An audit into DevelopmentWA, sparked in part by the conviction of a former public servant who stole millions of taxpayer dollars, has found significant vulnerabilities to fraud at the government-owned entity.

DevelopmentWA is one of Western Australia’s biggest land and property developers, but unlike commercial developers, it is owned by the state government — meaning any profits or losses belong to taxpayers.

Auditor-general Caroline Spencer said the intention of the audit, which looked at transactions between 2017 and 2022, was to determine whether there were irregularities in public land sale information that could indicate fraud, corruption or misconduct.

Caroline Spencer says DevelopmentWA could not show value for money was achieved in all of its public land sales. (ABC News: Cason Ho)

“We have the dubious honour here in WA of the largest known public sector fraud with Paul Whyte,” she told ABC Radio Perth’s Drive program.

“He was the head of the housing authority within the Department of Communities, and so we saw through the Corruption and Crime Commission’s hearings that land was identified as a way that you could settle gambling debts if someone was given the heads up — you know, ‘buy this land because the government will be buying it in the future’.

Paul Whyte was at the centre of one of WA’s biggest corruption scandals. (ABC News: Hugh Sando)

“And so we saw there a case where a seller got $260,000 profit just by, if you like, buying it in advance of a government purchase.

“We wanted to see if there was any unreasonable growth in value, or properties selling too low, over a five-year period [at DevelopmentWA].

“Absolutely there could have been fraud within this period.“

Property valued at $800k sold for $385k

Ms Spencer said her office was able to identify a number of serious issues that meant DevelopmentWA was unable to demonstrate value for money had been achieved in all of the public land sales.

“We found that one property sold for more than 50 per cent lower than its most recent valuation, with no formal rationale documented on the files, so the most recent valuation was $800,000 and then it was sold for $385,000,” she said.

DevelopmentWA, one of the state’s biggest land and property developers, is owned by the WA government. (ABC Pilbara: Susan Standen)

“We found 50 per cent of 1,100 properties under a regional stimulus program, during the audit period, didn’t demonstrate compliance with approved pricing methods.

“We’ve got a case study of a piece of land that’s four times larger than the lot next door drop to the same price with no justification why.”

Much of the detail in the report highlights issues with appropriate documentation and the following of proper processes, which Ms Spencer said led her to the conclusion that fraud could have been taking place.

The audit details serious risks at DevelopmentWA. (ABC News: Kenith Png)

“If you look at it like Swiss cheese, that you get too many holes and gaps in process and people not doing their job reviewing what’s being done by the staff around them and you line up those holes, then you can get things getting through,” she said.

“So absolutely there could have been fraud within this period.”

Commercial interests seek influence

Ms Spencer stressed the importance of DevelopmentWA, and those who work for it, understanding why following appropriate processes was so important.

“What you have to understand in this environment is there are commercial interests here … third parties that DevelopmentWA interacts with, they are going to want to sell property for the highest value or buy property from government for the lowest value,” she said.

“And so every decision that is made by this agency to sell property needs to be properly documented, it needs to be on an approved basis.”

The probe covers a five-year period from 2017-2022. (ABC News: Kenith Png)

Another area of concern for the auditor-general was the lax way in which conflicts of interest, gifts and benefits had been handled at the government agency.

“Being aware that people are going to seek to influence you and maintaining impartiality so you can have fair dealing with all developers, with all residential or industrial buyers of state-owned land is really important,” she said.

“We had 891 invitations where the information was incomplete to understand what was the benefit to DevelopmentWA, what was the actual management of that potential conflict of interest by the entity for those staff members.”

Signs of shift in culture

In both her audit and in talking on ABC Radio Perth, Ms Spencer highlighted that a change in leadership at the board level had led to a better culture within DevelopmentWA in recent times, but stressed those changes needed to continue.

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A number of recommendations were made in the audit, and DevelopmentWA responded by saying while it “believes it has solid foundations of well-defined policies and procedures, it acknowledges best-practice requires constant evolution and improvement”.

“DevelopmentWA’s Board and Executive will build on these audit findings and continue to strive for the highest standards in governance and decision-making robustness,” it finished.

Ms Spencer tabled the Fraud Risks in Land Transactions by Development WA report in parliament on Wednesday and said her office would continue to have oversight.

“This is the biggest audit that my office has done on this organisation. It doesn’t normally get this level of scrutiny,” she said.

“But … we’re going to continue to monitor the governance and the transactions and the transfers of state land to ensure that the public interest is served.”

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