Effectiveness of Drought Assistance Measures
1.1 Introduction
The impact of drought is widespread and extends to
agribusinesses, rural and regional communities and state and
national economies.
In October 2008, the state raised its support for farmers and
rural communities by $115 million to nearly $400 million since
2005–06.
In response to unprecedented conditions faced by farmers and
affected businesses, the government introduced drought response
measures that directly targeted business assistance. This included
the municipal rate subsidy and rebate for fixed water charges
(water rebate) in 2005 and 2006 respectively.
Just over 48 per cent of funding has been allocated to the water
rebate and municipal rate subsidy between 2005–06 and 2008–09. Both
these schemes provide business support to certain eligible
categories of farmers. This audit focused on these schemes, given
their materiality. The balance of funding is spread across
approximately 50 other drought programs.
The audit objective was to assess the effectiveness of the water
rebate and the municipal rate subsidy measures in terms of how well
these measures have achieved objectives.
1.2 Conclusion
While the audit acknowledges the need to respond quickly to the
worsening drought situation, there are no documented objectives or
intended outcomes for the municipal rate subsidy and water rebate
schemes, apart from the high-level strategic objectives of the
drought assistance package. Consequently, we could not definitively
conclude that funding for these two schemes are an effective use of
public moneys. Normally it would be expected that schemes should be
able to demonstrate that public money has been well spent, given
the $176 million cost incurred as at the end of February 2009.
In terms of Victoria’s future drought assistance programs,
implementing the National Reform Agenda is likely to result in a
longer-term response in line with recently agreed principles for
drought reform, which emphasise greater preparedness and
self-reliance by farmers.
The Department of Primary Industries (DPI) control framework
could be relied on to provide an adequate level of assurance that
payments of the municipal rate subsidy were made in accordance with
the schemes requirements. Less reliance could be placed on the
Department of Sustainability and Environment’s (DSE) control
framework over water rebates. This also affected the administration
of the rebates by water corporations. Further, in the case of
Goulburn-Murray Water, the control environment should be
strengthened.
1.3 Findings
1.3.1 Scheme design
There were no documented objectives or intended outcomes for
either scheme, apart from the broad strategic objectives of the
drought assistance package to help farmers with the worst drought
on record. This meant that it was not possible to measure the
extent to which expenditure on these schemes was effective.
The water rebate scheme is not means tested. As long as eligible
customers in
2008–09 are receiving less than 30 per cent of their water
allocation, the rebate is paid irrespective of their financial
circumstances. In 2007–08 the rebate was paid if customers received
less than 40 per cent of their water allocation and, in 2006–07,
less than 50 per cent of their water allocation.
1.3.2 Performance reporting with an outcome focus
Program implementation and the financial status of all current
drought assistance initiatives are reported quarterly. The
reporting framework does not include the extent to which program
objectives are achieved and the level of contribution made by the
program to meeting relevant outcomes.
The transaction-based design of both the water rebate and
municipal rate subsidy schemes makes it difficult to effectively
measure the extent to which outcomes have met objectives. However,
not all drought assistance programs are transaction-based and there
is potential to improve the way in which their performance is
reported across the board. Clear and consistent performance
reporting holds agencies accountable for how well public money is
spent.
1.3.3 Program development and the National Reform Agenda
Drought initiatives are reassessed annually to determine whether
funding should continue. The National Reform Agenda should involve
a rethink of existing Victorian drought assistance programs. This
should drive a longer-term and better-targeted approach to program
development that conforms to the recently agreed principles for
drought reform, announced by the Primary Industries Ministerial
Forum in November 2008 and reconfirmed in February 2009.
1.3.4 Control frameworks over expenditure
DPI has developed a control and reporting framework that
provides a sound level of assurance over the expenditure by
councils in relation to the municipal rate subsidy. This involves
both independent audits over councils’ administration of the scheme
and comprehensive monitoring of payments.
DSE needs to improve its control framework for managing the
water rebate. For example, eligibility criteria requires further
clarification to avoid the difficulties being experienced by water
corporations in interpreting the criteria.
1.4 Recommendations
Effectiveness of schemes
The Drought Interdepartmental Coordination Group (DICG) should
consider the impact of the National Reform Agenda and:
- establish a consistent approach to sound
program design and development such as clearly defined objectives
and outcomes to give effect to the Primary Industries Ministerial
Forum’s recently agreed principles for further drought
reform
- re-evaluate existing initiatives for
consistency with these principles (Recommendation
4.1).
The Department of Primary Industries (DPI), as part of its
management of the Drought Interdepartmental Coordination Group
(DICG), should:
- improve current performance reporting of
drought assistance programs to include the reporting of outcomes
and their extent of alignment with program aims and
objectives
- develop a standard method for evaluating
key drought assistance programs, in conjunction with relevant
agencies (Recommendation 4.2).
Rebate and subsidy administration
DSE should improve the planning and control framework for the
Rebate for Fixed Water Charges (water rebate) and, in
particular:
- improve consultation and communication
with water corporations when planning and implementing any changes
to the scheme’s administration
- implement a robust risk management
framework for the scheme’s operation and delivery
- closely monitor the administration of the
water rebate to identify any inconsistencies or inaccuracies in
interpretation of the eligibility criteria by water
corporations
- enforce the requirements of the deed of
grant with each water corporation, particularly for reporting and
audit of the administration of the scheme to provide assurance over
the expenditure of public funds (Recommendation
5.1).
Goulburn-Murray Water should upgrade control procedures by:
- including the administration of the water
rebate in its risk management plan
- increasing the sample size for checking
that the water rebate has been correctly applied
- improving controls over data security
(Recommendation 5.2).
Grampians Wimmera Mallee Water should include the administration
of the water rebate in its risk management plan
(Recommendation 5.3).