Australian schools missed out on $10 million in federal government funding earmarked for school sporting grants in the past two years because the central distribution agency, Sport Australia, used it for administration, technology, marketing and other associated programs.

The agency has told The Saturday Paper that both former Sport minister Bridget McKenzie and the Sport Australia board approved its decision to withhold 25 per cent of the $41.7 million allocated to the Sporting Schools program in 2018 and that it was “authorised by government under the usual budget processes”.

The funding included an amount for establishing the program.

But when it was allocated a similar overall amount again in last year’s budget, McKenzie suddenly insisted that Sport Australia distribute all $41 million in grants, as originally described.

When the portfolio was transferred to Richard Colbeck after the election, he reinforced the decision.

Sport Australia is now scrambling to restore the $10 million it spent on other things, leaving the agency with a deficit and forcing it to shrink its operations and sack staff.

The Saturday Paper has seen a document that says Sport Australia’s financial position is a direct result of the new ministerial instruction and that it must significantly rein in operations over the next two years.

In the document, the agency describes itself as a “business”.

The Sporting Schools program has been running since 2015. Initially it provided free sport-based activities to primary schools but later expanded into secondary education.

Sports Minister Richard Colbeck told The Saturday Paper: “The government in its 2019-20 budget allocated $41 million for Sporting Schools – a tangible program aimed at delivering outcomes for young people across Australia. The government insisted the funds be used as intended.”

The agency said it has funded 7200 schools over the life of the program. Figures on the Sport Australia website show schools receive between $1000 and $4000 each.

“Sport Australia has managed the Sporting Schools program since its inception in 2015 and has consistently reached the program targets as agreed by government,” the agency said in response to questions from The Saturday Paper.

But it also confirmed the sudden requirement to restore the $10 million from this year. “In 2020, all funding for Sporting Schools is being delivered as direct grants to schools,” its statement said.

These details are not spelled out in the agency’s annual report. Sport Australia said the report complied with the national accountancy standard.

“This does not require figures to be disclosed at a program level,” it said.

Sport Australia said it was wrong to suggest the $10 million portion of the Sporting Schools funding not spent on grants had been redirected to unrelated programs. It had been spent on “program delivery costs”, which included “complementary programs” for Sporting Schools.

Part of it had contributed to “a national awareness campaign to raise the importance of physical activity and influence behavioural change in children and youth”.

Funding had been allocated to developing a national physical literacy standard and framework to be embedded in school curricula. It had also helped train and support community coaches to provide coaching, to set up school-based IT systems to access the program hub and to make participation grants to national sporting organisations.

But Sport Australia received a separate allocation in the 2018 federal budget of $28.9 million over four years for similar services – to help national sporting organisations increase participation – above what they already receive to fund them directly. It also received another $19.8 million to maintain its capacity to fund “sporting organisations and sportspeople”.

Sport Australia told The Saturday Paper that money had been spent on direct administration costs associated with operating the Sporting Schools program, including staff.

“The workforce required to establish the national program was 79 but is now delivered by a staff of 14,” it said.

The national awareness campaign on the importance of physical activity had been designed to “influence behavioural change in children and youth”.

But although Sport Australia insists it is funding more schools, its own performance markers show little increase in children’s participation in sport. Its target for increasing participation at school is not being reached.

After only 30 per cent of schools met the target for increasing school sport time by at least 45 minutes a week – instead of 55 per cent as hoped – the new target for participation in sport at school has been set at 60 per cent of schools reporting some kind of increase in dedicated sport time this financial year. It rises to 62.5 per cent next financial year.

There is no longer a target for how large that increase should be.

Another target for outside-school participation was exceeded but, instead of aiming higher or changing its approach, the agency has downgraded it for this year and next.

“They were set as aspirational targets and we’re managing them as we go along,” a spokesman said. He said the minister had approved the corporate plan in which the targets are published.

Sport Australia’s annual report shows it engaged in a rebranding exercise in 2018-19, changing its name from the one in its governing legislation – the Australian Sports Commission – to the more shorthand Sport Australia. It does not say how much that cost.

Last week, its chairman, John Wylie, told a senate inquiry into the infrastructure grants program that his agency laments not having more money for grants.

“We would love to see more funding going into community sport,” Wylie told the senate inquiry on February 27. “It is the backbone of sport in this country and getting kids and families active and all of that. So we all would have loved there to have been more funding to go around.”

The Saturday Paper has been told that the agency’s integrity unit – set up to address safety and inclusiveness, including the National Redress Scheme for victims of child sexual abuse in sporting institutions – has been disbanded.

Sport Australia argues this is part of a transition to the planned new national body Sport Integrity Australia, which is due to operate from July but has not yet been legislated.

At least $6 million in funding provided for a Safe Sports program, which included a national injury database, has now been redistributed to projects in both the Australian Institute of Sport and Sport Australia, including some that the recently retired chief executive, Kate Palmer, described internally as “big plays”.

Those projects include establishing a centre for sport and physical activity, creating a shared data and analytics platform to better link with sports fans and improve “commercial outcomes”, and encouraging sports to sign up to a privately run online fundraising lottery, Play for Purpose.

Play for Purpose allows fans to buy $10 raffle tickets to win big prizes, $5 of which goes to a nominated participating sports organisation. The most recent raffle was drawn this week.

Resourcing the “big plays” is listed fifth on an internal seven-point Sport Australia corporate services document produced under Palmer and seen by The Saturday Paper.

Its highest priority was “enabling a mobile workforce” – an apparent reference to allowing executives to live interstate and fly in. Consolidating corporate data to support operational decision-making was second, followed by making “core tools useable”. Implementing procurement guidelines and processes was the fourth priority.

After funding the “big plays”, training staff to deliver them was sixth and supporting “effective board decision-making” was seventh.

The revelation about Sport Australia’s reallocation of $10 million earmarked for schools comes during a week in which the agency faced separate questions about accountability, after its officials gave misleading evidence to a senate inquiry and failed to correct the record for several days, despite being required to do so at the earliest opportunity.

The officials were forced to formally amend their evidence, acknowledging they had not fully revealed correspondence with then minister McKenzie’s office over approvals for a final round of infrastructure grants after the election was called on April 11 last year.

The email correspondence occurred after the caretaker period began, in which government agencies are not supposed to take binding decisions.

Sport Australia’s chief operating officer, Luke McCann, initially told the inquiry that the agency had received an email from the minister’s office at 8.46am on April 11. He was not aware until Labor senator Katy Gallagher told him during the hearing that the caretaker period had begun at 8.30am, and did not mention further correspondence.

But when officials from the Australian National Audit Office appeared at a separate senate estimates committee hearing this week, they revealed the minister’s office had sent a second email to Sport Australia containing changes to a list of approved grants at 12.43pm.

Those officials said the minister’s office had sent it to the prime minister’s office at 12.35pm.

When Sport Australia appeared before estimates on Wednesday, McCann was forced to admit he had failed to mention the second email and acknowledged that despite discovering the error on Tuesday he had not yet made a formal correction.

In both the sports grants inquiry and through the estimates committee process, Labor and Greens senators have been pursuing the role of Prime Minister Scott Morrison’s office in overseeing the process of allocating the pre-election infrastructure grants.

Correspondence emerged last week showing 136 emails were exchanged between McKenzie’s office and Morrison’s office through the course of three grant rounds.

On Wednesday, the Sport Australia officials and Sports Minister Richard Colbeck revealed they had met the previous afternoon and discussed the evidence the officials would give to estimates the next day.

Colbeck revealed he had met later with two officials from Morrison’s office.

Labor has accused the prime minister of trying to cover up his role.

“One side of the house is taking this matter very seriously and has taken the actions that are necessary,” Morrison told parliament on Wednesday. “The other side of the house is just engaged in a desperate political smear campaign to prop up what is a very feeble leader of the Labor Party.”

Labor leader Anthony Albanese accused the government of not telling the truth.

“If this government was ever straight about anything and just said what was actually occurring with this sports rorts saga, then this wouldn’t be dragging on,” he told Sky News.

In the committee hearings, opposition senators have also criticised Sport Australia and queried whether it understands the accountability obligations of a government agency.

Among its many programs, Sport Australia is running a project to force sporting organisations to improve their governance, threatening to withhold funding unless they overhaul the way they operate.

There may now be a push to first get its own house in order.

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