Home Affairs underfunded, overstretched and ‘set up to fail’, says leaked report

Home Affairs’ cyber systems are vulnerable to hacking and frontline officers are not properly trained, according to a damning internal report that says chronic underfunding has undermined the department’s ability to keep Australia safe.

The leaked confidential review into the mega department – responsible for national security, cyber defence and foreign interference among other areas – revealed the department lost 600 employees in a year and more than $2 billion in cost-cutting has stopped it from hiring enough staff.

Malcolm Turnbull announcing the new department in July 2017.Credit:Andrew Meares

The probe into the agency’s budget, conducted by consulting and legal firm Proximity between December 2021 and February 2022, interviewed dozens of top brass including the agency’s secretary Mike Pezullo, who has run the department since its inception.

“From the beginning the department was set up to fail, in terms of its expectations and budget envelope,” an anonymous department official told the investigation.

Home Affairs was created by then-prime minister Malcolm Turnbull in 2017. Peter Dutton was the first minister in charge of the department, which brought together agencies including ASIO and the Australian Border Force. Moderate Liberals including former foreign minister Julie Bishop opposed its creation.

Dutton was previously home affairs minister.Credit:Rhett Wyman

“The financial underpinnings to support the resolution of critical policy and operational issues have not been available. Functions and priorities were never right sized or funded appropriately from the outset,” the report found.

“While all agencies are expected to be efficient and balance their budgets according to government direction, the baseline budget situation for the department has become misaligned with its core and far-reaching activities related to keeping Australia safe.”

“A large gap between funding and operation requirements is forcing the department to make tradeoffs between risk tolerance, service delivery quality, and cost.”

Budget documents show Home Affairs’ budget is slated to drop by $500 million over the next year, from $7.8 billion to about $7.3 billion.

Labor MP Julian Hill.Credit:Alex Ellinghausen

While funding has increased in recent years, the report noted the agency’s responsibilities have tripled. It previously managed five key areas including border protection, citizenship and customs. By 2022, it had control of 13 functions including national security policy and operations, cyber policy, critical infrastructure and ethnic affairs/social cohesion.

A Home Affairs spokesman said the agency reviewed base funding annually and sought one-off top-ups “where funding is critical to meet immediate priorities”.

“The Department has a strong record in budget management and has historically reported balanced results despite its complex budget arrangements and has achieved an average financial result within 0.7 per cent of the allocated budget over the eight years to 2021-22,” the spokesman said.

Dutton’s office declined to comment.

The chair of the parliament’s public accounts and audit committee, Julian Hill, said Home Affairs’ top executives had admitted the agency was set up to fail and was compromising national security.

Referring to the poor relationship identified in the review between Home Affairs and the agency responsible for the budget, Hill said: “S***show would be a technical term for a government that gets to the point it commissions an expensive consultant report to referee a dysfunctional fight between Home Affairs and the Finance Department because ministers failed for years to simply do their jobs.”

The review did not identify many examples of the ways in which underfunding harmed its operations. The document says the department struggles to train frontline officers appropriately and has not maintained up-to-date IT systems, including its 30-year-old visa system requiring 17 different screens to process a single visa.

The report also found the department wasted $180 million on a visa system overhaul proposed by the Morrison government.

It is not known if the visa system has been upgraded since the report was written, but Home Affairs Minister Claire O’Neil told the AFR Workforce Summit at the end of February that the visa backlog had been reduced from 1 million to 500,000 over the eight months she had overseen the department.

In the year before the review was conducted 600 staff left the agency, resulting in a “hollowing out of talent”. It had 13,371 staff in 2021, well below the 14,000 staff the agency can purportedly hire under its “average staffing level” cap.

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