Audit finds scope for improvement in $46m NSW emergency grants program

The audit, tabled in the NSW Parliament on March 31, was conducted by Auditor-General Bola Oyetunji at the request of Special Minister of State John Graham, who asked for recurring performance reviews of emergency relief grants.

The Office of Local Government (OLG) administered a $46 million program providing grants of up to $1 million to each of 45 councils across regional NSW, to aid recovery from flooding in August and September 2022.

Funding was provided by the state and Commonwealth governments equally under Disaster Recovery Funding Arrangements and was designed to provide streamlined, flexible and immediate support for local economic and social recovery.

But the audit found the OLG had not documented "fraud controls nor processes to manage conflicts of interest" and had failed to demonstrate whether funded activities were achieving the program's objectives.

Key findings:

• The OLG did not record its reasons for initial eligibility decisions before making grant payments, limiting transparency of who received funding and why.
• Fraud controls existed in practice but were not documented, and the OLG did not record its rationale for treating the program as low-risk.
• Conflict of interest processes were absent at the initial payment stage.
• Councils were never asked to provide midterm performance reports, affecting the measurement of outcomes.
• The OLG and the NSW Reconstruction Authority failed to agree on their respective roles, which delayed key stages of delivery.
• At a time when about 28 per cent of councils had completed all projects, they were still waiting to be told how to finalise their grants, which created uncertainty for coucils.
• Most project eligibility assessments took more than six months.

The audit recommended that by June 2026 the OLG should:

• overhaul its fraud and conflict of interest controls to bring them into line with the state’s grants administration guide
• develop a clear plan to finish administering the program, including how unspent or ineligible funds will be recovered
• apply lessons learnt from this program to future grants
• work with the Reconstruction Authority to formally agree and document which agency is responsible for what, including monitoring, acquittal and risk management, before the program closes.

All four recommendations were accepted, three by the department alone, and one jointly with the Reconstruction Authority.