Ac­count­ing trick frames reef grant

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The govern­ment’s sur­prise $444 mil­lion grant to a pri­vate foun­da­tion is al­legedly be­ing used to fudge its com­mit­ment to UNESCO on reef pro­tec­tion. By Mike Sec­combe.

Pic­ture the scene: three men in a room, two of them of­fer­ing the third the deal of a life­time.

The pair say they will give the man’s lit­tle out­fit – which has as­sets of only about $3 mil­lion, turnover of less than $8 mil­lion and just a hand­ful of staff – a $444 mil­lion con­tract, un­der terms yet to be ne­go­ti­ated. The of­fer comes out of a clear blue sky, to­tally un­so­licited by the lucky re­cip­i­ent. For this lit­tle or­gan­i­sa­tion, it is like win­ning the lot­tery, ex­cept they didn’t even buy a ticket.

Such a deal would be ex­cep­tional, even in the cor­po­rate world. It would have been ex­cep­tional even if the pair mak­ing the of­fer had been, say, in­vest­ment bankers, and the third man the head of a tech start-up.

But they weren’t. Two of them were the prime min­is­ter of Aus­tralia and his en­vi­ron­ment min­is­ter, and the third was the chair­man of a char­i­ta­ble or­gan­i­sa­tion called the Great Bar­rier Reef Foun­da­tion. All three do have back­grounds as bankers, how­ever: Mal­colm Turn­bull, Josh Fry­den­berg and the foun­da­tion’s John Schu­bert worked with Gold­man Sachs, Deutsche Bank and Com­mon­wealth Bank re­spec­tively.

The ques­tion is why it was done this way. Why so­licit this lit­tle or­gan­i­sa­tion, of which most peo­ple would never have heard, to be the re­cip­i­ent of the big­gest such grant ever made in Aus­tralia? Why was the money given without ten­der and without any prior grant pro­posal? Why, in­stead of pro­vid­ing the money a bit at a time, sub­ject to sat­is­fac­tory per­for­mance as as­sessed on an an­nual or bian­nual ba­sis, was six years’ worth of fund­ing pro­vided in one lump on June 28, less than three months af­ter that first meet­ing?

Ge­off Cousins thinks he knows the an­swer.

Cousins is a for­mer pres­i­dent of the Aus­tralian Con­ser­va­tion Foun­da­tion. Per­haps more im­por­tantly, he is a cor­po­rate board­room heavy­weight. For 10 years, he was an ad­viser to John Howard.

“It’s a most cyn­i­cal piece of ac­count­ing trick­ery,” he says of the Bar­rier Reef grant. “A piece of chi­canery. That’s the only way I can de­scribe it.”

To ex­plain why, he traces back sev­eral years, to the govern­ment’s des­per­ate at­tempts to per­suade UNESCO, the United Na­tions Ed­u­ca­tional, Sci­en­tific

and Cul­tural Or­ga­ni­za­tion, that it was a good ste­ward of the Great Bar­rier Reef, and that the reef World Her­itage area should not be de­clared to be “in dan­ger”.

To that end, the govern­ment had promised, un­der its Reef 2050 Plan, to in­vest more than $700 mil­lion in mea­sures to pro­tect one of the world’s great nat­u­ral won­ders.

“They made a com­mit­ment, the Aus­tralian govern­ment, to the World Her­itage list­ing com­mit­tee, to spend

$716 mil­lion on the Bar­rier Reef, prior to 2020,” Cousins says. “But they have spent just a frac­tion of that, and there is no way that in the re­main­ing 18 months or less that they can reach that tar­get, which raises the po­ten­tial of the reef be­ing put on the en­dan­gered list.”

In Cousins’s view, some­one must have re­alised the trou­ble the govern­ment faced in meet­ing its spend­ing tar­gets on time. His guess is Fry­den­berg.

“Even if you started now, you couldn’t ac­tu­ally spend that money. There’s not a list, not a pipe­line of projects ap­proved and ready to go,” Cousins says.

“So Mal­colm, then putting on … his busi­ness head, his ac­count­ing head, says ‘Well, all we’ve re­ally got to do is make sure the money moves from the govern­ment’s ac­counts to the bank ac­count of some other pri­vate or not-for-profit in­sti­tu­tion, then the money is spent.’ But the money hasn’t re­ally been spent at all. Even the CEO of the foun­da­tion says it won’t all be spent for six years.”

If you tried that kind of dodge in the cor­po­rate world, Cousins says, “your ac­count­ing firm would say … they would have to qual­ify your ac­counts”.

Cousins makes a very strong cir­cum­stan­tial case. It is true the fed­eral govern­ment has grossly un­der­spent on its UNESCO com­mit­ment, and that the money given to the reef foun­da­tion will go much of the way to mak­ing good on that fund­ing prom­ise.

It is true also that UNESCO has be­come increasingly crit­i­cal of the govern­ment’s per­for­mance pro­tect­ing the reef. Last year’s meet­ing of the World Her­itage Com­mit­tee noted in par­tic­u­lar that progress on achiev­ing wa­ter-qual­ity tar­gets was too slow to meet the agreed time frame. As it hap­pens, the largest sin­gle item on the reef foun­da­tion’s todo list is im­prov­ing wa­ter qual­ity, with $201 mil­lion al­lo­cated to it.

Over its near five years in power, the Ab­bott–Turn­bull govern­ment has not cul­ti­vated good re­la­tions with the char­i­ta­ble sec­tor, par­tic­u­larly en­vi­ron­men­tal groups. Just a few years ago the Lib­eral Party’s fed­eral coun­cil, urged on by the right-wing In­sti­tute of Pub­lic Af­fairs, voted to strip all en­vi­ron­men­tal groups of their char­i­ta­ble sta­tus. The govern­ment’s var­i­ous ide­o­log­i­cally driven ef­forts at in­hibit­ing char­i­ties’ ca­pac­ity to pub­licly ad­vo­cate have been well re­ported, here and else­where.

On top of that, char­i­ties strug­gle with what David Cros­bie, chief ex­ec­u­tive of Com­mu­nity Coun­cil for Aus­tralia, the peak body for char­i­ta­ble or­gan­i­sa­tions, calls “creep­ing mi­cro­man­age­ment” and in­or­di­nately com­plex due dili­gence pro­cesses.

Vast amounts of time and thou­sands, some­times hun­dreds of thou­sands, of dol­lars are spent re­spond­ing to bu­reau­cratic de­mands for “more and more in­for­ma­tion, more com­pli­ance, more de­tails about the or­gan­i­sa­tion, more stip­u­la­tions about ex­pen­di­ture, the ac­tiv­i­ties per­mit­ted, even the em­ploy­ment con­tracts that can be used”.

Cros­bie rub­bishes claims by Turn­bull and Fry­den­berg that the Great Bar­rier Reef Foun­da­tion was sub­ject to nor­mal due dili­gence pro­cesses.

“For the De­part­ment of the En­vi­ron­ment and En­ergy to grant over $440 mil­lion to a small char­ity that didn’t even pre­pare an ap­pli­ca­tion form or ask for the grant is in­con­ceiv­able!” he writes, in an email re­sponse to The Satur­day Paper.

“It is to­tally in­con­sis­tent with any grant process from this De­part­ment or any other De­part­ment or even the be­hav­iour of any in­di­vid­ual phi­lan­thropist – none would be silly enough to grant such a large amount to such a small or­gan­i­sa­tion. It is not just un­prece­dented, it is lu­di­crous.”

But the Great Bar­rier Reef Foun­da­tion is quite un­like any other char­i­ta­ble or­gan­i­sa­tion in the coun­try, and es­pe­cially un­like any other en­vi­ron­men­tal foun­da­tion. Its “chair­man’s panel” is a who’s who of Aus­tralian busi­ness lead­ers. Schu­bert is a for­mer pres­i­dent of the Busi­ness Coun­cil of Aus­tralia (BCA), among other roles, in­clud­ing chair­man and man­ag­ing direc­tor of Esso Aus­tralia. Else­where among the board’s big names are rep­re­sen­ta­tives of com­pa­nies whose cor­po­rate in­ter­ests would ap­pear quite an­ti­thet­i­cal to the preser­va­tion of the reef. Coalminer Pe­abody En­ergy, for ex­am­ple, which, as with Esso’s par­ent com­pany Exxon, has a his­tory of fund­ing an­ti­cli­mate change groups.

The other big fos­sil fuel com­pa­nies also ap­pear: Rio Tinto, BHP, Shell, AGL and Cono­coPhillips. There is also a long list of in­surance com­pa­nies, ac­coun­tancy firms, man­u­fac­tur­ers et cetera. Not to men­tion big banks, in­clud­ing Fry­den­berg’s for­mer em­ployer, Deutsche Bank. Next month, when a Se­nate in­quiry con­venes to ex­am­ine the foun­da­tion’s fund­ing, Stephen Fitzger­ald, a for­mer chair­man of Turn­bull’s old em­ployer Gold­man Sachs – and some­time guest at the Turn­bulls’ Point Piper man­sion

– is ex­pected to ap­pear on be­half of the char­ity, along with Schu­bert and Grant King, cur­rent pres­i­dent of the BCA and for­mer head of Ori­gin En­ergy.

The foun­da­tion spon­sors no in-house pol­icy an­a­lysts crit­i­cal of the govern­ment’s woe­ful en­vi­ron­men­tal record, nor any noisy ad­vo­cates com­plain­ing to the me­dia that the fos­sil fuel in­dus­try is killing the reef. There are no ac­tivists likely to chain them­selves to equip­ment or block­ade in­fra­struc­ture. The reef foun­da­tion is meek and un­crit­i­cal, which is why most Aus­tralians have never heard of it and one big rea­son why the govern­ment likes it.

An­other rea­son, end­lessly em­pha­sised by Fry­den­berg, is its po­ten­tial, through its links to busi­ness,

“to lever­age off the pri­vate sec­tor”. But to date that lever­age has not moved much money. In its 2017 an­nual re­port, the foun­da­tion showed rev­enue of

$7.7 mil­lion, a bit over half as much as the ACF brought in. The big­gest sin­gle source of that rev­enue, al­most $2 mil­lion, was listed as “govern­ment re­search con­tri­bu­tions”. Only about $1.4 mil­lion came from “do­na­tions”, with an­other $744,000 recorded as “do­na­tions – chair­man’s panel”.

This week, though, in re­sponse to news that mem­bers of the chair­man’s panel were – to quote Syd­ney’s Daily Tele­graph, “wined and dined … at a luxury is­land re­sort where pri­vate vil­las cost more than $2000 a night” – the foun­da­tion qual­i­fied its de­scrip­tion of those “do­na­tions”.

“Mem­bers of the Chair­man’s Panel pay around $20,000 an­nu­ally to be a mem­ber of the Panel which is com­prised of a $15,000 do­na­tion to Reef projects, with the re­main­der cov­er­ing the cost of mem­ber­ship in­clud­ing the Chair­man’s Panel meet­ing at Hamil­ton Is­land in 2018,” it said in a state­ment.

The costs of the re­treat on

Hamil­ton Is­land, it said, were “fully paid for via their mem­ber­ship fees and no tax­payer dol­lars, grants or other do­na­tions re­ceived by the GBRF are used. The pur­pose of this event is to pro­vide a fo­rum for busi­ness lead­ers to di­rectly en­gage with sci­en­tists, and re­searchers.”

Per­haps you have to spend a buck to make a buck. But so far, the num­bers show the foun­da­tion has ex­tracted only com­par­a­tively small change from its cor­po­rate back­ers.

What else does the foun­da­tion do with its money? It lists its prin­ci­pal ac­tiv­i­ties as “the fund­ing and pro­vi­sion of re­search, in­for­ma­tion and ed­u­ca­tion”. Ba­si­cally, it gives money away.

Oddly, as Cousins cor­rectly notes, last year “five of its seven big­gest grants went to govern­ment in­sti­tu­tions”. One might won­der why the govern­ment did not just fund them di­rectly, and save the cost of the dou­ble han­dling of the money. The foun­da­tion’s ad­min­is­tra­tion costs eat up close to 20 per cent of rev­enue – down from al­most a third in years past.

Some of the projects funded by the foun­da­tion are well out on the sci­en­tific fringe. Last year, for ex­am­ple, it gave $30,000 to re­search on poly­mers that might be sprayed onto the wa­ter to re­duce sun dam­age to corals.

That is not to say all the projects funded are un­wor­thy. Given the fail­ure of govern­ments to ad­dress cli­mate change, it is ne­c­es­sary to put money into re­search that might pro­duce corals able to sur­vive hot­ter and more acidic wa­ter.

Hence $100 mil­lion of the

$444 mil­lion grant is ear­marked for reef restora­tion and the fund­ing of science sup­port­ing reef re­silience and adap­ta­tion. Like­wise, $48 mil­lion is com­mit­ted to con­trol­ling the plague of co­ral-eat­ing crown of thorns starfish, which has been wel­comed by the sci­en­tific com­mu­nity.

As noted pre­vi­ously, the largest part of the govern­ment’s grant is al­lo­cated to im­prov­ing wa­ter qual­ity on the reef. As well it might be, given that pol­lu­tion from agricultural chem­i­cals and sed­i­ment from graz­ing and ram­pant land clear­ing pose the big­gest threat, other than cli­mate change, to the reef.

And past govern­ment ef­forts at ad­dress­ing the prob­lem have been sin­gu­larly un­suc­cess­ful, notes Aus­tralia’s fore­most ex­pert on reef wa­ter qual­ity,

Jon Brodie, pro­fes­so­rial fel­low at the

ARC Cen­tre of Ex­cel­lence for Co­ral Reef Stud­ies at James Cook Univer­sity.

De­spite govern­ment spend­ing of some $100 mil­lion a year since 2008, Brodie says, the ma­jor agricultural in­dus­tries in the reef catch­ment, cane grow­ing and cat­tle graz­ing, still man­aged their land us­ing meth­ods “well be­low best prac­tice for wa­ter qual­ity”.

He points to de­tailed sta­tis­tics from the joint fed­eral–state re­port cards that come out ev­ery year. And they are tragic. The 2017 re­port re­veals, for ex­am­ple, that just 18 per cent of land un­der sugar cane is sub­ject to best prac­tice for fer­tiliser use, 39 per cent for pes­ti­cide use and 40 per cent for sed­i­ment.

The tar­get is 90 per cent for this year. The re­port card gave the cane in­dus­try a “D”. Graz­ing also got a “D”. Other in­dus­tries did a lit­tle bet­ter, but the over­all pic­ture re­mains grim.

Brodie wor­ries, too, about whether the money com­mit­ted to wa­ter qual­ity un­der the Great Bar­rier Reef Foun­da­tion grant will be ad­di­tional to ex­ist­ing fund­ing for wa­ter qual­ity, a re­badg­ing of some ex­ist­ing fund­ing, or a de­crease.

“The fed­eral govern­ment’s al­ready putting in $100 mil­lion a year, or they were, into wa­ter qual­ity,” he says. “This grant amounts to less than $40 mil­lion a year, over six years, and this is the only money we know about, go­ing for­ward.”

He has other con­cerns, too. The reef foun­da­tion has no ex­pe­ri­ence in en­vi­ron­men­tal man­age­ment, only in fund­ing re­search.

“I’m not to­tally pes­simistic here,” Brodie says. “The foun­da­tion’s al­ready talk­ing about bring­ing in ex­per­tise, try­ing to get the best peo­ple in­volved and di­rected to the right pri­or­i­ties, so that’s good. It’s pos­si­ble that the foun­da­tion can spend it bet­ter than the De­part­ment of En­vi­ron­ment and En­ergy.”

But Brodie ques­tions how much a char­i­ta­ble or­gan­i­sa­tion can achieve by friendly per­sua­sion, where pre­vi­ous govern­ment ef­forts have failed.

“If all you’ve got is money, and you are re­ly­ing on the good­will of farm­ers to use that money to im­prove prac­tices, and there’s no big stick if they don’t … Without leg­is­la­tion, it makes it much harder.”

Brodie notes the fed­eral govern­ment has failed to use its ex­ist­ing leg­isla­tive pow­ers to stop ram­pant land clear­ing.

And that goes to the fun­da­men­tal ques­tion here. Is the govern­ment’s ex­traor­di­nary out­sourc­ing of re­spon­si­bil­ity a gen­uine at­tempt at do­ing things dif­fer­ently and bet­ter? Or is it rushed scheme to meet an ar­bi­trary obli­ga­tion?

The sci­en­tists are hope­ful, but Ge­off Cousins is cyn­i­cal.

“This is Mal­colm, in his usual way, think­ing that if we have a big an­nounce­ment, the big­gest ever do­na­tion to the reef, no one will no­tice that it’s an ac­count­ing trick,” he says.

The ev­i­dence sug­gests he’s prob­a­bly right. The rest of us can only hope that

• he’s wrong.

“FOR THE DE­PART­MENT OF THE EN­VI­RON­MENT AND EN­ERGY TO GRANT OVER $440 MIL­LION TO A SMALL CHAR­ITY THAT DIDN’T EVEN PRE­PARE AN AP­PLI­CA­TION FORM OR ASK FOR THE GRANT IS IN­CON­CEIV­ABLE!”

Josh Fry­den­berg (left) and Mal­colmTurn­bull dur­ing ques­tion time this week.

MIKE SEC­COMBE is The Satur­day Paper’s Syd­ney cor­re­spon­dent.

MIKE SEC­COMBE is The Satur­day Paper’s Syd­ney cor­re­spon­dent.

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