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Estimates: Finance and Public Administration Legislation Committee (WestConnex)

Estimates & Committees
Lee Rhiannon 19 Oct 2015

Here Lee questions the acting Auditor-General, Ms Mellor, and an officer of the Australian National Audit Office, Mr Boyd, on possible federal oversight and audits of the WestConnex Delivery Authority. While Ms Mellor does not answer definitively whether WestConnex will receive a federal audit, it is affirmed that a potential audit could only occur after the completion of the audit of Melbourne's East-West Link at the end of the financial year. 

Senator RHIANNON: The WestConnex Delivery Authority has been reformed into the private Sydney Motorway Corporation. Would such a change from a public to a private body impact on any audit of the WestConnex project?

Ms Mellor: I will ask Mr Simpson to join us. The Auditor General does have quite extensive powers, including some follow-the-money powers into private organisations that may be using Commonwealth funds-so we can exercise quite extensive powers. Did you want to add anything, Brian?

Mr Boyd: Those two authorities, as I understand it, are state government entities, so they would not be entities that we would be auditing primarily from the Australian National Audit Office's perspective.

Senator RHIANNON: So, in any audit of the WestConnex project, you would not be looking at the operations of the WestConnex Delivery Authority or the Sydney Motorway Corporation?

Mr Boyd: The only way, under our legislation, that we could audit a state government entity is where we were requested to use our follow-the-money powers. Otherwise, our audit scope in terms of performance auditing is focused on Commonwealth entities and the Commonwealth role.

Senator RHIANNON: Just looking at the use of the Commonwealth money and any federal interaction?

Mr Boyd: Correct.

Senator RHIANNON: How you delineate that must be interesting. Is that challenging at times?

Mr Boyd: It is not normally, no.

Senator RHIANNON: Would an audit of a motorway project like WestConnex consider traffic modelling and the work of the company that undertook the modelling?

Mr Boyd: It would depend on what the audit scope was. Ordinarily that response, which goes into things such as the preparation of business cases and the like, is the state government role-it prepares the business case and so forth. That is where those state government entities perform a role, so any audit there would be by the state government auditors. For example, the WestConnex business case preparation has been audited by the Audit Office of New South Wales but not by ourselves. The only real differences there happen when there is a submission to the Commonwealth for funding. If we were auditing that process, we would examine how that business case was analysed by the Commonwealth before deciding whether it would invest funds or, if we were doing an audit of Infrastructure Australia's general role, we would look at the information that Infrastructure Australia had before it in forming its view as to whether it thought the project should be supported or not and at which level of its categorisation process.

Senator RHIANNON: If I understood correctly, you said that a point could come where you would be looking at the business case and how the Commonwealth had judged that. Would the business case not be intersecting with the projected traffic figures?

Mr Boyd: What I was saying was that, depending on the scope of the audit, that may come into play. For example, generally in these sorts of projects we are talking land and transport infrastructure projects, which are usually funded under the land transport legislation, and that legislation has certain requirements that have to be considered before funding is approved, in terms of both whether the funding is eligible and whether it is appropriate, which is defined under the legislation. For example, the legislation says the things the minister 'may' have regard to include things such as benefit-cost ratio. As soon as you are examining benefit-cost ratios, ordinarily those sorts of things are set out in the business case. Then, underpinning the business case, you get into the traffic modelling and so forth. So there is a long process to go through, but our focus is basically upon what the Commonwealth entity that is advising the relevant minister has done in terms of it analysing that business case material to provide advice to the relevant Commonwealth minister.

Senator RHIANNON: So would the track record of the company involved in the traffic modelling come into it?

Mr Boyd: Those are the sorts of things where we would look at how the department administering that funding program did its job so that it was satisfied that that business case, and what underpinned it, was something it could rely upon in forming advice to the minister.

Senator RHIANNON: Just to give you an example, AECOM, the company contracted by the WDA-the WestConnex Delivery Authority-to perform traffic modelling, has paid $280 million in damages to banks who sued in relation to inaccurate traffic modelling for the RiverCity CLEM7 tunnel in Brisbane, which carried less than 25 per cent of forecast traffic volumes since it opened in 2010. Would those be the sorts of details you would consider?

Mr Boyd: They are not things that we would consider. It is the role of the Commonwealth agency that advises the minister as to whether he or she should or should not approve funding to determine what things it would bring to the table in its advice. If we were doing an audit of WestConnex, depending on what the scope is, it might be something we looked at, but there are a few ifs there for us: 'if' we were doing an audit-we are not at present- what is the scope and objective of that audit? That forms what it is we would look at and not look at as part of that audit.

Senator RHIANNON: Just to clarify, that detail seems incredibly relevant to me, considering we are talking about a tollway, traffic modelling and a considerable overestimation. So that would seem to be incredibly relevant. You did touch on this, but I just want to clarify: if the Commonwealth overlooked that and did not go into that detail, surely, if you came along to do an audit, you would look at that.

Mr Boyd: The first thing we would look at is what the Commonwealth agencies had done. In this process, there is not a requirement at law for everything to work through this, but invariably Infrastructure Australia is expected to perform a role there in terms of analysing, as I put it, the merits of funding different land transport infrastructure projects and then categorising them. That forms the input to decision making. Those sorts of considerations around whether the business case is sound and whether the traffic modelling and so forth can be relied upon are the sorts of things that Infrastructure Australia has looked at in the past when we have examined its processes. But, if we were doing an audit and we found, for example, that there were concerns around the traffic modelling, it would not be our role to try to rectify those shortcomings.

Senator RHIANNON: I did not mean rectify. It just seemed to be incredibly relevant, and I would have been surprised if it were not looked into.

Mr Boyd: I cannot really say because, as I say, we are not auditing it, so we cannot really say what we would look at and not look at unless we are actually in there examining the circumstances.

Senator RHIANNON: Okay. Just to head south, what is the status of the Auditor-General's audit of the federal government's decision to provide funds to the former Victorian government for the East West Link project?

Mr Boyd: We have an audit of that particular commitment of funds underway, and that is expected to be tabled in the parliament before the end of this calendar year.

Senator RHIANNON: Thank you. So it is on track.

Mr Boyd: It is on track, yes.

Senator RHIANNON: Good. I understand it has been a cross-agency investigation. That is correct, is it?

Mr Boyd: No. I understand that the Victorian audit office are separately doing some work, looking at-as I understand it from our discussions with them-in broad terms the costs of the project to the Victorian taxpayer, but that is a separate exercise by the performance audit area of the Victorian audit office. It is separate from us,and our legislation does not enable to share information in terms of our audit work.

Senator RHIANNON: Sorry, I do not think I expressed it well. I meant that you were looking at different departments and different ministers.

Mr Boyd: Yes. We are looking at Infrastructure Australia, the Department of Infrastructure and Regional Development, the Department of the Treasury, the Department of Finance and the Department of the Prime Minister and Cabinet.

Senator RHIANNON: Have you interviewed the ministers from those portfolios?

Mr Boyd: No.

Senator RHIANNON: So just departments?

Mr Boyd: The objective of our audit-and this is set out on our website-is focussed on, essentially, what the advice was that went to ministers in terms of them forming their decisions about whether the Commonwealth should commit funds to each of the two stages and the make payments in June 2014 in respect of each of the two stages. So, as is usually the case, our performance audit work is focused on the administration side of executive government, which is the role played by the departments and agencies in providing advice.

Senator RHIANNON: So you have interviewed Infrastructure Australia as part of this?

Mr Boyd: We have spoken with them and examined records they hold, yes.

Senator RHIANNON: What about former Infrastructure Australia representatives or board members?

Mr Boyd: To us, Infrastructure Australia is an entity and, yes, staff, both junior and senior, come and go. In terms of this and the records for us, in the discussions we have with them, if they do not answer the questions we have such that we need to speak to former staff, in the course of audits we do that from time to time. That has not been necessary on this occasion. The records they hold are quite clear and readily answer the questions we had.

Senator RHIANNON: Just to finish up back on WestConnex, has a decision been made? You said that there is no audit being undertaken of WestConnex. Does that mean that the decision has been taken not to have an audit, or is it yet to be made?

Mr Boyd: As Ms Mellor mentioned, we call our work plan the blue book. A possible or potential of WestConnex is on our program, but we do not do all the potential audits in our blue book, simply because we cannot. A decision as to whether we will actually conduct an audit of WestConnex will be informed by a number of things-partly the results of our audit of the East West Link project. Because the approval processes proceeded in broadly similar time frames and potentially through broadly similar processes, from our perspective, there is not a lot of benefit from auditing each and every infrastructure project-if for no other reason than we would not cover much of the rest Commonwealth public administration. So it will be informed by that but also by other priorities. Again, there is only so much work we can do, and there is much more going on in that portfolio as well as more broadly than simply the funding of major infrastructure projects. So it is not that it is not nationally
important; it is just that we have to look at, on a risk basis, what we can cover and what we have already covered in a way through other work, such as the East West Link.

Senator RHIANNON: When will that decision be made, please?

Mr Boyd: With East West Link expected to table this calendar year, we would make it before the end of the financial year. But we first have to deliver East West Link and there is some other audit work that is foreshadowed in that portfolio as well.

Senator RHIANNON: Do you mean that that all has to be done before a decision will be made on a possible audit of WestConnex?

Mr Boyd: As to whether that potential audit will then proceed to be an actual audit, yes.

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