Common(wealth) Knowledge #55: Report into Esther Foundation finds $4 million grant 'likely unlawful'

A $4 million grant given to a rehab facility by the Commonwealth government in 2019 likely lacked legal authority.

A report handed down by the Australian National Audit Office on June 5th has concluded that a $4 million grant to the Esther Foundation by the Commonwealth government under former Prime Minister Scott Morrison was ‘likely unlawful.’ The ANAO found that the grant lacked any ‘legal authority,’ along with a number of other grants under the Community Health and Hospitals Program.

The Esther Foundation was closed down in 2022, following a number of allegations made against the Christian ‘rehabilitation facility’ for women suffering from various mental health issues, including eating disorders, depression, and addictions, along with victims of domestic violence and sexual abuse.

In 2022, the Western Australian Legislative Assembly’s Education and Health Standing Committee held an inquiry into the Esther Foundation. It heard evidence of LGBTQIA+ conversion therapy, exorcisms, a refusal to give patients medication, and facility staff telling patients that talking about their mental health issues and trauma was ‘attention-seeking behaviour.’

However, in 2019 Scott Morrison personally visited the facility and the Commonwealth government’s Department of Health and Aged Care, as p entered into an arrangement with the Esther Foundation to provide $4 million in funding.

Many victims of the Esther Foundation felt that Morrison’s personal visit and the subsequent grant silenced them, as many claimed that this indicated his approval of the program, which deterred them from speaking out.

The ANAO found that the government failed to act with ‘due diligence,’ because the Department of Health failed to undertake any real investigation into the facility before approving the grant, and failed to wait for the Australian Solicitor-General’s advice. When it eventually received the advice, which identified the Esther Foundation grant as ‘high risk,’ it disregarded the advice.

The Esther Foundation grant was one of many given under the Community Health and Hospitals Program, which was allocated $2 billion in funds. Although some of the grants were given under national partnership agreements, which involved both Commonwealth and State governments, many of the grants, including the one given to the Esther Foundation, were given by the Commonwealth government on its own.

In addition to the significant ethical issues and violations of ethical guidelines raised by the ANAO, it also concluded that there was no legal authority behind the Esther Foundation grant, among others.

The basis for this conclusion is two High Court rulings involving Commonwealth grants under the National School Chaplaincy Program to Scripture Union Queensland, which provided funding for chaplaincy programs.

Darling Heights State High School in Toowoomba had been using funds under this program to employ a Scripture Union chaplain at its school for an extra day. Ron Williams, a parent of students attending this state school, challenged the program.

In Williams (No 1) (2012), the High Court found that there was no general power to ‘contract and spend’ held by the Commonwealth government.

The Commonwealth government also relied on Section 51(xxiiiA) of the Australian Constitution, which allows Parliament to provide “benefits to students,” as the basis for the government’s National School Chaplaincy Program. However, the majority of the High Court said that it was not enough for there to be a legislative power; for the executive branch of the government to spend money in this way, it had to be authorised by Parliament’s legislation, and that legislation had to be grounded in the Constitution.

Because legislation passed by Parliament did not lawfully authorise the National School Chaplaincy Program, the gap between the executive’s ‘contracting and spending’ and the Constitution had not been bridged, so the program was unlawful.

After Parliament passed legislation to authorise the executive branch to create the National School Chaplaincy Program, Williams returned to court, arguing in Williams (No 2) that the power to contract and spend granted by the legislation still had to be within the scope of Section 51(xxiiiA), and that as the program wasn’t a direct benefit to the students, it was unconstitutional. He also won this challenge.

Williams (No 1) and Williams (No 2) greatly limited the spending power of the executive government. It led to the creation of the Commonwealth Grants Rules and Guidelines 2017. Rule 3.6 states that for a spending program to be lawful, it must have legal authority, a reference to the Williams judgments.

Rule 3.6 was repeatedly referred to by the ANAO in their report. Referring to the Esther Foundation, the report said that the “[Department of] Health executed the grant on 25 June 2019 without confirming legal authority for the grant.”

In response to the ANAO’s findings, the Department of Health has agreed to undertake an ‘internal grants assurance program’ each quarter of the financial year to ensure that all grants comply with the Commonwealth Grants Rules and Guidelines 2017, including Rule 3.6.

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Sources:

Commonwealth of Australia Constitution Act 1900 (Imp) 63 & 64 Vict, c 12.

Williams v Commonwealth (No 1) (2012) 248 CLR 156; [2012] HCA 23 (‘Williams (No 1)’).

Williams v Commonwealth (No 2) (2014) 252 CLR 416; [2014] HCA 23 (‘Williams (No 2)’).