organisation for the purposes of depositing funds was irregular. It placed government funds at risk because the NGO [non-government organisation] was under no obligation to acquit the funds for the purpose for which they were intended. No funding agreement was signed between the Department of Families and Communities and the Julia Farr Association to ensure that the funding would be expended for the purpose for which it was intended.

•No explanation was able to be provided as to the reason for variations of up to $640,000 in one-off grants to various disability organisations between the 2008 cabinet submission and the actual payments. This decision was probably made by the then Minister for Disability, the Hon. Jay Weatherill.

•The office of the then Minister was involved in the decision to provide funds in this matter, but no individual(including the then Minister) has admitted involvement.

On that point, this matter had been raised in parliament prior to the establishment of the committee. The then shadow minister, the member for Bragg (Vickie Chapman) had asked questions of the Hon. Jay Weatherill, the minister on whose watch this took place, and the minister at the time, the Hon. Jennifer Rankine. The answers they provided in parliament were unsatisfactory, which is why it was determined to pursue this committee.

At one point our committee wrote to the Hon. Jay Weatherill to seek further information, and he merely referred us to his statement in parliament. So, some documentation clearly has gone missing, which seems to be a theme for his administration. Further findings include:

•The office of the then Minister was involved in the decision to provide funds in this manner, but no individual (including the then Minister) has admitted involvement.

•The Auditor-General's own audit team was unable to determine how the details of the cabinet submission supporting the original funding proposal was created. Two of the three cabinet submissions lacked appropriate mechanisms for the efficient and effective use of the funds.

•The funds were eventually expended on the purpose for which they were allocated, that is, for the purpose of disability equipment.

We made a series of recommendations based on a lot of the issues raised in the committee. With those words, I endorse the report and look forward to further contributions on this matter.