Billions of taxpayer dollars were handed to the private contractors running Australia's offshore detention centres without adequate authorisation or value-for-money assessments, the Commonwealth auditor has found.
In a scathing report, the Australian National Audit Office said the Immigration Department had "fallen well short" of expected standards in its management of contracts for detention facilities on Manus Island and Nauru.
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Audit slams Immigration Department over Nauru, Manus contracts
'Fallen well short' of standards: An audit into Nauru and Manus Island contracts has slammed the Immigration Department. Vision courtesy ABC.
Out of $2.3 billion paid over 40 months, $1.1 billion was approved by officers without the appropriate authorisation and another $1.1 billion was paid with "no departmental record" of who had authorised the payments.
The ANAO also concluded the contracts themselves lacked effective guidelines and management mechanisms, owing partly to the "great haste" with which the detention centres were established in 2012-13. Many faults persisted in later contracts, the ANAO said.
And in an astounding oversight, the department failed to update its asset register or advise Comcover about a new $75 million facility in Nauru - meaning the building was not insured when it burnt down in a riot in 2013, within weeks of being commissioned.
Released on Tuesday, the report follows a similarly blistering ANAO audit published in September which identified "serious and persistent deficiencies" in the department's procurement of garrison support and welfare services for the offshore detention centres.
While acknowledging that "in the aggregate", payments made to contractors in the last financial year aligned with the purpose of their contracts, the ANAO concluded there were multiple instances where value-for-money assessments were not conducted.
A $1 billion extension to Transfield's 2014 contract was made last year "without documented consideration of value for money". Another system allowed Transfield, now Broadspectrum, to spend up to $112 million a year without direct value-for-money assessment.
The auditor noted that while the contract required full substantiation of any intermediary or "pass through" costs, "Transfield did not provide it and [the department] generally did not seek it".
An agreement struck with Transfield to review only five per cent of invoices for pass through costs under $10,000 contravened the department's finance guidelines, the audit found.
The Department of Immigration and Border Protection denied it made payments without the appropriate authorisations, or that it failed to give due consideration to value for money.
But it agreed to implement the ANAO's recommendations, including taking "immediate steps" to strengthen procedures and comply with its own Accountable Authority Instructions.
In a statement posted on its website, the department acknowledged that "its decision-making processes in this complex and rapidly evolving environment may not have been adequately documented". Many of the recommendations were already being implemented, it said.
Greens immigration spokesman Nick McKim said the audit revealed "a department that has gone rogue and needs to be brought to heel" by Immigration Minister Peter Dutton.
There were 871 people detained on Manus Island and 383 in Nauru at the end of November, according to government data - while many more now live in the Nauruan community.
The auditor identified that speed was of the essence when the then Labor government opted to establish offshore processing centres on the islands in 2012. Contracts were described "only in general terms", while service standards were "not articulated" and delivery timeframes were not clearly established in the contracts.
One in five supporting guidelines were "never settled", including around the use of force and restraints, procedures for handling deaths, and management of safety and security. Transfield instead "operated under its own procedures", the ANAO said. Many of these faults persisted into the current contracts, the audit found.
In its response, Broadspectrum said it disagreed with any suggestion it had not complied with obligations under its contract with the DIBP. The company also said its ability to respond to the audit was compromised because it had only been provided with a "heavily redacted" draft copy.
Following the audit's release on Tuesday, a Broadspectrum spokeswoman declined to comment, directing Fairfax Media to the department's online statement.
The cost of the audit was $1.5 million.