Corruption watchdog finds officials tried to hide $285m in covid grant losses

The four-year investigation by the Independent Broad-based Anti-corruption Commission (IBAC) followed tip-offs by several whistleblowers concerned about corrupt handling of the Business Cost Assistance Program (BCAP).

The program issued $4.5 billion in help to businesses hit by the pandemic across five grant rounds between 2020 and 2022. 

While an internal analysis by the then-Department of Jobs, Precincts and Regions showed that as much as $285 million was wrongly paid out, senior officials kept that information from then Industry Support and Recovery Minister, Martin Pakula, and the department’s secretary, Simon Phemister.

An IBAC investigation found that more than 9000 ineligible businesses had backdated their GST status to the date required to get a grant, despite not operating as required at the time. Yet even after this issue was identified, the department did not address it, which meant that ineligible or fraudulent businesses continued to apply for and receive grants.

The Operation Harmonia investigation found:

• the associate secretary withheld information about suspected losses from Phemister
• the associate deputy secretary directed that the information be scrubbed from a report to the minister and the Victorian auditor-general about the suspected $285 million losses
• the associate deputy secretary provided “false and misleading” information in a brief to Pakula’s ministerial successor, Ben Carroll, that suggested no payments had been made in error 
• an executive director withheld information from the Victorian Ombudsman about the GST backdating issue, which allowed for many of the incorrect payments 
• officials failed to act on suspected substantial losses.

IBAC did not name the officials in question, but in response to questions from Grants Management Intelligence said that “the use of titles was appropriate to expose the conduct”. 

A spokesperson said that “IBAC considers on a case-by-case basis how persons adversely mentioned will be identified”.

The Age last month reported that two of the officials in question had secured new posts with the National Disability Insurance Agency, raising concerns among disability advocates.

In commenting on the investigation, IBAC Commissioner Victoria Elliott said senior officials had failed to meet the required standard.

“What Operation Harmonia has uncovered is behaviour contrary to the Victorian Public Sector code of conduct [and] professional obligations, and a clear failure to act in line with the high integrity standards expected of Victoria’s public officers,” Elliott said.

She said the Department of Jobs, Precincts and Regions had also failed to create a culture in which such actions would be readily exposed.

“An absence of a positive risk culture and failure to provide frank and fearless advice, no matter how uncomfortable, ultimately left the department vulnerable to an even greater risk of fraud and corruption,” she said.

Even when some department officials raised concerns, “their leaders failed to act, meaning the government was left uninformed and unable to move quickly to address this suspected significant loss of public funds”.

She praised the whistleblowers whose bravery was critical for the state’s public sector.

IBAC did not make any formal recommendations and was prohibited in this report from making any finding that a person has committed a criminal offence, even though it has the powers to lay charges if it chooses.

The IBAC study follows a Victorian Auditor-General’s Office (VAGO) report that also uncovered serious deficiencies in the state’s covid-19 grants programs. 

Read the full IBAC report and summaries

More information