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Up to $A1.4m in government subsidies under the contentious Australian Broadband Guarantee Program were misdirected into the wrong hands, according to a report from the Australian National Audit Office (ANAO).

The ABG has been running since 2007 by the Department of Broadband, Communications and the Digital Economy, ostensibly to provide all Australian residential and small business premises with access to metro-comparable broadband services.

At the start of the program over 925,000 premises were eligible to receive ABG broadband services, and according to the report claims totalling around $A258m have been paid from April 2007 to 30 June 2010.

The payments were distributed to 34 providers for connecting more than 100,000 ABG customers from the start of the program. Almost 95 per cent of the subsidies paid under the program were for satellite broadband connections.

The ANAO report revealed a number of “inconsistencies or anomalies in the program metrics reported in internal management reports – an issue compounded by the practice of not keeping records of how the data reported was derived”.

It adds: “Similarly, by not keeping copies of the outputs of the demand forecasting model, the department has impaired its ability to effectively review and adapt the model.”

Of deeper concern is the report’s revelation that customers who should have had access to a viable commercial service “had been incorrectly classified as being eligible for a satellite service”.

The report claims that this happened over a six-month period, August 2008 to February 2009, when the department had “inadvertently omitted” 211 ADSL‐enabled exchanges from the Broadband Service Locater (BSL).

As a result customers in these areas who registered during this period were directed by the BSL to a subsidised service, rather than to available commercial services.

The department claims that 351 customers received a subsidised connection at a total cost of more than $875,000 because of the error.

Additionally, 245 customers held unlodged declaration forms on 30 April 2010 referring them to a subsidised service, representing potential claims totalling over $540,000.

According to the report the department amended the BSL registration status of the 245 customers that had not lodged declaration forms. While these customers were required to re-register if they wanted to claim a service, it is not clear how many did.

It took the department over 18 months, to June 2010, to contact the 351 customers that had received subsidised connections in error.

While the customers were informed that there was a wider range of commercial broadband services, including ADSL, available, the department decided not to try and recover the $870,500 already paid to providers.

While the audit report found that the ABG helped to reduce the number of under-serviced premises, the process was let down by insufficient reporting and technical testing. The number of underserved premises in Australia has fallen from over 925,000 at the start of the program to 160,000 in July 2010.

Most of this, the ANAO decided, is because providers – mainly Telstra – had continued rolling commercial services into previously-underserved areas. “Some 70% of the premises that received an ABG connection between 2 April 2007 and 30 June 2010 were in areas where a commercial broadband service had become available by 1 July 2010.”

It added that the usefulness of some of the measures introduced to improve the process “was reduced by a number of factors, such as: the delayed implementation of a demand forecasting model; the timeliness of management reports; and until recently, the currency and quality of the program’s risk register”.

And finally, the ANAO slapped the wrist of Conroy’s office, stating: “The department has not reported against the program’s key performance indicators and performance targets outlined in its Portfolio Budget Statements, whether program objectives have been achieved and what outcomes can be attributed to the program’s intervention.” ®

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