The former Abbott government paid a $1.5 billion lump sum in advance to the Victorian Liberal government so it could inflate the 2013-14 federal budget deficit, according to an audit office investigation.

A damning Australian National Audit Office report into the approval and administration of Commonwealth funding for the doomed East West Link Project also alleged the Abbott government ignored advice telling it not to hand the funding over to the state of Victoria.

The report also claimed the Abbott government made the payments in advance so it would result in “budget improvements” in later years.

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“The decision to provide $1.5 billion in advance provided budget presentation benefits to the Government by bringing forward the payments which resulted in a larger budget deficit for 2013–14,” the report said.

“The Department of Infrastructure and Regional Development (DIRD) provided clear advice to Government that the $1.5 billion was being paid in advance of project needs, and proposed an alternative payment approach that aligned payments with project progress.”

The report’s findings have called into question the conduct of the then-Prime Minister Tony Abbott and Treasurer Joe Hockey.

During the 2013 federal election, Mr Abbott promised to provide Victoria with the money, which amounted to $1.5 billion funding for stage one of the project.

This was then approved in the 2014 budget process, along with a further $1.5 billion funding for stage two of the East West Link.

Advance payments of $500m (for stage one) and $1bn (for stage two) were then made on 30 June 2014, the final day of the 2013-14 financial year.

“Neither stage one, nor stage two, of the East West Link project required Commonwealth funding in 2013–14,” the report explained.

“Advance payments on or before 30 June 2014 would increase the deficit for 2013–14 but improve the reported position for later years.”

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The report was charged with uncovering whether the Abbott government had received value for money in providing the then-Dennis Napthine Liberal government in Victoria with funding.

Mr Andrews and Mr Napthine were derided in a previous report for their roles in the road funding saga. Photo: Getty

It found the Abbott government ignored advice from various departments of its own government.

“The Department of the Prime Minister and Cabinet provided the then-Prime Minister with advice on the merits of making advance payments in relation to the East West Link project, and the implications of such an approach more broadly in relation to infrastructure project decision-making.

“[It ignored] well considered departmental advice, and that Infrastructure Australia’s assessment processes had been bypassed.”

The Victorian government received the $1 billion in stage two funding for the 18km road without presenting it, or having it assessed, by Infrastructure Australia, the report said.

The ANAO recommended the federal Treasury try to recover the advance payments from Victoria, however PM Malcolm Turnbull had said Victoria could use it for other infrastructure projects.

Victoria’s Napthine Coalition government, which lost power in November 2014, had not included the second, western stage in its 2013 submission to Infrastructure Australia. It instead approached Mr Abbott directly in early 2014, the report stated. 

Mr Abbott backed the project even after it was scrapped. Photo: AAP

Therefore it secured funding “without this proposal having been presented to, or assessed by, Infrastructure Australia”.

The Daniel Andrews Labor government in Victoria scrapped the project when it won power. 

The East West Link was to connect the Eastern Freeway with the Western Ring Road in Melbourne, aiming to cut travel time for cars across the metropolitan area.

The deficit for the 2014 Federal Budget was forecasted at $29.8 billion by the Treasury.

A report published last week by the Victorian audit office showed both the state Labor and Coalition governments had mishandled the East West Link Project.

It found the decision by the Napthine government to sign contracts for the toll road before the state election was driven by politics, but also blamed the Andrews government for accepting limited advice when it tore up the contracts.

– with ABC