The Auditor-General has been asked to investigate the Gillard Government handing over $20 million of Murray-Darling Basin water efficiency money for a pipeline project in New South Wales that doesn’t even deliver any water savings.
It follows revelations in this week’s Senate Estimates that federal funding for the pipeline between Orange and the Macquarie River was given under a now abandoned agreement to save up to 200 billion litres (200 gigalitres) of water by redeveloping the Menindee Lakes storage.
“It wasn’t conditional or contingent. It was an agreement to provide the funding at the time that the agreement was made and the project is proceeding.”
Mary Harwood, Water Efficiency Division
Department of Sustainability, Environment, Water, Population and Communities,
Senate Supplementary Budget Estimates, 18 October 2011
The $20 million in federal funding to the New South Wales Government was agreed[1] as part of a July 2010 pre-election Memorandum of Understanding (MOU) which the Federal Department’s own website now indicates NSW has walked away from[2].
“This pipeline might be a meritorious project, but it does not meet the aims of the program under which it’s being funded, and of course the entire Menindee Lakes MOU underpinning this funding has collapsed,” Coalition Basin spokesman Simon Birmingham said today.
“The Gillard Government was quite happy to throw in this $20 million sweetener to bring New South Wales to the table for the main game of saving water by better managing the Menindee Lakes.
“However, the Gillard Government has failed to ensure value for money for Australian taxpayers or any water savings at all by not linking this $20 million to delivery by New South Wales of its side of the deal.
“Thanks to this shoddy agreement, Murray-Darling reform is now $20 million poorer and the river system continues to lose up to 200 billion litres annually through substandard management.
“I hope the Auditor-General can shed light on how this debacle happened.”
20 October 2011
Mr Ian McPhee
Australian National Audit Office
GPO Box 707
Dear Mr McPhee
I write to request a performance audit relating to the provision of $20 million in Commonwealth funds to the New South Wales Government under a Memorandum of Understanding no longer in effect, and which at the very least has been committed in questionable circumstances.
My request is made with your office’s role in providing independent assessment of selected areas of public administration, together with assurance about public sector financial reporting, administration and accountability, in mind.
Please find enclosed a copy of the July 2010 Memorandum of Understanding (MOU) between the New South Wales and Commonwealth Governments.
The MOU primarily concerns the returning of up to 200 gigalitres of water to the Murray-Darling Basin through evaporation reduction and other infrastructure improvements to the Menindee Lakes water storage system, towards which Labor had committed up to $400 million during the 2007 election campaign.
The MOU remains available on the website of the (Commonwealth) Department of Sustainability, Environment, Water, Population and Communities at, which also features a statement that “In June 2011 NSW advised that it considered the MOU had ceased to have effect.
Curiously, the MOU made provision in Clause 27, from within the $400 million committed overall, for $20 million towards a pipeline between Orange and the Macquarie River, described as Orange City Council’s water security project – a project quite unrelated to Menindee Lakes and which appears designed to divert more water from the Murray-Darling Basin rather than return it.
Department officials yesterday advised the Senate Environment and Communications Legislation Committee, in a Supplementary Budget Estimates hearing, that funds for the Macquarie Orange Pipeline Project were being provided under Clause 27 of the MOU, notwithstanding its collapse, because “it was not conditional or contingent; it was an agreement to provide the funding at the time that the agreement was made, and the project is proceeding.”
While the provision of funding might be strictly in accordance with the terms of the MOU, I urge you to consider the appropriateness of having included such a clause in this MOU and the honouring of it by the Commonwealth given the withdrawal of New South Wales. In particular,
·         it would appear that the cooperation of the New South Wales Government in signing the MOU was conditional on the inclusion of what was little more than a bribe or deal sweetener unrelated to the primary objectives of the MOU; but
·         the Commonwealth has failed to ensure value for money for Australian taxpayers by making, for example, the provision of this $20 million in funding conditional upon further substantial and ongoing cooperation by New South Wales towards the Commonwealth’s objectives to better manage the Menindee Lakes.
I note that the MOU’s signing was considered significant enough by the Prime Minister to have built expectations by publicly announcing the MOU’s existence during the 2010 federal election campaign as follows:
“One of the most significant challenges in the Murray Darling Basin is one step closer to being resolved, with the Gillard Labor Government signing a Memorandum of Understanding with the New South Wales Government on the future of Menindee Lakes … It gives the green light to a final feasibility assessment that will be completed in October…”
Julia Gillard and Penny Wong, media release, 10 August 2010
The $400 million committed under the MOU (of which the $20 million being provided is part) was from within the Sustainable Rural Water Use and Infrastructure Program (SRWUIP), as confirmed for example by Senator Conroy in the Senate on 16 November 2010.  Under this program, as detailed at, investment is supposed to be principally directed towards projects that:
1.    deliver substantial and lasting returns of water for the environment
2.    secure a long-term future for irrigation communities, and
3.    deliver value for money in the context of the first two tests.
Though a potentially meritorious project, the pipeline between Orange and the Macquarie River does not appear to meet the principal objectives of the SRWUIP.
Noting that SRWUIP has been listed for potential audit within your Audit Work Program, I urge you both to proceed with this audit but also more urgently to separately investigate the specific matter of the Menindee Lakes MOU and the provision of this $20 million towards the Orange pipeline notwithstanding the absence of recorded progress on the primary objective of addressing the vast sums of water lost in the Menindee Lakes.
I look forward to your reply and thank you for your consideration of this important matter.
Yours sincerely
Simon Birmingham
Shadow Parliamentary Secretary for the Murray-Darling Basin