ANAO audits of offshore processing contracts in Nauru and Manus Island

What the audit found

The first audit, Report No. 16 2016-17, was tabled in September 2016 ². It examined how the Department of Immigration and Border Protection bought garrison support and welfare services. AusTender values at the end of March 2016 totalled $3,045 million, made up of two Transfield Services contracts worth $351 million and $2,190 million, a G4S contract worth $245 million, Save the Children contracts worth $160 million combined and a Salvation Army contract worth $99 million ¹. The ANAO concluded that the department's management "has fallen well short of effective procurement practice". It found approaches that reduced competitive pressure and raised service prices without Government authority, an open tender cancelled on 29 July 2016 with no outcome, and incomplete records ¹.

The second audit, Report No. 32 2016-17, carries a letter of transmittal dated 16 January 2017 ³. It covered contracts with a combined AusTender value of $3,386 million at 6 December 2016, of which $2,449 million had been paid by 31 October 2016 ². Of $2.3 billion in payments made between September 2012 and April 2016, about $80 million had the authorisation of an appropriate delegate, about $1.1 billion was approved by officers without the required authority, and for about $1.1 billion there was no record of who authorised it ². Contract variations worth more than $1 billion had no documented value for money assessment, and the department had no approved contract management plan until 13 October 2016 ². The ANAO concluded that contract management "has fallen well short of effective contract management practice" ².

The third audit, Report No. 37 2019-20, dated 28 May 2020, looked at the Department of Home Affairs contracts that followed. It listed Canstruct International at $1,122.0 million for Nauru, Paladin at $532.0 million, NKW Holdings at $136.0 million and JDA Wokman at $77.0 million, a total of $1,867.0 million ⁶. It found value for money demonstrated for Nauru but not for the Papua New Guinea procurements, where most cost benchmarks were not appropriate ⁶. The department did not document why it asked Paladin, JDA and NKW for quotes from a field of 11 possible providers, did not apply its probity framework consistently, and paid NKW above its approved limit ⁷.

The official response

The department agreed to both recommendations in Report No. 16 2016-17. In its response it said its decision-making "has not been adequately documented at each stage of the procurement process" and that it would make changes through a wider reform program monitored by its independently chaired Audit Committee ¹.

The department agreed to all three recommendations in Report No. 32 2016-17 but disputed several findings, including those on unauthorised payments, contract variations and mould remediation. It said most of the payments in question were fixed monthly fees tied to resident numbers ². In a company statement printed in the report, Broadspectrum said its compliance with its contract had been "exemplary" and said heavily redacted material limited its ability to respond. The Salvation Army declined to comment on invoicing, citing Federal Court proceedings with the Commonwealth. Wilson Security said it had given the audit all relevant stored video data ².

Home Affairs agreed to both recommendations in Report No. 37 2019-20. It said offshore procurement is complex and shaped by host government timing and sovereignty, and it argued that its Papua New Guinea negotiations were appropriate given the changed operating model and short timeframe ⁷.

Parliament

The Joint Committee of Public Accounts and Audit published Report 465, Commonwealth Procurement, in September 2017. It has a chapter on garrison support and welfare services at the offshore processing centres, with an examination of Report No. 32 2016-17 and committee conclusions and recommendations ⁴. The ANAO later reported that the department had substantially implemented the recommendations of Report 465 ⁶.

Senator Stirling Griff wrote to Auditor-General Grant Hehir asking for detail on how the later contracts were negotiated and awarded and whether due diligence on value for money was enough. The ANAO received the letter on 11 April 2019. Hehir replied on 18 April 2019 that the audit's high-level criteria went to the matters raised and that a conclusion would be given in the report tabled in Parliament ⁵.

Follow-up audits and recommendations

Report No. 37 2019-20 served as the follow-up. It found that the department had substantially implemented the recommendations of Report No. 16 2016-17 and of Report 465 ⁶. It found contractors had no reporting obligations for an average of more than eight months when they worked under Letters of Intent ⁷.

The ANAO made two new recommendations: written policy guidance on how providers are picked for requests for quotation in limited tenders, and interim performance reports where Letters of Intent are issued ahead of a final contract. The department agreed to both ⁷. As reported by The Mandarin on 29 May 2020, the audit judged the procurement largely appropriate and mostly compliant with the Commonwealth Procurement Rules ⁸. No public record found as of 19 October 2026 of a later ANAO audit reporting on these two recommendations.

Courts, tribunals and investigations

Report No. 32 2016-17 records that The Salvation Army had Federal Court proceedings with the Commonwealth at the time of the audit ². No public record found as of 19 October 2026 of the outcome of those proceedings in the sources reviewed for this page.

The National Anti-Corruption Commission published a case study on Operation Bannister, a joint inquiry by the Australian Commission for Law Enforcement Integrity (ACLEI) and Home Affairs. It looked at a Home Affairs employee who was a close relative of Paladin founding director Craig Thrupp. Home Affairs told ACLEI of media reports in September 2019, ACLEI opened its own inquiry in October 2019 and the joint operation began in March 2020. The commission finalised it after 1 July 2023 ⁹.

The commission found the employee "did not abuse her office" and that "no conflict of interest existed". It found she may not have reported changes in her circumstances to the security vetting agency, and that those omissions were not intentional, dishonest or corrupt ⁹. The case study says she received about $215,000 from Paladin in 2017 ⁹. The Mandarin, in a report by Dan Holmes dated 9 October 2024, put the figure at more than $194,000 ¹⁰. The two figures have not been reconciled in the sources reviewed.

Where it stands now

The 2016-17 audit findings led to recommendations the ANAO found substantially implemented by 2020 ⁶. The 2020 audit left two newer recommendations, both agreed by Home Affairs ⁷. The Paladin-linked integrity inquiry has closed with no finding of abuse of office ⁹. No public record found as of 19 October 2026 of court rulings or recoveries tied to the payment control findings of Report No. 32 2016-17.

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