Au­di­tor-gen­eral found Mor­ri­son breaches

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While mystery sur­rounds Scott Mor­ri­son’s sack­ing from Tourism Aus­tralia, a buried au­dit re­port shows nu­mer­ous anom­alies and con­cerns over con­tracts worth $184 mil­lion. By Karen Mid­dle­ton.

Ever since Scott Mor­ri­son was sacked from his job as manag­ing di­rec­tor of Tourism Aus­tralia in 2006, the rea­sons for his dis­missal have been kept se­cret.

At the time and since, pub­lic spec­u­la­tion has var­i­ously at­trib­uted the now prime min­is­ter’s re­moval to a per­son­al­ity clash with his min­is­ter, a fall­ing out over changes to the or­gan­i­sa­tion’s struc­ture, and a dis­pute over the agency’s con­tentious “Where the bloody hell are you?” cam­paign.

But an au­di­tor-gen­eral’s re­port com­pleted 10 years ago, which has es­caped pub­lic scru­tiny un­til now, re­veals that in the pe­riod lead­ing up to Mor­ri­son’s dis­missal, his agency faced a se­ries of au­dits and a re­view of its con­trac­tual pro­cesses or­dered by the De­part­ment of Prime Min­is­ter and Cabi­net, amid se­ri­ous con­cerns about its gov­er­nance.

The au­di­tor-gen­eral’s in­quiry into Tourism Aus­tralia – which fol­lowed these re­views, and was con­ducted after Mor­ri­son’s de­par­ture – re­veals in­for­ma­tion was kept from the board, pro­cure­ment guide­lines breached and pri­vate com­pa­nies en­gaged on con­tracts worth $184 mil­lion be­fore pa­per­work was signed and with­out ap­pro­pri­ate value-for­money as­sess­ments.

The Aus­tralian Na­tional Au­dit Of­fice (ANAO) re­port ex­am­ines three ma­jor con­tracts that Tourism Aus­tralia signed while Scott Mor­ri­son was manag­ing di­rec­tor. It crit­i­cises pro­cesses in all three cases but es­pe­cially the con­tracts for global creative de­vel­op­ment – ad­ver­tis­ing cam­paigns – and me­dia place­ment ser­vices.

Ten years since the au­dit, and 13 years since the con­tracts were signed, those two com­pleted con­tracts ap­pear not to be listed on the gov­ern­ment’s AusTen­der web­site, where all con­tracts are re­quired to be avail­able for pub­lic view­ing.

Searches, in­clud­ing by AusTen­der staff, have failed to lo­cate them on the site this week. Pro­cure­ment rules say they must be re­ported within 42 days of the con­tracts be­ing en­tered. The 2005 re­quest­for-ten­der doc­u­ments an­nounc­ing the pro­posed con­tracts are listed.

Gov­ern­ment records show the ANAO au­dit was first pro­posed in July 2006. It is be­lieved to have com­menced in the sec­ond half of 2007, while the Howard gov­ern­ment was still in of­fice and be­fore the Novem­ber 2007 elec­tion in which La­bor de­feated the Coali­tion, and for­mer New South Wales Lib­eral Party di­rec­tor Scott Mor­ri­son en­tered par­lia­ment in the Syd­ney seat of Cook.

Mor­ri­son be­gan at Tourism Aus­tralia in Novem­ber 2004 and left 19 months

later. The ANAO au­dit cov­ered the 2005 pre-con­tract pe­riod to mid-2008 and doc­u­mented a se­ries of gov­er­nance fail­ures at the agency, which co­in­cided with Mor­ri­son’s time at its helm.

The re­port does not men­tion Mor­ri­son by name or po­si­tion, nor ap­por­tion blame to any in­di­vid­ual but rather to Tourism Aus­tralia as a whole. The chair­man of its board at the time was for­mer deputy prime min­is­ter and Na­tion­als leader Tim Fis­cher, who is cur­rently un­der­go­ing treat­ment for leukaemia.

The au­dit re­port crit­i­cises ex­ten­sively the agency’s pro­cesses for draft­ing, ex­e­cut­ing and manag­ing the con­tracts, the opaque ac­count­ing pro­cesses in­volved in as­pects of them and poor com­mu­ni­ca­tion with the board and re­gional of­fices, in­clud­ing by ser­vice providers. It de­tails Tourism Aus­tralia’s fail­ures at the time to ad­here to guide­lines – the sign­ing of a con­tract with­out in­cor­po­rat­ing mea­sur­able per­for­mance in­di­ca­tors and non-ex­is­tent risk as­sess­ments or value-for-money anal­y­sis.

Tabled in par­lia­ment on Au­gust 6, 2008, the re­port was one of more than 40 the Au­dit Of­fice had pro­duced in the pre­vi­ous 12 months.

It es­caped pub­lic at­ten­tion at least partly be­cause it was not among the hand­ful that par­lia­ment’s joint com­mit­tee on pub­lic ac­counts chose to ex­am­ine fur­ther in its role as chief au­dit scru­ti­neer. At the time, the com­mit­tee was chaired by then La­bor MP Sharon Gri­er­son with then Lib­eral MP Petro Ge­or­giou as her deputy.

When the re­port was tabled, Mor­ri­son was a mem­ber of the pub­lic ac­counts com­mit­tee, which was tasked with con­sid­er­ing it for re­view. He re­signed from the com­mit­tee six weeks after the re­port was tabled and, it is un­der­stood, some months be­fore the com­mit­tee for­mally con­sid­ered it. The Satur­day Pa­per does not sug­gest Mor­ri­son in­flu­enced the au­dit’s treat­ment. Gri­er­son says that as Tourism Aus­tralia had ac­cepted its three rec­om­men­da­tions, and no­body on the com­mit­tee raised any is­sues, the re­port was not of­fi­cially ex­am­ined fur­ther – stan­dard pro­ce­dure in deal­ing with the vol­ume of au­dits each year.

The Satur­day Pa­per lodged de­tailed ques­tions about the au­dit re­port with Mor­ri­son’s of­fice but was told he was not able to an­swer them in the time avail­able.

Per­for­mance re­views of the two key con­tracts be­tween 2005 and 2007 – con­tained in the au­dit – re­vealed Tourism Aus­tralia had failed to dis­close to its own board that it had un­der­spent $3.9 mil­lion on one of the con­tracts in 2006-07.

It was found that in one case in­voices had been raised be­fore the con­tract was signed and that in an­other case the price paid in some ar­eas of a con­tract was “more ex­pen­sive than the bench­mark”.

The au­dit re­port does not men­tion then tourism min­is­ter Fran Bai­ley’s sack­ing of Mor­ri­son in July 2006, nor any of the al­leged pre­ced­ing ten­sion be­tween them that has been the sub­ject of pub­lic spec­u­la­tion since.

But The Satur­day Pa­per un­der­stands the events and is­sues the au­dit re­port out­lines played a sig­nif­i­cant role in Mor­ri­son’s re­moval. Un­con­firmed news re­ports have since al­leged that he re­ceived a pay­out of more than $300,000.

Asked to com­ment this week on the re­port’s con­tents in re­la­tion to Mor­ri­son’s dis­missal, Bai­ley would only re­peat the one com­ment she has made be­fore: “I re­it­er­ate that it was a unan­i­mous de­ci­sion to get rid of Mr Mor­ri­son by the board and the min­is­ter.”

She added: “I have al­ways treated con­fi­den­tial mat­ters as con­fi­den­tial.”

The re­port’s de­scrip­tion of the chronol­ogy of events would sug­gest mat­ters came to a head be­tween Mor­ri­son and Bai­ley when the or­gan­i­sa­tion asked her to ap­prove the agency’s an­nual up­per spend­ing limit for the three-year creative de­vel­op­ment and me­dia place­ment con­tracts – re­quired be­cause of their high value – in June 2006.

The year be­fore, dur­ing the se­lec­tion of ten­der­ers, Bai­ley had raised con­cerns with the De­part­ment of Prime Min­is­ter and Cabi­net about Tourism Aus­tralia’s eval­u­a­tion process for short­list­ing com­pa­nies.

The prime min­is­ter’s de­part­ment or­dered a re-eval­u­a­tion, which pro­duced the same re­sult.

The ANAO re­port de­scribes the doc­u­men­ta­tion pro­vided as “not com­pre­hen­sive” and, as a re­sult, the se­lec­tion process “lacked trans­parency”.

Un­con­firmed me­dia re­ports at the time recorded in­dus­try in­sid­ers al­leg­ing that ad­ver­tis­ing and mar­ket­ing com­pany M&C Saatchi – which was sub­se­quently awarded the con­tract – had been given early ac­cess to in­for­ma­tion.

It’s un­der­stood there had also been ten­sion over Tourism Aus­tralia’s com­mis­sion­ing of an AC Nielsen sur­vey of Aus­tralians’ stock­pil­ing of an­nual leave, which then formed the ba­sis for a mar­ket­ing cam­paign “No Leave, No Life” to en­cour­age peo­ple to take hol­i­days.

It is be­lieved some in the Howard gov­ern­ment were an­noyed, see­ing it as po­ten­tially un­der­min­ing its work­place re­la­tions poli­cies.

The au­dit re­port men­tions the cam­paign and sur­vey as an ex­am­ple of Tourism Aus­tralia’s do­mes­tic ac­tiv­i­ties, with­out com­ment or crit­i­cism.

In mid-2006, be­fore ap­prov­ing the an­nual up­per spend­ing lim­its, Fran Bai­ley asked Tourism Aus­tralia to pro­vide a fully com­pleted in­ter­nal as­sess­ment of all of its 2005-06 con­tracts, an in­de­pen­dent as­sess­ment of whether the two con­tracts were value for money, and de­tails of the mech­a­nisms in place to mon­i­tor and man­age the con­tracts for the fol­low­ing fi­nan­cial year.

Await­ing the in­for­ma­tion and to avoid dis­rupt­ing an in­ter­na­tional mar­ket­ing cam­paign al­ready un­der way, Bai­ley agreed to au­tho­rise ex­pen­di­ture of $25.8 mil­lion for the two con­tracts.

An in­de­pen­dent as­ses­sor was ap­pointed to re­view the con­tracts as re­quested, but Tourism Aus­tralia told the min­is­ter the re­view couldn’t be fin­ished un­til Septem­ber.

The agency said that de­lay­ing the ap­provals un­til then could “lead to a loss of dis­counts worth $6.7 mil­lion” and urged her to act.

“In light of this, the for­mer min­is­ter felt she had no op­tion but to ap­prove (in July 2006) the to­tal an­nual ex­pen­di­ture of $82.6 mil­lion,” the 2008 re­port says, with the brack­eted date in­cluded.

Bai­ley added two con­di­tions to her agree­ment: that the board must be sat­is­fied the eval­u­a­tion, once com­pleted, showed tax­pay­ers had re­ceived value for money; and that the fol­low­ing year’s fund­ing ap­proval re­quest should pro­vide eval­u­a­tion ma­te­rial up­front.

The au­dit re­port omits the next event in the chronol­ogy of re­la­tions be­tween the min­is­ter and Tourism Aus­tralia – that Bai­ley sacked Mor­ri­son the same month. The then prime min­is­ter, John Howard, did not in­ter­vene to pre­vent it.

The 2008 au­dit re­port goes on to say that once the re­views were com­pleted in 2006, as the min­is­ter had re­quested, the agency ad­vised its board that the ser­vice providers’ over­all per­for­mance was sat­is­fac­tory and, in Oc­to­ber 2006, the board con­veyed that to the min­is­ter.

Some of the fi­nan­cial man­age­ment is­sues the au­di­tor-gen­eral de­scribes had emerged ear­lier that year in a broader an­nual re­view, prompt­ing Tourism Aus­tralia to im­ple­ment a monthly rec­on­cil­i­a­tion process from Fe­bru­ary.

De­spite that, the au­di­tor still had con­cerns in 2008 – two years after Mor­ri­son left the or­gan­i­sa­tion.

It also raised se­ri­ous con­cerns about the board’s han­dling of con­flicts of in­ter­est.

Ac­knowl­edg­ing that con­flicts were to be ex­pected in the tourism in­dus­try and on a board that strad­dled the pub­lic and pri­vate sec­tors, the au­dit re­port noted that, as of 2007, ev­ery board mem­ber had reg­is­tered at least four po­ten­tial con­flicts, and on av­er­age be­tween seven and 20, with the high­est num­ber for any board mem­ber be­ing 71.

But only one case had been doc­u­mented in which a board mem­ber had stepped out of a meet­ing over a po­ten­tial con­flict.

The au­dit re­port noted that in­stead of abid­ing by its char­ter, the board had amended the char­ter to re­flect its prac­tice. One of its 2008 rec­om­men­da­tions, all of which Tourism Aus­tralia ac­cepted, was to change it back.

The ANAO re­port says that since July 2007, Tourism Aus­tralia had im­proved its pro­cesses fur­ther but, as of Au­gust 2008, “was un­able to demon­strate whether all rec­om­men­da­tions from the in­ter­nal and ex­ter­nal re­views, which were agreed to, have been prop­erly im­ple­mented”.

Tourism Aus­tralia’s an­nual re­ports since then have not given rise to any fur­ther ANAO in­ves­ti­ga­tion.

The 2008 au­dit re­port also de­tails other as­pects of the two con­tracts about which it had most con­cern.

It de­scribes how its me­dia place­ment con­trac­tor struck a deal with Amer­i­can net­work the Dis­cov­ery Chan­nel for the pro­duc­tion of three spe­cial Aus­tralian episodes of the tele­vi­sion se­ries Amer­i­can Chop­per, which would air in 2007 and ex­pose Aus­tralia as a tourism des­ti­na­tion to a po­ten­tial au­di­ence of 300 mil­lion house­holds in 160 coun­tries.

Three sep­a­rate con­tracts were signed cov­er­ing the deal, one of which in­volved hav­ing a mo­tor­cy­cle cus­tom built.

But the au­di­tor-gen­eral iden­ti­fied ac­count­ing prob­lems. Al­though it es­tab­lished that Tourism Aus­tralia’s con­tri­bu­tion to the build­ing of the bike was $150,000, it was un­able to es­tab­lish what hap­pened to the bike. Con­fu­sion over the way the agency recorded the bike as an as­set meant the au­di­tor was un­able to es­tab­lish the ac­tual cost.

None of this rang alarm bells for the par­lia­men­tary joint com­mit­tee on pub­lic ac­counts when the re­port was tabled in 2008, pre­sented as it was with a slew of oth­ers.

Among the dozens of re­ports pro­duced be­tween Au­gust 2007 and Au­gust 2008, the com­mit­tee se­lected six for fur­ther in­spec­tion through pub­lic in­quiries, based on their wider im­pli­ca­tions.

The find­ings on Tourism Aus­tralia didn’t cap­ture mem­bers’ at­ten­tion, nor flag any broader is­sues war­rant­ing ex­am­i­na­tion and nei­ther they nor the then new La­bor tourism min­is­ter, Mar­tin Fer­gu­son, rated them for a sep­a­rate pub­lic in­quiry.

Most of the au­di­tor-gen­eral’s re­ports fol­low a sim­i­lar path onto the shelf for sheer rea­sons of re­sourc­ing and the need to pri­ori­tise.

Hav­ing been elected in 2007, Mor­ri­son had joined the com­mit­tee in March of 2008 when it was re-formed in the new par­lia­ment.

He served on it for just over six months, re­sign­ing along with an­other Lib­eral MP on Septem­ber 25 – three days after hav­ing been pro­moted to the op­po­si­tion front bench and six weeks after the au­dit re­port into the agency he had headed was pub­lished and sank with­out trace.

Ten years later, peo­ple in­volved still won’t say why Mor­ri­son was sacked as head of Tourism Aus­tralia. Given he is now prime min­is­ter, it was a mi­nor

• set­back.

THE AU­DIT RE­PORT OMITS THE NEXT EVENT IN THE CHRONOL­OGY OF RE­LA­TIONS BE­TWEEN THE MIN­IS­TER AND TOURISM AUS­TRALIA – THAT BAI­LEY SACKED MOR­RI­SON THE SAME MONTH.

KAREN MID­DLE­TON is The Satur­day Pa­per’s chief po­lit­i­cal cor­re­spon­dent.

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