Victoria's decision to abandon the 2026 Commonwealth Games was based on shoddy accounting and will cost taxpayers almost $600 million, an audit reveals.
In a scathing report released on Wednesday, Auditor-General Andrew Greaves found agencies failed to work together to give "frank, full and timely advice" to the government.
"The decisions to bid for, plan and then withdraw from the Games have cost Victoria over $589 million with no discernible benefit," the report said.
"This waste of taxpayer money on an event that will not happen is significant, especially considering the state's recent sustained operating deficits and rising debt levels."
The government agreed to pay $380 million in compensation to Games organisers and racked up additional bills of $192 million for employee and planning across state departments and committees and $17 million in other costs.
Nine months out from heading to an election, the Labor state government in April 2022 agreed to host the Games in regional Victoria at an estimated cost of $2.6 billion but pulled out in July 2023, saying the figure had blown out to $6.9 billion.
While the initial budget was unrealistically low, the updated figure was overblown and effectively double-counted a $1 billion contingency fund for industrial action and cost blowouts.
"The cost estimate for the Games that the government publicly released in August 2023 of $6.9 billion was overstated and not transparent," Mr Greaves wrote.
"Fairly presenting the contingency allowance and additional costs would have resulted in a gross estimated cost of around $5.9 billion."
The original business case for the 2026 Games, developed by the Department of Jobs, Skills, Industry and Regions, was inadequate for the government to make an informed decision on costs, Mr Greaves found.
Commonwealth Games Australia said the government had ignored its advice on cost overruns and how to mitigate them.
"The decision to cancel is a missed opportunity for the people of this once proud major event state," its chief executive Craig Phillips said in a statement.
Mr Greaves' report reveals the government, in principle, approved a revised gross target budget of $3.6 billion in April 2023.
The estimate was updated to $3.6 billion in May's state budget but not shown separately in the budget papers as it formed part of a general contingency allowance.
"It also was not referred to in evidence given to the Public Accounts and Estimates Committee in its May and June 2023 hearings into the budget," the auditor-general wrote.
Premier Jacinta Allan, the minister tasked with delivering the Games, told a budget estimates hearing on June 13 Victoria was making "tremendous progress" with the event and gave no indication of budgetary concerns.
Opposition Leader John Pesutto said the report showed Ms Allan had lied to state parliament and the Victorian people.
"The premier's credibility is in tatters today," he told reporters.
Ms Allan bristled when asked how she would respond to anyone who believed she and former premier Daniel Andrews lied or inflated the cost-blowout estimate to justify axing the Games.
"I'd say the auditor-general's report proves those claims to be wrong," she said.
She acknowledged the original business case's estimate of $2.6 billion was incorrect but was not backing away from the decision to can the Games.
"We made the right decision," she said.
"We stand by that decision."
The Department of Premier and Cabinet (DPC) and Department Of Treasury And Finance (DTF) rejected the auditor-general's recommendation to work with the public sector commission to review why advice to government did not always meet the required standards.
"(The departments) consider the advice provided to government was comprehensive, frank, timely and impartial, and was clear about the risks and financial impact of hosting the Games," DPC secretary Jeremi Moule and DTF secretary Chris Barrett wrote.
