Queensland business one of more than 200 recipients under regional jobs program criticised by auditor general

This article is more than 10 months old

This article is more than 10 months old

A company that received a $1m grant from the Coalition for a ferry and bus project had not been in the transport business, is currently the target of deregistration by the corporate regulator and is “losing money”, with the director saying the project is unlikely to happen for at least two years.

Dindarr Pty Ltd was one of more than 200 companies to receive federal government grants under the Coalition’s regional jobs and investment program, which was the subject of a scathing report from the auditor general released on Tuesday.

The $1m allocated to Dindarr was for the Yarrabah Ferry and Bus Project in Queensland, which would connect the Yarrabah Indigenous community to Cairns by “fast, low-cost ferry and bus services”.

Audit office blasts roll-out of Coalition’s $200m regional jobs and investment program Read more

Under the program guidelines, applicants were required to provide co-funding towards the total cost of the project, which in Dindarr’s proposal was estimated at $2m.

The Dindarr director Peter McAllister told Guardian Australia he was not aware of the “concerning” strike-off action under way by the Australian Securities and Investments Commission and said he would “have to fix that”.

He also said that he had not been required to show he had $1m to match the federal government grant.

Instead, he said he had been required to provide a letter from an accountant that said he was trading profitably in a different business, and that he would have the ability to access finance through this company.

“I didn’t have to show I had the money, I had to show I had the ability to access the money, that the business was trading and had the ability to borrow.”

This was through a separate business – AwareHouse Analytics – which was not the company that received the grant.

Dindarr Pty Ltd was registered in July 2017 to apply for the grant, McAllister confirmed. He also said that he did not operate a transport business prior to receiving the funds.

McAllister said he had already invested approximately $300,000 from private funds into the business and was “on track to exceed our $1m commitment” by November next year.

“I can confirm that my accountant did certify that AwareHouse could access funding of $1m on Dindarr’s behalf, as it has, is and will continue to do.”

On the current operation, McAllister said that it was “extremely difficult” to establish the new service which was mostly dependent on bus fares being paid by members of the Yarrabah Indigenous community.

“We are losing money. We are developing the business in a variety of ways but Yarrabah is a very challenging environment to work in,” he said.

“I’m confident that the service is going to survive and it will eventually develop, and eventually there will be a ferry service ... but there are a few hoops to jump through before we get there,” McAllister said.

He also confirmed that he had been forced to lay off three bus drivers and was now operating the service himself, because “the cash flow is hard to maintain”. He said the jobs were on “pause” until cash flow improved, but he was confident of growing the workforce to 12, as outlined in his grant application, by June-September 2020.

While using the $1m grant to buy vehicles and boats, the ferries have since been moved to the Gold Coast because the proposed route for the ferry in Trinity Bay is not deep enough. The ferries are not yet operating commercially.

McAllister said that dredging would now be required to allow the ferry route at Yarrambah to function, but this was unlikely to happen in the next two years.

He said he had looked at buying a private shipyard at Trinity Bay for around $600,000 to secure a different ferry route, but had been unable to secure finance.

A report in the Cairns Post in December last year said McAllister was seeking an “angel” investor to provide funding of $1m for capital expenditure, and an additional $600,000 in startup capital and operating costs.

When the grant was initially announced, the ferry service was expected to be operational by August 2019.

Under the grant guidelines, awarded projects were expected to “create new local jobs in the region” and “contribute to boosting the skills and knowledge of employees and people in the region”, among a list of criteria for funding.

According to the audit report, funding decisions that were made by a panel of government ministers under the RJIP program were often made against the recommendations of the department.

Ministers declined to fund 28% of grant applications recommended to them by officials, and approved 17% of applications that had not been recommended to them.

The audit found that projects approved most often against the recommendations of department were located in tropical north Queensland.

The government is refusing to provide the list of recommended projects, with the department saying the information is not publicly available.

It has also declined to comment on individual projects, saying information is “commercial in confidence”.

The department refused to say whether Dindarr was one of the recommended applicants for funding, but said progress payments were paid in arrears based on invoices supplied by the applicant that demonstrated their expenditure.

Analysis by the Labor party, which had complained to the auditor general about potential bias in the grants program, shows that of the $18.1m spent in the tropical north Queensland region, 89% of this was spent in the LNP-held seat of Leichhardt, compared to just 11% spent in Kennedy, held by the independent MP Bob Katter.

The shadow infrastructure minister, Catherine King, has called on the government to explain “how on earth it had a ministerial panel that came up with the decisions that it did”.