A grants program designed to help telcos defray the initial capital costs of complying with the government’s data retention regime was not implemented “to an appropriate standard having regard to the risks involved and the policy outcomes being sought,” a less-than-flattering audit has concluded.
The Australian National Audit Office today released the results of its scrutiny of the Data Retention Industry Grants Program, which was initially administered by the Attorney-General’s Department, but since May this year has been the responsibility of the Department of Home Affairs, headed by Peter Dutton Scott Morrison.
The report reveals that, among a host of other issues, the government funded a far greater portion of compliance costs than originally intended.
Details of the funding for telcos under the $130 million grants program was revealed in September 2016. In total, 180 grants worth a total of $128.4 million were awarded. The big winners were Telstra, Vodafone and Optus, which received $40 million, $29 million and $15 million, respectively.
Under the guidelines drawn up by the Attorney-General’s Department, no provider was to be fully funded by the grants scheme.
The government’s intention had been to fund 50 per cent of the industry’s estimated aggregate capital costs of compliance. However, the ANAO revealed that the government had awarded funding that represented 65 per cent of telcos’ estimated costs — and as telcos’ actual costs turned out to be lower, the funding equated to 79 per cent of capital costs.
Some 26 providers that incurred aggregate compliance costs just short of $40 million had their efforts fully funded by the government.
As of the beginning of June 2018, grant recipients reported that they had spent almost $155 million on compliance, the ANAO said. (According to separate figures in a government report on telecommunications interception powers, by the end of FY17, Australian telcos subject to the data retention regime had spent more than $176 million in capital costs on compliance.)
The estimated cost to industry of compliance that was used to inform the size of the grant program was based on a report that the Attorney-General’s Department commissioned from PricewaterhouseCoopers (PwC) report.
PwC initially estimated a cost of between $189 million and $319 million. However, the ANAO revealed that the firm later prepared a draft for the department based on data obtained from industry during the grant application process that showed the mid-point estimated cost was more likely to be $198.5 million.
The department “decided that the consultant should not reflect this data in its final report and the amount of grant funding made available was also not revised”. Using the revised estimate could have cut $28 million from the cost of the program.
The ANAO also found that conflicts of interest were not managed, the program was subject to “significant errors and delays”.
“There was no probity plan in place for the program,” the ANAO report states. “An assurance plan was prepared, but it was not implemented in full.”