Audit reveals 50% of Victorian businesses awarded government grants failed to meet grant criteria

A report tabled in the Victorian Parliament yesterday by the state’s Auditor-General found that over 50% of businesses awarded government grants failed to meet grant criteria.

The assistance was provided to businesses by the Victorian Government from 2008 to 2011 and was worth hundreds of millions dollars, with expectations that the business investment projects which received grants would generate $8 billion in capital expenditure, create 18,000 full-time equivalent jobs and increase exports by $1.5 billion.

The damning report, tabled by Auditor-General Des Pearson, found the state government did not clearly define objectives for investment attraction and did not have a comprehensive strategic plan governing the various activities it performs to attract investment to Victoria.

“Without a strategy, the Department of Business and Innovation does not have the information it needs to improve the effectiveness of its investment attraction activities,” the report said.

“The effectiveness of the grant assessment process is questioned, as over 50% of the applications examined in this audit received grants despite not meeting the eligibility criteria and there was insufficient information to appropriately assess criteria.”

He found criteria were vague, most submissions lacked key detail, objections by Treasury were overruled and some grants were made that exceeded the budget of the grant program.

The Auditor-General recommended the government provide more guidance on the application of eligibility criteria, particularly those relating to innovation and productivity.

He warned the government did not have a formal process for assessing and approving access to facilitation services.

While the Auditor-General found the eligibility criteria for the government’s Investment Support Program and Industry Transition Fund were “reasonable”, he said “there is a need to provide more guidance on the application of these criteria, particularly those relating to innovation and productivity.”

The Auditor-General also said a review of the Industry Support Fund and Industry Transition Fund raised concerns about an overemphasis on capital expenditure and job creation when allocating grant funding, noting that projects that contribute little to productivity are unlikely to offer a net economic benefit to Victoria.

“A focus on innovative projects that increase productivity would likely have provided better outcomes for the state,” the report said.

The Auditor-General recommended the government “limit financial assistance to those projects that meet eligibility criteria, and place greater emphasis on productivity and innovation,”

SmartCompany contacted Innovation Minister Louise Asher for comment but no response was available prior to publication.

This story first appeared on SmartCompany.