You might remember the election campaign in 2019 with Liberal and National Party members and candidates announcing grants for sporting clubs. The Australian National Audit Office (ANAO) at the time was prompted to have a look into the Community Sport Infrastructure program.

The program was set up in 2018 to help sporting clubs with player growth. Most of the funding announcements, totalling $100 million, were made in the lead up to the 2019 election. 2056 sporting clubs spent the time writing applications and ultimately only 684 were successful in getting a grant.

Last week the ANAO report was handed down. Since then the media have headlined debate over Ministerial power to hand out grants and whether the power to make grants to sporting clubs is a Commonwealth or State power.

Our Constitution

Our Constitution is a federal Constitution. This means it distributes power amongst the Commonwealth and the States. This protects individual citizens by ensuring that no single level of government has complete power to do what it wants.  Each is limited in some way and sometimes cooperation between them is needed.

The basic system is that the Commonwealth Parliament has been given limited legislative powers on subjects listed in the Constitution. The States are left with full power to legislate on anything at all, including most of the subjects that the Commonwealth could legislate about. States are only prevented from legislating on a subject if the Commonwealth has been given exclusive legislative power or the Constitution expressly takes away the power, such as the power to tax goods.

This means that there are lots of areas in which both the States and the Commonwealth can legislate.  So there needs to be a rule about how to deal with conflicts between those laws.  This rule is in section 109 of the Constitution.  If both a Commonwealth and a State law are valid, and they are inconsistent, then the Commonwealth law applies and the State law ceases to operate, to the extent of the inconsistency. 

What can the Commonwealth legislate about?

So what things can the Commonwealth legislate about?  These are largely listed in sections 51 and 52 of the Constitution, but there are also some Commonwealth powers in other sections, such as sections 90, 111, 114, 115, 122 and 125. The Commonwealth’s powers include the sorts of things you would expect for a national government, such as defence, immigration, taxation, currency and banking.

But the people who wrote the Constitution knew they could not imagine all the things that would need to be dealt with at the federal level. Some of the subjects they listed were intended to expand over time. One was ‘postal, telegraphic, telephonic and other like services’. This was meant to pick up future communications technology, like television and the internet, which was beyond anything known at the time. 

Another was the external affairs power in s 51(xxix) of the Constitution, which allowed the Commonwealth to legislate to implement international treaties. The subject-matters addressed by treaties have expanded enormously over the last century, extending the types of things the Commonwealth can now legislate about. For example, the Hawke Government used its power to implement a World Heritage treaty to prevent the Franklin River from being dammed in 1980s. (You can see information about this case at the Australian Constitution Centre Exhibition and website).

Can the Commonwealth spend money on anything it likes?

Section 81 of the Constitution says that all money received by the Commonwealth has to go into the one Consolidated Revenue Fund, and that money can only be taken out of it ‘for the purposes of the Commonwealth’. This can only be done by enacting legislation, known as an ‘Appropriation Act’.

For many years, the Commonwealth Government claimed that it could decide what was a ‘purpose of the Commonwealth’ and could therefore spend money on anything it wished, regardless of whether it fell within the subjects about which it could legislate. But the High Court disagreed in two cases in 2012 and 2014, called Williams v Commonwealth of Australia. (You can see these cases at the Australian Constitution Centre Exhibition and website).

Ron Williams was concerned about Commonwealth funding of chaplains in the State school his children attended in Queensland.  He challenged it in 2012 in the High Court. The scheme had been funded by the Commonwealth Government without any parliamentary authorisation.  The Commonwealth relied upon its executive power to do so.  The High Court held that it was not enough to appropriate the money out of the Consolidated Revenue Fund. Parliamentary authorisation was also needed to spend the money, at least when it was being spent on things outside the ordinary administration of government departments.

As the Commonwealth had been spending money on lots of things without parliamentary authorisation, it then enacted one law to authorise them all. This included authorising the chaplaincy scheme. Ron Williams was still upset about the chaplains being in the State schools, so he took another challenge to the High Court in 2014.  This time he argued that the part of the legislation authorising the chaplaincy scheme did not fall under one of the subjects the Commonwealth has power to legislate about. The High Court again agreed with him. The Commonwealth had no legislative power to authorise chaplains in schools.

The Commonwealth then decided to make grants to the States under section 96 of the Constitution, so that they could fund a chaplaincy scheme. This is a valid way of dealing with such issues. The framers of the Constitution knew they had set up a system where most of the tax went to the Commonwealth and most of the spending was the responsibility of the States. They intended it to work by the Commonwealth passing money to the States, so that the States could fund things like schools. As this was a constitutionally valid action, Ron Williams did not challenge for a third time.

Nationhood Power

In addition to the subjects listed in the Constitution, the High Court has also held that there are some things that are peculiarly national in nature that cannot otherwise be carried on for the benefit of the nation. One such thing was celebrating the bicentenary. Another is legislating about the national flag or the national anthem. Even though they do not fall within an express subject of Commonwealth legislative power, the High Court has held that the combination of the executive power in section 61 and the power to legislate about matters incidental to it, in section 51(xxxix), is enough to support Commonwealth legislation on such matters.  It is known for short as the ‘nationhood power’.

The nationhood power was relied upon to support grants to taxpayers that were intended to support the economy during the global financial crisis. It was argued that this was a national emergency that only the Commonwealth could deal with. So the High Court upheld the law in the case of Pape v Commissioner of Taxation.

In contrast, when it came to the Williams cases, the High Court said that the funding of chaplains in schools did not amount to a national emergency. It was not something which only the Commonwealth could do. This was clear because the States had their own chaplaincy schemes in the schools.

Grants to sporting clubs

So on what basis can the Commonwealth legislate to fund sports grants to community sporting organisations in the States? There is no express power in relation to sport that is allocated to the Commonwealth in the Constitution. There is no national emergency about repairing local ovals or fixing toilet blocks. It is not something that only the Commonwealth can do, because the States also have funding programs for sporting clubs.

The Commonwealth may well have power to establish a national sports institution in the Australian Capital Territory, as it has power to legislate with respect to territories in s 122 of the Constitution. But this is unlikely to extend to giving sports grants to local communities in the States. The Commonwealth can also make laws about trading corporations, but it is likely that most of the sporting clubs that received the grants are not trading corporations.

When the Commonwealth first started funding ‘national fitness’, it did so from 1939 as part of defence preparedness under the defence power. That is unlikely to apply today.

What about the external affairs power? Is there an international treaty to which Australia is a party that could be implemented by a law that authorised grants to local sporting bodies? Take a look for yourself at the Australian Treaties Database, we couldn’t find anything.

The Commonwealth could always grant the money to the States, under section 96 of the Constitution, on the condition that it be used for sports grants. But then it would not get the same publicity benefits as handing over the cheques, which is probably why it did not do this to begin with.

But it’s not just the Constitution

Unfortunately the constitutional problems for the sports grants are not the only issue. The Australian National Audit Office (ANAO) report stated:

The award of grant funding was not informed by an appropriate assessment process and sound advice.

Sports Australia ran an assessment process in 2018 and 2019 for the projects which was largely in accordance with the program guidelines. The ANAO stated:

In parallel, the Minister’s Office had commenced its own assessment process to identify which applications should be awarded funding. The Minister’s Office drew upon considerations other than those identified in the program guidelines, such as the location of projects, and also applied considerations that were inconsistent with the published guidelines. It was this assessment process that predominantly informed the Minister’s funding decisions, rather than Sport Australia’s process. This resulted in the assessment advice to the Minister being inconsistent with the approved program guidelines.

The ANAO also found:

Program guidelines were developed and published. While the guidelines identified the Minister in an approval role, there are no records that evidence that the Department of Health (Health) or Sport Australia advised the Minister on the legal basis on which the Minister could undertake an approval role. It is not evident to the ANAO what the legal authority was.

And

there was no legal authority evident to the ANAO under which the Minister was able to be the approver of…program grants to be paid from the money of Sport Australia.

There are questions as to whether it was lawful for the Minister to be making decisions about which sporting clubs would receive grants. In the end 417 applications that were not approved by the Sports Australia assessment program were chosen by the Minister to be given funding (60% of the total number of grants handed out).

What happens next?

The judicial power of the Commonwealth is vested in the High Court (chapter III). It is the role of the High Court to interpret the Constitution and make decisions such as whether Commonwealth officers, including Ministers, are acting within their powers.

But not just anyone can bring a challenge about a public law issue. A person would need to have ‘standing’ to challenge. This means that they must have a special interest, above that of an ordinary member of the community, to bring the legal action.

The clubs that missed out on funding would most likely have standing to challenge the Minister’s decisions, but it has been reported that many are reluctant to rock the boat in case they miss out on any further funding. They are also unlikely to challenge the constitutional validity of the scheme, because they will want the Commonwealth to be able to make future grants.

There are law firms that have stated they are willing to support a class action by clubs against the Minister. We have to see if any clubs sign up. It is likely that they would argue that the Minister was acting for an improper purpose and seek to have the decisions re-made.

What happens politically is a different thing. Parliament returns in 12 days, so we will have to wait and see what happens.