Actually, the water would go away from the tent, because the ground is not level (it is lower towards the lower right corner of the photo). That is why the tarp is not folded and completely stuffed underneath the flysheet.
In any case, we agree that the tarp should be set up in such a way that no water would be allowed between it and the inner tent. The actual size of the tarp is not important, so long as the extra parts are on the side of the tent where terrain profile would take the rain away from the tent.