Howard legacy: $328 million grants rorts

The Auditor-General has exposed unprecedented government abuse of a $328 million grants program, undermining the Coalition's credentials as a careful financial manager.

A damning report shows that a third of the money from the controversial Regional Partnerships Program from 2003 to last year was pumped into just 10 rural Coalition seats - including one held by John Anderson, who as minister for transport and regional services had ultimate responsibility for the scheme.

"The manner in which the program has been administered over the three-year period to 30 June 2006 examined by ANAO had fallen short of an acceptable standard of public administration," it says.

It found some ministers were more likely to overrule departmental opposition to specific projects if the applications came from Coalition seats, and more likely to knock back funding for projects supported by the department if they were from Labor seats.

Before the 2004 election, then parliamentary secretary DeAnne Kelly asked the department to compile a list of 100 projects - by electorate and bid amount - for her consideration over a nine-day period. Other grants were being approved up to the 5pm start of the caretaker period, with 16 projects winning funding in the last 90 minutes of the Government's term. New grants were also announced during the campaign - in some cases without the recipients having filled in an application form.

The approval rate for applications jumped to a record 81 per cent in the lead-up to the 2004 poll, compared with one of 57 per cent the year before.

The report also revealed that the introduction of a three-member ministerial committee to oversee the program in November 2005 initially had little effect, with more grants approved by the relevant minister despite departmental opposition. In the past year, however, the Government has made major steps to overhaul the grants process.

Kevin Rudd said he was outraged by the arrogant abuse of the scheme.

"Mr Howard must today explain to the Australian people how this abuse of such a massive amount of taxpayer's dollars occurred. How did it happen on his watch?" he said.