The NSW government shoehorned the rollout of its controversial transport corporation to match benefits promised in 2015 budget papers, the state’s auditor-general has found, rendering a seven-year government implementation process overly costly, ineffective and opaque.
In a report handed down Tuesday, the NSW government was found to have committed future governments to ongoing financial obligations when it established the Transport Asset Holding Entity (TAHE) in order to deliver a $1.8 billion sugar hit to the 2015-16 budget, without certainty it would deliver “longer-term financial improvements”.
The government established TAHE as a state-owned corporation to manage the state’s various transport assets in 2020, in a bid to move billions of dollars in transport costs out of the state budget.
“The process was not cohesive or transparent,” the report said. “It delivered an outcome that is unnecessarily complex in order to support an accounting treatment to meet the NSW government’s short-term budget objectives, while creating an obligation for future governments.”
The state’s auditor-general Margaret Crawford said it forced the agencies responsible for implementing the transport entity to deliver a framework that matched the promises, beginning two years before the relevant legislation was passed, despite whatever challenges arose.
The report’s findings confirm the suspicions of Labor’s opposition treasurer Daniel Mookhey, and other critics, who have long called the establishment of the TAHE an “accounting trick”. He said he would abolish the corporation if Labor wins at the March election.
The report also found that the government’s dependence on consulting firms saw the cost of delivering the entity almost double from initial estimates of $12.9 million to more than $22 million during NSW Premier Dominic Perrottet’s tenure as state treasurer.
In their dealings with the big four, consultants working on the project claimed public servants had forced them into watering down criticisms of the NSW government’s rail entity.
Former KPMG partner Brendan Lyon levelled accusations at the government during a 2021 parliamentary inquiry into TAHE, where he said he was subjected to “unprofessional, ongoing attacks” after he wrote a report that found there were holes in Treasury’s cost-benefit modelling.
In a separate report, he said Treasury’s “numbers used for the budget are wrong” and that it had “made up the benefits” that came to form its submission to cabinet on the rail corporation’s viability.
A spokesperson for NSW Treasury told Crikey the department “looks forward to continuing its constructive engagement with the Audit Office” and working with TAHE and Transport for New South Wales to “more effectively manage the state’s investment in rail assets”.
Another example of a familiar story. Labor’s opposition treasurer Daniel Mookhey is right to call it an “accounting trick”. It’s a variation on the scam that is variously labelled PFI (Private Finance Initiative) or PPP (Public-Private Partnership). The first know versions were invented by Mussolini. The trick is to get the borrowing off the government’s books by hiding it in company accounts. The scam is that although the government’s finances appear better, the government must pay more for the borrowing because it is going through intermediaries who must borrow at higher rates of interest and who get paid for doing it. These agreements also lock the government, or its agencies, into decades of paying for the deal no matter how the government changes in future. To make it worse the companies profiting from it usually have the good sense to be based offshore and make full use of tax havens, so the deal is more or less a total loss to the state. There are also ample opportunities for corruption and cronyism in these schemes because they are lucrative for the private companies and they naturally seek to reward the ministers who are pouring cash into their capacious pockets and lobby to persuade ministers to set up more of the schemes.
Mookhey says he would abolish the corporation if Labor wins at the March election. Well, fine. That will require paying compensation if the deal included any such protection for the parties, so not necessarily a cause for unrestrained rejoicing. In the end the only answer to really fix this scourge on the public is to change the accounting practices that justify it. If the accounting showed the true cost of such shenanigans from the start it would be much more difficult for governments to rob us this way.
Creative but legal accounting practices have lucrative outcomes for corporations world wide.
Time to make “creative accounting: within government, or by government entities punishable as misfeasance or malfeasance in public office and we will see how long the behaviour continues for.
Like the iCare debacle, Perrottet cannot dissociate himself from these multi-billion dollar cockups…………..
…………he was in the hot-seat at the time, they were his idea and he directed the implementation.
He should be in the dock for defrauding the State, not running it.
Has anything promised in the last few months by Perrotet and his merry man been anything other than pure electioneering?
I consider it a complete fraud and the Premier nothing more than a right wing con artist. He has a list of cock ups longer than both my arms and I come from a very long armed family.
I understand it is a pre-requisite for membership of the Liberal Party that both arms must reach the ground when standing upright………………………
St Matthew the Klean has fixed all this too?
Fortunately for him, he never went near this one………………
…………it’s 100% down to Perrottet.
How long before he works out he’s in the wrong Party, do you think?………………………..