Paul Murray: The Auditor-General’s probe into potentially dubious land dealings has raised several questions

Labor has been in power in WA for eight years and three months, and long ago ran out of excuses for the poor performance of any government agencies under ministerial control. So the recent critical Auditor-General’s report into DevelopmentWA has fallen on John Carey as the current Minister for Lands with sole responsibility for the organisation. But, far more culpably, it’s on Treasurer Rita Saffioti who had significant ministerial control of what was to become DevelopmentWA in the period from Labor’s election win in 2017 until 2023, which covers the five-year timeframe chosen for the audit. “DevelopmentWA was not, between 2017 and 2022, conducting land sales in a way that minimised the risk of error, fraud and corruption, and is unable to demonstrate that probity and value for money was achieved,” Auditor-General Caroline Spencer damningly concluded. DevelopmentWA is no small concern. It is one of the State’s biggest land and property developers, holding a portfolio on behalf of the WA public with a market value of $2.18 billion and annual sales of $457.8 million. It was created under Saffioti as planning minister and former treasurer and lands minister Ben Wyatt in 2019 by combining the former Metropolitan Redevelopment Authority and LandCorp. The fraud risks confronting an organisation holding and transacting so much land are very high, as the Auditor-General’s office has warned its board and the relevant ministers many times previously. The new report into DevelopmentWA states there were 14 “recurring parties” involved in the hundreds of private sales the Auditor-General reviewed and 13 “potential relationships” between the agency’s employees and the buyer or seller. No identifying details were given, but this is obviously fertile ground for further inquiry. For instance, were any property developers featured as recurring parties? Are they Labor donors? Spencer’s report published last month suggests that previous warnings about potential fraud traps involving undervalued land, including some raised during the Corruption and Crime Commission’s investigation of corrupt public servant Paul Whyte, went unheeded by the agency. Despite the fraud warnings, the Auditor-General has now unearthed more than $100m in publicly-owned land parcels that were inexplicably transferred to DevelopmentWA at massively reduced values, often with inadequate documentation. Whether any of that land ended up cheaply in the hands of property developers was, unfortunately, beyond the scope of the audit. “Given the role of DevelopmentWA, we expected to find a culture that clearly reflected an understanding of the risks and responsibilities of managing high value public land assets in a commercial and competitive environment,” the new report said. “A culture where due process was rigorously and consistently followed and due scepticism applied. “Unfortunately, we found a historical lack of consistency and due diligence in land pricing and sales, as well as serious gaps in process and documentation. “As a result, DevelopmentWA is unable to demonstrate that value for money to the community has been achieved in all public land sales during the review period.” There’s no way to gloss over such a damning finding from the WA Parliament’s independent oversight watchdog. As much as the Cook Government is trying. The report highlights one April 2022 sale of land that DevelopmentWA initially listed at $600,000 before dropping it in July 2020 to $450,000 under a pandemic-era plan known as the Temporary Incentivising Regional Land Pricing Policy. A year later, when the board was considering extending the policy, a new valuation was ordered which came in at $800,000. “There was no evidence that the price extension was approved after receipt of this valuation,” the Auditor-General found. “Despite the higher valuation and a lack of approval to extend the price, the land continued to be marketed at $450,000 and was sold for $385,000.” But what further aggravated the Auditor-General was the response she got when her officers questioned why that taxpayer asset was sold for less than half its apparent value. “When we queried why the land was advertised and sold well below the valuation, DevelopmentWA advised the valuation was incorrect,” Spencer says. “Having reviewed the valuation, we do not agree with DevelopmentWA’s reasons for it being incorrect as it reflected the condition of the land. No record has been provided explaining why, at the time, it was seen to be incorrect, or why a replacement valuation was not requested. “After further questioning, DevelopmentWA justified the lower sale price by saying it was supported by the best price available in the market and the latest available land tax determination from the Valuer-General of Western Australia. “While that value is commensurate with the sale price, the use of the Valuer-General’s land tax determination was not an approved basis for valuing this land. The reasons for selling much lower than the latest market-based valuation sought, should have been documented and reviewed at the time of the sale.” The best that can be said of the Auditor-General’s report is that she sees some recent improvement in the attitude of the current board. Saffioti handed over planning to Carey in June 2023, giving him full control of DevelopmentWA. The sample of transactions audited occurred between July 2017 and June 2022, although Spencer also reports critically on the agency’s inadequate responses during the inquiry period from January 2023 to this year. The report notes “our observations from later stages of the audit suggest this is not the same organisation as when these transactions occurred, and a much-needed cultural shift has begun under strengthened board leadership in recent years.” But that doesn’t negate what happened under Saffioti’s watch, nor the agency’s responses during the Auditor-General’s inquiries over the past two years which she says resulted in “a frustrating audit over an extended period”. “DevelopmentWA operates in an environment where market participants will always seek to obtain the best deal for land purchases,” the report warns. “We identified some important areas where DevelopmentWA can improve its oversight and management of these influence-seeking relationships, as well as improve its management of staff conflicts of interest. “When combined with the prior defensiveness we have experienced with DevelopmentWA, these findings raised significant concerns for my office of a broader organisational culture placing commercial interests and expediency above transparency and accountability in the management of public land assets that belong to the people of Western Australia. “The volume of transactions, complexity of focus and elapsed time meant we were not able to capture more recent transactions for consideration as part of this audit.” DevelopmentWA’s potentially illegal breaches of record-keeping requirements blunted the audit’s ability to examine suspicious transactions. “We also note that relevant documents and information, including sales release plans and valuations, could not be found in over 30 per cent of the 242 properties we reviewed,” Spencer said. “This is very concerning, especially that decision makers are putting their signatures on approvals without checking the requisite documentation. “Western Australian taxpayers would rightly expect zero unexplained and unapproved deviations from established procedures, a solid and readily available paper trail and meticulous attention to detail when it comes to transfers of State-owned land into private ownership.” Parts of DevelopmentWA’s response to the report were underwhelming given the nature of the criticism: “It is reassuring to note that no actual fraud, misconduct or corruption was found during the extensive forensic audit, which was the focal point of the audit.” The truth is quite different. The audit covered only a sample of transactions among many thousands and was hampered by missing documents in nearly a third of reviewed cases. “Without the supporting documents, DevelopmentWA cannot prove the transactions were conducted in the public’s best interest and any wrongdoing within the organisation is less likely to be detected,” the audit concluded. That’s hardly a vote of confidence. But the agency’s deflective response seemed to satisfy our gormless Premier, who has effectively told the Parliament under questioning: “Nothing to see here.” That was despite this specific caveat from Spencer: “As this audit was limited to land transactions, we did not conduct other procurement fraud analysis as is conducted in other targeted forensic audits. “The following areas were excluded from the audit scope: development projects and public-private partnership; market-led proposal type transactions; government-to-government transfers.” So the Auditor-General’s investigation really just scratched the surface. It was looking for weaknesses in fraud prevention systems, not prosecutable evidence of offences. “Forensic audits seek to identify vulnerabilities to, and indicators of, fraud in State government entities,” Spencer wrote when presenting her report to Parliament. “Their purpose is to improve resilience to fraud across the WA public sector. “This audit sought to identify if there were irregularities in land transfer information in DevelopmentWA that may indicate fraud, corruption or misconduct.” It certainly achieved that. But Spencer’s report seems to have raised as many questions as it answered. Those categories excluded from her agency’s inquiry are where a body with stronger powers, like the CCC, should now be concentrating its efforts under new leadership.