Bad advice to politicians comes with a high cost

24 Nov 20

An Australian case shows the importance of providing complete advice to politicians.

The Australian government’s Department of Infrastructure, Transport, Regional Development and Communications failed to exercise appropriate due diligence over its acquisition of land for the potential expansion of an airport in western Sydney, an investigation has concluded.

The Australian National Audit Office conducted a probe into the purchase, after the department’s 2018-19 financial statements valued the ‘Leppington Triangle’ land at a little more than A$3m – one-tenth of the price it had paid 11 months earlier.

ANAO’s report, published in September, found aspects of the operations of the department fell short of ethical standards.

A purchase agreement between the department and the original landowner was reached in July 2018 for A$28.9m. The report said the department did not develop an appropriate acquisition strategy, and the valuation inflated the value of the land.

The ANAO found that formal briefings by officials to decision-makers and ministers omitted relevant information, including the purchase price, and that the price exceeded all known market valuations of the land.

It added that a departmental review of the acquisition process “lacked rigour and did not provide a reasonable basis for concluding that the transaction was settled for an appropriate value”.

The incomplete advice provided to decision-makers, and the inadequate response by the department when questions were raised by the watchdog, was “inconsistent with effective and ethical stewardship of public resources”, the report said.

The ANAO made three recommendations, all of which were accepted by the department. These included the preparation of comprehensive and balanced written analysis on the benefits, costs and risks of proposals to spend public money.

The department has also been asked to put in place protocols covering staff engagement with landowners, developers or similar parties with integrity risks. These protocols should include guidelines regarding suitable venues and require the presence of at least two departmental representatives,with properly recorded minutes.

The department has also been asked to develop policies and procedures to govern its approach to obtaining purchase valuations.

Failings come with high cost

This case exposes the importance of public trust and the expectation that professional work is completed competently, and, of course, is capable of being verified. The fact the land was valued prior to purchase by an independent valuer would appear to be an obvious control. In reality, however, only one valuer was approached, when a competitive tender approach would be expected, and the appointed valuer was, in fact, proposed by the landowner. 

Specific instructions were given to ensure the usual enquiries and investigations associated with a market valuation of this type were not carried out, the report found. The result? A ‘restricted assessment’, which provided a lower level of assurance than was appropriate. “The department did not provide the ANAO with accurate answers when questions were first asked about the valuation approach,” the report found. Not surprisingly, the auditors concluded this was “not ethical behaviour”.

Questions relating to integrity and objectivity, as well as professional competence, are raised by the case. Overall, there were numerous instances where officials were not acting in the public interest, the cost of which was enormous to the public purse.

Don Peebles is head of CIPFA policy & technical, UK & international

Image Credit | Cox Architecture

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