The ICAC Commissioner has warned that a NSW Auditor-General’s recommendation for Treasury and DPC to implement a new funding model for the state’s key integrity bodies could fall foul of the law.

The report, released this week, focussed on funding for the ICAC, the NSW electoral Commission, the NSW Ombudsman and the Law Enforcement Conduct Commission, as well as the role played by NSW Treasury and the Department of Premier and Cabinet in making funding decisions.

It concluded that a lack of transparency around funding is threatening their independence, and calls for Treasury and the DPC to implement a new funding model addressing the threat.

Chief Commissioner Peter Hall QC says the report correctly identifies that the current funding model doesn’t recognise the independence of the ICAC, that there are insufficient safeguards against threats to that independence and that the Commission doesn’t have an appropriate mechanism to seek more funds.

However the Commission does not think DPC or Treasury should be involved in implementing a new model, he writes in his response to the audit.

There is … a potential for (ICAC’s) operations to embarrass the government, to criticise the leadership of the bureaucracy and affect the political fortunes of ministers to whose directions those senior public servants as subject.

Bret Walker SC

“The Commission’s position is that, because of the involvement of executive government in funding arrangements for the commission is incompatible with its independence, such involvement is unlawful,” Mr Hall says.

That position is supported in a supplementary opinion by leading legal expert Bret Walker SC, who says senior public servants within the departments should play no role in putting a new funding system in place.

Mr Walker says “there is … a potential for (ICAC’s) operations to embarrass the government, to criticise the leadership of the bureaucracy and affect the political fortunes of ministers to whose directions those senior public servants as subject.”

Ambiguities

The report identifies “several areas of ambiguity” in the way the current financial arrangements apply to the integrity agencies.

“Specific mechanisms that present threats to the independence of the integrity agencies include the absence of transparency in decisions about funding for the integrity agencies, the means of applying efficiency dividends and budget savings and reform measures, the process of providing additional funding from DPC to the integrity agencies, and requests for the integrity agencies to report to DPC on their activities and outcomes,” auditor Margaret Crawford says.

The report shows ICAC’s revenue dropped by $9 million in 2016 compared to 2014, and expenditure outstripped funding between 2015-2019, making it hard for it to operate within its budget.

The funding cut occurred event though alleged corrupt conduct remained steady and ICAC investigations intensified, the report said.

Funding levels were restored in 2018-19, but a proposal for an additional $4.1 million in 2019-20 was rejected without reason.

Ms Crawford makes other recommendations, including giving parliament more structured oversight, expanding its role in the funding process, increasing transparency to parliament and requiring integrity agencies to show they are managing their resources prudently.