Introduction

Streamlining Government Grants Administration Program

1.1 In the 2015–16 Budget, the Streamlining Government Grants Administration (SGGA) Program was introduced as part of the Digital Transformation Agenda—Stage One measure. The measure provided $106.8 million over four years to support implementation.⁶ The objective of the SGGA Program was to deliver simpler, more consistent and efficient grants administration across government. This approach would enable government to deliver grants more effectively at lower cost and risk.

1.2 To achieve this objective, four core deliverables were established (Table 1.1).

Table 1.1: SGGA Program core deliverables

Note a: Participating entities provided more than 90 per cent of the total value of Australian Government grant funding and comprised: Department of Agriculture; Attorney-General’s Department; Department of Defence (including Defence Materiel Organisation); Department of Education and Training; Department of Employment; Department of the Environment; Department of Health; Department of Industry and Science; Department of Infrastructure and Regional Development; Department of the Prime Minister and Cabinet; Department of Social Services; and Department of Veterans’ Affairs. The Department of Communications and the Arts was added in December 2015. Subsequent machinery of government changes and the inclusion of entities have led to modifications in the number of participating entities over time.

Note b: A market test involves considering alternative delivery models including approaching the market to determine if another organisation could provide a function more efficiently (having regard to cost, benefits and risks).

Source: Summary of April 2015 SGGA Program funding proposal, and SGGA Program implementation plan.

1.3 Industry and DSS were responsible for building and operating the Business Grants Hub (BGH) and Community Grants Hub (CGH), respectively.⁷ The hubs would implement standardised business processes, with oversight from the Department of Finance (Finance). Finance was responsible for SGGA Program governance. The interim Digital Transformation Office (DTO) was responsible for delivery of a data warehouse.⁸ The Digital Transformation Agency (DTA) was responsible for providing support to Finance and overseeing user experience deliverables.⁹

1.4 Effective implementation of this initiative was intended to lead to:

• improved policy outcomes by better targeting grants;
• an improved experience for grant applicants and recipients;
• a reduction in red tape;
• efficiencies for government entities administering grant programs; and
• improved transparency of, and capability to analyse, whole-of-government grants administration and payment data.

1.5 Total annual financial benefits were estimated to be around $400 million.

Program operation and funding

1.6 Funding allocated by government for the implementation of the program and related ICT systems initiatives included $106.8 million allocated over four years in the 2015–16 Budget for the SGGA Program and $35.2 million over two years in the 2017–18 Budget from the Public Service Modernisation Fund (see Appendix 3).¹⁰ In total, $157.8 million was allocated over six years from 2013–14. In April 2015 government agreed that hub operational costs would be recovered through a user pay cost recovery model based on a unit priced service catalogue.¹¹

1.7 The hubs operate as a shared service arrangement for grants administration.¹² Under an arrangement with a hub¹³, the client entity¹⁴ retains policy control for its grants programs. The accountable authority of the client entity must establish an appropriate internal control framework and manage risks and is responsible for grants administration compliance with the Public Governance, Performance and Accountability Act 2013 (PGPA Act) including the Commonwealth Grant Rules and Guidelines (CGRGs).¹⁵

1.8 The hub provides grants administration services to the client entity, the nature and extent of which are selected by the client entity from the service catalogue. The service catalogue was to offer end-to-end grants administration services of design, selection, establishment, management and evaluation (also referred to as the grants lifecycle).

1.9 Both Industry and DSS commenced building their hubs in 2015, and the hubs commenced operation from 1 July 2016. Each hub used a single separate grants management ICT system (see Appendix 4).

Participation in the SGGA Program

1.10 Australian Government Grants – Briefing, Reporting, Evaluating and Election Commitments (Resource Management Guide 412) encourages all non-corporate Commonwealth entities to leverage whole-of-government initiatives when developing grant policy proposals, and requires participating entities to consume grants administration services from either the BGH or CGH.

1.11 From October 2016 the government issued amended Budget Process Operational Rules (BPORs) and Estimates Memorandums¹⁶ that set out requirements for participating entities. All New Policy Proposals (NPPs) for grant programs commencing from and including Mid-Year Economic and Fiscal Outlook 2016–17 were to be implemented via the hubs.¹⁷ From November 2017 existing grant programs that did not have an exemption or deferment were required to transition to the hubs by 31 March 2019.¹⁸ The hubs were required to implement all in-scope grant programs by 30 June 2019.

1.12 GrantConnect¹⁹ was launched in February 2017, with mandatory reporting of grant opportunities from April 2017²⁰ and grants awarded from 31 December 2017.²¹ In 2018–19 and 2019–20, 28 entities reported grant opportunities and grants awarded on GrantConnect.

1.13 In November and December 2020, the ANAO surveyed these entities to determine the number that had entered into agreements with a grants administration service provider (Table 1.2). Grant administration service providers include BGH, CGH, National Health and Medical Research Council (NHMRC)²², Australian Research Council (ARC)²³ and SmartyGrants.²⁴

Table 1.2: Entities citing agreements with grants administration service providers, 2020–21

Note a: Industry, DSS and NHMRC provide grants administration services to grant programs for which their entity has policy responsibility. These entities do not enter into head agreements or schedules with policy areas.

Note b: DSS advised the ANAO in February 2022 that the National Disability Insurance Agency did not have an agreement with CGH in 2021–22.

Note c: ACMA advised the ANAO that it received an exemption in January 2018 from the moratorium that prohibited acquisition of grants management ICT systems. ACMA used the SmartyGrants ICT system to deliver grant programs in 2018–19 and 2019–20.

Note d: ARC advised the ANAO that it has been delivering the Per-and Poly-Fluoroalkyl Substances (PFAS) program as a special research initiative under an agreement with the Department of Defence since 2018.

Note e: ARC and NHMRC administer their own grants.

Note f: Wine Australia is a Corporate Commonwealth Entity (CCE). The CGRGs apply to CCEs where they undertake grants administration on behalf of the Commonwealth.

Source: ANAO survey.

1.14 Table 1.3 shows an increase in the number of grant programs and awards, and the value of grants payments, between 2018–19 and 2019–20, as reported to the ANAO by ARC, BGH, CGH and NHMRC. The service providers advised the ANAO that in 2019–20 they administered 768 grant programs and managed 36,279 grants awarded, and made grants payments of $8.4 billion.

Rationale for undertaking the audit

1.15 Between 1 July 2016 and 9 February 2021²⁵, the 15 entities participating²⁶ in the SGGA Program published on GrantConnect more than $44.9 billion in grant funding across 79,651 grants, representing around 85 per cent of total reported funding and awards.²⁷ The government has invested $157.8 million since 2013–14 to support the SGGA Program and related ICT initiatives.

1.16 The ANAO has not previously audited the effectiveness of the SGGA Program, BGH or CGH. Recent audits of grants programs have identified issues with the management of grants through the hubs. The audit will provide assurance to the Parliament about the extent to which the hubs have achieved SGGA Program objectives.

Audit approach

Audit objective, criteria and scope

1.17 The audit assessed whether the Streamlining Government Grants Administration (SGGA) Program improved the effective and efficient delivery of grants administration.

1.18 To form a conclusion against the audit objective, the audit adopted two high-level criteria:

• Was there robust design and governance of the SGGA Program to support achievement of intended outcomes?
• Have the hubs been built and operated to deliver SGGA Program objectives?

1.19 The audit focused on Finance’s, the interim DTO’s, and DTA’s role in establishing design and governance of the SGGA program, and Industry’s and DSS’s build and operation of the hubs as shared service arrangements for administration of grant programs. The audit did not examine in detail administration of individual grant programs or their outcomes, and grant recipients’ experience.

Audit methodology

1.20 In undertaking the audit, the ANAO:

• examined documentation collected from Finance and DTA relating to the design and governance of the SGGA Program;
• examined documentation collected from Industry and DSS relating to the build and operation of the hubs;
• examined relevant sections of the PGPA Act and Rules, the CGRGs and Finance guidance material;
• analysed data extracted by Finance from GrantConnect, and by Industry and DSS from the BGH and CGH grants management ICT systems;
• surveyed 28 Commonwealth entities that reported grant opportunities or grants awarded in 2018–19 and 2019–20 on GrantConnect (see Appendix 5 for an overview of the purpose and responses to the ANAO Survey); and
• met with Industry, DSS and Finance staff.

1.21 The audit was conducted in accordance with ANAO auditing standards at a cost to the ANAO of $1,090,000.

1.22 The team members for this audit were Tracey Martin, Natalie Maras, Chay Kulatunge, Supriya Benjamin, Stephenson Li, Dung Chu, Alicia Vaughan, Runal Velso, Christine Chalmers and Peta Martyn.

2.1 To determine whether the design and governance of the SGGA Program supported the achievement of intended outcomes the audit considered whether:

• evidence-based advice was provided to government when establishing the SGGA Program;
• governance and planning supported the achievement of objectives;
• program benefits were measured; and
• key program deliverables were achieved.

Was evidence-based advice provided to government?

Development of the SGGA Program funding proposal

2.2 Consideration of options to improve grants administration commenced in 2012. This included progressing various grants management streams of work such as funding for GrantConnect and the Department of Social Services’s (DSS’s) grants management information and communications technology (ICT) system, and transitioning Department of Health and Aging funding programs to DSS’s grants management ICT system. In October 2013, the Secretaries Board endorsed the Transforming and Modernising Government Programme, which included ten initiatives relating to improving grants administration.

2.3 In May 2014 the Secretaries ICT Governance Board²⁸ decided that the Department of Finance (Finance) would lead a feasibility study to reduce the number of grants management ICT systems and draw together other improvements to grants administration.

2.4 Concurrently, the Efficiency Working Group²⁹ considered options for grants administration improvements between August and September 2014. Options included reducing the number of entities administering grants, having a single entity managing grants, having a single grants management system, and outsourcing grants administration. Several entities noted that they had achieved some efficiencies already by centralising grants management within their entity.³⁰

2.5 In September 2014 the Efficiency Working Group recommended to the Secretaries Committee on Transformation³¹: establishing a whole-of-government grants management system involving a standardised grants lifecycle; pre-qualification; a single ICT system; and consolidating administrative functions for grants in a single entity or small number of hubs.

2.6 In late 2014 an eGovernment Ministerial Taskforce on Digital Transformation was established to develop a whole-of-government plan to enhance digital delivery of government services. This Taskforce oversaw the development of the Digital Transformation Agenda and was supported by an eGovernment Steering Committee including representatives from Department of the Prime Minister and Cabinet (PM&C), Department of Communications, Finance, Industry and DSS.

2.7 In March 2015 the government decided the work of the Efficiency Working Group relating to improving grants administration would be included in the Digital Transformation Agenda.

2.8 Figure 2.1 provides an overview of meetings and decisions between October 2013 and April 2015 of the Secretaries Board³², the eGovernment Ministerial Taskforce on Digital Transformation, and various taskforces, boards, committees and working groups, that led to a SGGA Program funding proposal.

2.9 In 2013 and 2014 Finance undertook surveys of Commonwealth entities and their grant activity, and of grant recipients and their experiences when searching and applying for grants, to inform a pre-feasibility report and scoping study for GrantConnect. In 2014 and 2015 Finance conducted further surveys to capture information about grants expenditure and ICT systems for a feasibility study.³³ Finance was unable to provide the ANAO with any documentation for these surveys.

2.10 The eGovernment Steering Committee met in March and April 2015 to draw together the grants administration and ICT components into a single funding proposal.

2.11 In the final meeting of the eGovernment Steering Committee on 2 April 2015, the interim Digital Transformation Office (DTO) presented information on grant cost types and drivers to provide an indication of baseline costs related to grants administration (see Figure 2.2). The information shown in this presentation was not reliable.

• The ANAO was unable to reproduce the average grant costs depicted, based on the information in the presentation.
• Although the interim DTO’s presentation purported that it relied on information from Finance surveys, the data shown was not consistent with findings of the 2013 and 2014 pre-feasibility study or GrantConnect scoping study, which did not capture information about costs and related to a different financial year.
• The presentation states that an incomplete data set was used for indicative purposes only to provide a proportional cost comparison.
• Other graphs in the same presentation indicated the data related to 10 granting entities, which included entities that were not affected, and excluded some entities that were affected, by the SGGA Program.

Figure 2.2: Presentation to eGovernment Steering Committee on baseline grant cost types and drivers, 2013–14

 

 

Note: A note to the diagram contained in the original material provided to ANAO reads: ‘raw data from Finance ICT surveys. This does not represent a complete data set and is used for indicative purposes only for a proportional comparison of costs.’

Source: Presentation to eGovernment Steering Committee, 2 April 2015.

2.12 By centralising grants information, standardising administrative processes and consolidating ICT, the interim DTO identified six areas of estimated financial benefit totalling $370 million a year (Figure 2.3).³⁴ This comprised $300 million a year from administered funding, $50 million a year from program administration, and $20 million a year from ICT systems.

Figure 2.3: Presentation to eGovernment Steering Committee on financial benefits associated with grants centralisation

 

 

Note: A note to the diagram contained in the original material provided to ANAO reads: ‘The $200M ICT platform consolidation cost is based on early decommissioning of legacy systems. The $20M cost reflects a replacement as part of natural ICT refresh.’

Source: Presentation to eGovernment Steering Committee, 2 April 2015.

2.13 On 24 April 2015 the Minister for Communications and the Minster for Social Services finalised a funding proposal for the SGGA Program component of the Digital Transformation Agenda.

2.14 Table 2.1 sets out the SGGA Program benefits identified in the funding proposal. Financial benefits were estimated to exceed $400 million annually, with 85 per cent to be achieved by December 2017. The funding proposal indicated that benefits would be quantified as part of detailed transition planning with granting entities. However, the funding proposal did not establish baselines, a methodology for measuring benefits or performance measures to demonstrate achievement of outcomes.

Table 2.1: Funding proposal specification of benefits to be realised

Note a: Better outcomes for users were to be achieved through the implementation of the SGGA Program and grants.gov.au (GrantConnect).

Note b: Based on the draft August 2015 SGGA Program Implementation Plan. On 2 April 2015, the interim DTO estimated financial benefits of $20 million a year arising from whole-of-government integration and consolidation of ICT when presenting to the eGovernment Steering Committee.

Note c: Based on SGGA Program implementation plans between August 2015 and July 2017, which included a long-term outcome of avoidance of capital costs through the streamlining of 20 ICT systems to two or potentially one system. The implementation plans indicate the capital avoided estimate was based on benchmarks from a similar program to consolidate parliamentary workflow systems to a single government platform.

Source: ANAO summary of SGGA Program funding proposal.

2.15 In March 2017, two years after the decision to commence the SGGA Program, Finance completed a baseline study of grants administration costs for 2014–15. The 2017 cost baseline study presented (for the entities participating in the SGGA Program³⁵), total expenditure on grant programs, administration, ICT, and FTE; and showed costs by grants lifecycle phase (Table 2.2). Finance repeated elements of the baseline study for 2015–16 and 2016–17 and reported the results to the SGGA Reference Group in May 2018.³⁶ Finance observed that entities experienced difficulty completing the exercise, as cost information for grants administration was not readily available.

Table 2.2: Baseline costs

Note: The information in the SGGA Program funding proposal in April 2015 was based on information from 10 entities, whereas the baseline cost studies were based on information from 13 participating entities.

Source: SGGA Program funding proposal, and Finance cost baseline reports and documentation.

2.16 The March 2017 study indicated that the initial policy advice had overestimated the ICT proportion of total grants administration costs by $35 million. The overestimation impacted on the assumption that the program would deliver $100 million in savings through the ICT moratorium.³⁷ Similarly the baseline estimate incorporated total grant funding of $30 billion to derive a saving of $300 million, but as indicated in Table 2.2, actual grants funding was significantly less than estimated in the funding proposal. The ANAO has previously observed that a single grant program can significantly increase the total grant funding awarded in a financial year, leading to significant variation from year to year.³⁸ This highlights the risk of basing estimates on a single year of data.

2.17 Government was not advised of the changes in expectations regarding benefits to be derived from the SGGA Program.

Did governance and planning support the achievement of program objectives?

SGGA Program governance

2.18 Finance adopted typical governance structures and roles for the SGGA Program, which included:³⁹

• a senior responsible officer (SRO) from Finance (at Senior Executive Service — SES— Band 2 level), supported by a program manager from Finance and a Finance Program Management Office;⁴⁰
• seven sponsoring committees (at the Secretary and Deputy Secretary level) that were reported to on an as required basis;⁴¹
• a Governance Board, established in June 2015, chaired by the SRO and with SES Band 2 members from Finance, the interim DTO, the newly established grants hubs (the Business Grants Hub [BGH] and Community Grants Hub [CGH]), and participating entities;
• Program Management Group⁴² and Grants Hubs Catch-ups;⁴³
• an SGGA Reference Group chaired by Finance, with members at SES Band 1 level; and
• at times, other committees and groups to foster collaboration between Finance, the interim DTO and Digital Transformation Agency (DTA), the National Health and Medical Research Council (NHMRC), the Australian Research Council (ARC), the new hubs and client entities.

2.19 The Governance Board’s role was to provide broad oversight of SGGA Program implementation⁴⁴, including approving Program artefacts and deliverables.⁴⁵

2.20 The governance arrangements changed over time. These changes were reflected in versions of the SGGA Program implementation plan until July 2017. After July 2017 the SGGA Program implementation plan was not kept up to date and changes to governance arrangements were conveyed through an April 2018 governance review, briefings to sponsoring committees and the 2019 terms of reference for the SGGA Reference Group. Changes to the key decision-making and implementation oversight committee supporting the SRO (from the Governance Board to the Program Management Group and Grants Hub Catch-ups in 2018 and to the SGGA Reference Group in 2019) were not clearly articulated at the time to the relevant governance bodies.

2.21 Figure 2.4 shows selected SGGA Program governance arrangements in place in August 2015, July 2017 and July 2020. Figure 2.4 does not reflect all changes that occurred between 2015 and 2020.

2.22 Some of the changes to governance arrangements were made in response to the recommendations of reviews, including gateway reviews⁴⁶ (see Figure 2.6), completed between 2016 and 2020. A summary of reviews and governance-related recommendations is presented in Table 2.3.

Table 2.3: Reviews of governance arrangements

Source: Review reports.

2.23 In addition, the ANAO identified further improvements that could have been made to governance arrangements.

• The governance arrangements would have benefited from further senior management involvement to drive the achievement of SGGA Program objectives, deliverables and outcomes.
• Responsibilities were established for most key positions, committees and entities. Terms of reference could have been developed for the Program Management Group and Grants Hubs Catch-ups as this creates an understanding about the purpose and role of these bodies.
• Meetings should occur as scheduled and records should have been kept in the case of the Governance Board and SGGA Reference Group.

SGGA Program planning

2.24 The SGGA Program funding proposal included details of deliverables, milestones and responsibility for establishing governance arrangements.

2.25 It was the responsibility of the Finance Program Management Office to develop and maintain an implementation plan, via the Governance Board. The SGGA Reference Group also had responsibility for reviewing updates to the implementation plan.⁴⁷

2.26 The implementation plan was developed for use by Finance, DTO, DTA, the hubs, participating entities and members of the Governance Board. The plan was intended to provide an overview of the program and describe the mechanisms to track and control progress and was to be supported by separate planning documents for specific projects, such as a data warehouse.

2.27 The plan and supporting documentation covered: the objectives and policy context; a statement of benefits and program outcomes; deliverables; governance arrangements; risk and issues management; and monitoring, review and evaluation.

2.28 The implementation plan was considered to be a ‘living document’ to accommodate an iterative approach to the program of work. Over time, there were changes to many aspects of the plan, including reassignment of responsibilities; changes to deliverables and timeframes; reclassification of benefits; and addition of long-term outcomes. Changes to benefits and deliverables were generally agreed as part of ongoing review by the SRO, Governance Board or SGGA Reference Group. The plan was generally consistent with advice to government although some long-term outcomes (such as ICT consolidation, avoidance of capital costs and business process standardisation) were added and these were not specified in advice to government.

2.29 The July 2017 SGGA Program Implementation Plan outlined the status of deliverables and made some changes to key milestones and deliverables, some of which were not authorised by government (Table 2.4). The Governance Board and SGGA Reference Group did not have the appropriate authority to change deliverables. Deliverables were not monitored after July 2017. Finance advised the ANAO in February 2022 that while the implementation plan was not updated from July 2017, deliverables were monitored through governance arrangements and the Public Service Modernisation Fund reporting.

2.30 Gateway reviews (see Figure 2.6) made findings in relation to implementation planning.

• The 2016 first-stage gateway review found that many critical controls and frameworks described in the implementation plan had not been initiated.
• The 2016 review found that there were inconsistent approaches to risk management by the overarching SGGA Program and participating entities.
• The 2017 first mid-stage gateway review observed that areas requiring attention included the clarity of program scope and outcomes, onboarding of client entities and emerging timeframe pressures.
• The 2019 second mid-stage gateway review noted that significant risks were untreated and had the potential to affect commitment to, and timing and sustainability of, the SGGA Program.
• The 2021 end-stage gateway review concluded a program management methodology and standard practices had not been consistently applied to drive the delivery of the program.

Were program benefits measured and reported?

2.31 The SGGA Program funding proposal identified three major benefits from the SGGA Program: better outcomes for users, reduction in red tape and efficiencies for government (see Table 2.1). To demonstrate these benefits, the SGGA Program required a framework for performance measurement, baseline information to compare performance against, and data and information about client entity experiences.

SGGA Program benefits realisation framework

2.32 No benefit measures were included in the SGGA Program funding proposal.

2.33 There was an intention to develop and maintain, in consultation with stakeholders, a ‘benefits realisation framework’ to identify the quantitative and qualitative benefits of the SGGA Program. The framework was to describe relevant measures, baselines, targets and schedules for realisation. Benefits reporting was to be provided to the Governance Board and Secretaries Committee on Transformation.

2.34 In February 2016 the first-stage Gateway Review recommended the SGGA Program commence as a priority the outcomes and benefits activities indicated in the implementation plan.

2.35 Three benefit realisation frameworks have been endorsed or approved since the commencement of the SGGA Program: in December 2016, March 2017 and October 2018. These were endorsed by the Governance Board or SRO. A logic map was used to link benefits to outcomes and measures. Figure 2.5 provides an overview of the development of the frameworks and the measurement of benefits.

2.36 The frameworks covered four core benefits: improved policy outcomes, efficiencies for government, improved user experience, and enhanced capability to use whole-of-government grants data. This represented a change in benefit areas from those identified in the funding proposal.⁴⁸

2.37 Ten benefit measures were identified in the 2016 framework. This was increased to 25 in the 2017 framework and reduced to 13 in the 2018 framework.⁴⁹ The 2017 and 2018 frameworks identified, for each measure, benefit owners who had responsibility for measuring the benefit.⁵⁰ However, the indicators were often not measurable⁵¹ as methodologies had not been finalised and agreed with entities, and they were not complete. The frameworks did not specify baselines, included targets only in 2017, and did not include a monitoring and reporting plan.⁵²

2.38 The end-stage gateway review completed in June 2021 concluded:

A benefits realisation framework was developed but benefits do not appear to have been actively managed or used to drive the Program, and the current benefits are not clearly aligned to the original [funding proposal].

2.39 The review made a recommendation to improve benefits management in future stages of the SGGA Program.⁵³ The review also recommended that the program prepare a closure report that covered the realisation of benefits.

Establishing baseline costs and monitoring costs

2.40 In successive years Finance sought to establish baselines for the SGGA Program, including the costing exercises in 2017 and 2018 (see paragraph 2.15) and benefits information collection from client entities in 2017. The outputs of these activities were not used to establish baselines for reporting against the benefits framework. The 2017 benefits information collection asked entities about grants administration and ICT savings realised. In total across 13 entities, savings of less than $1 million were reported and some entities reported no savings.

2.41 Finance did not continue the costing exercise in subsequent years. Planned annual cost efficiencies and savings were not measured and monitored. A contractor (ASG) was engaged to undertake surveys of client entities in 2019 and 2020. In the 2019 survey of 12 entities, all 12 indicated no impact or a negative impact from the hubs on administration costs. In the 2020 survey of 12 entities, 10 indicated no impact or a negative impact.

2.42 In 2020, to address concerns about the cost of hub services, Finance commissioned PwC to assess whether the hubs were more expensive than entities providing their own grants administration services. Client entities had difficulty providing robust cost information, indicating uncertainty around where to source the costing data and what costs to include, and often excluding overheads and surge staffing. Based on scenarios and estimates provided by the hubs and client entities, the PwC theoretical assessment found that, for the sample of opportunities analysed, the cost of grants administration on average was 29 per cent less for the hubs than for client entities providing their own grants administration. BGH had higher costs in some scenarios than CGH.

Measuring client experiences

2.46 Separately, DTA, Industry and Finance undertook user experience studies.

• DTA developed a diagnostic tool, however this work did not progress.
• In 2018 Industry engaged Portable to interview 20 users to establish current experience and opportunities for improvement. A range of potential improvements were suggested including measuring user effort and cost.
• Finance engaged PwC to undertake user experience research. A report was provided to Finance in November 2021. Based on survey responses from 92 grant applicants and recipients: 57 per cent were satisfied with the accuracy of pre-populated grants data; 51 per cent were satisfied with the consistency of experience when applying for grants; and 41 per cent were satisfied with any advice they were given regarding additional grant opportunities for which they were eligible.⁵⁴ A range of recommendations were made, including a single platform for grant opportunities, streamlining application processes and greater standardisation of application processes.

2.47 The ANAO surveyed client entity staff managing grant programs about the impact of using the hubs in relation to key intended benefits and outcomes of the SGGA Program (see Appendix 5). The survey measured the perception of benefits and outcomes in terms of cost, efficiency and effectiveness of grants administration; better grants experience for applicants and recipients; streamlining grants business processes; consistency of administration; better policy outcomes; availability of consistent and quality whole-of-government data; compliance with whole-of-government participation requirements; and evidence-based policy making. Surveyed entities did not indicate that the SGGA Program had led to the achievement of these positive outcomes and benefits.

Reporting benefits to government

2.48 The SGGA Program April 2015 funding proposal indicated that the interim DTO would report to government on implementation progress. Finance last reported to government in 2017; at this time program outcomes and benefits had not been achieved.⁵⁵

2.49 In May 2017, as part of the 2017–18 budget measure Public Service Modernisation Fund, it was agreed that the Minister for Finance would report to government by the 2019–20 Budget on the next stage of the SGGA Program, including a proposal for savings to be taken from entities participating in the program.⁵⁶ The report was to include the findings of the market test, together with the outcomes and benefits report and recommendations for stage two of the SGGA Program. This report did not occur because Finance considered the comeback to be extinguished (see paragraph 2.73).

2.50 To report back on and support further action in relation to the Digital Transformation Agenda, DTA was to provide a final report to government on an assessment of government investment in digital and ICT over the last five years, in the 2021–22 Mid-Year Economic and Fiscal Outlook context. In November 2021, DTA advised government that the DSS ICT investment project to deliver a single grants process across departments had delivered the outcomes⁵⁷ but there was no benefits realisation plan in place.⁵⁸ DTA observed that shared and common services can be successful but rely on effective governance.

Were key program deliverables achieved?

2.51 SGGA Program core deliverables are set out in Table 1.1.

2.52 The SGGA Program did not deliver:

• Deliverable 1 — a single whole-of-government grants administration process with six different workflows (see paragraphs 3.68 to 3.72);
• Deliverable 3 — a data warehouse capability to improve cross agency reporting (see paragraphs 2.61 to 2.66); or
• Deliverable 4 — a market test (see paragraphs 2.67 to 2.75).⁵⁹

2.53 Deliverable 2 was largely achieved. BGH and CGH provide grants administration services to participating entities. Each hub maintains its own grants management ICT system. However, the migration of grant programs to the hubs was delayed beyond the required completion date of September 2017 (see Table 2.4) and the hubs have not adopted a single standardised business process.

2.54 Several deliverables, including the data warehouse, were removed as a deliverable, without appropriate authority, from the July 2017 SGGA Program Implementation Plan.

2.55 Gateway reviews assessed progress towards completion of SGGA Program deliverables. Figure 2.6 shows actual and planned timing for the two mid-stage and an end-stage gateway reviews, as well as other commissioned reviews. The results from these reviews were variously presented to the SRO, the Governance Board, the SGGA Reference Group and, on occasion, sponsoring committees.

2.56 The first three gateway reviews indicated that from the outset there were major issues requiring urgent action to ensure successful delivery of the program. Where major issues and risk were identified, recommendations were made to address these issues. The committees monitored implementation of recommendations. While a number of issues were addressed, some matters such as benefits realisation, the market test and data warehouse arose as major issues or risks in most of the gateway reviews, indicating at times action taken was insufficient to manage the risk to the delivery of the program. The end-stage gateway review noted that a number of additional reviews were outsourced to a variety of consultants, but it was not clear how they had been utilised.

2.57 A PwC post implementation review commissioned by Finance and reported in October 2020 concluded that the SGGA Program had mostly achieved two program objectives⁶⁰ and partially achieved two others.⁶¹ However, the program objectives and deliverables described in the PwC post implementation review were not the same as the objectives or deliverables in the SGGA Program funding proposal.

2.58 The June 2021 end-stage gateway review noted that the outcomes and benefits have been through several iterations since the original funding proposal and observed that many of the iterations had not been measured or monitored. The review concluded that:

• in relation to deliverables — the data warehouse was not achieved;
• in relation to benefits — better outcomes for users, reduction in red tape, and efficiencies for government were partially achieved; and
• in relation to objectives — streamlined processes were achieved.

2.59 Observations from the end-stage gateway review report for each benefit area and a selection of deliverables are presented in Table 2.5. Often the evidence set out in the review report was anecdotal or limited in scope, and did not sufficiently demonstrate the deliverables, benefits or objectives realised, including how streamlined processes were achieved.

2.60 Two core deliverables from the SGGA Program funding proposal to be delivered by Finance — a data warehouse and a market test — are examined below.

Table 2.5: End-stage gateway review assessment of benefits, objectives and deliverables to be realised through the SGGA Program

Note a: Benefits were assessed and rated for the benefit areas and for two deliverables, rather than for the benefits to be realised as depicted in column three of the table.

Note b: The ANAO notes that this does not take account of the funding provided to the hubs (see Appendix 3).

Source: ANAO summary of end-stage gateway review.

Data warehouse

2.61 Establishing a data warehouse to support analysis of grants data was one of the four core deliverables of the SGGA program. In April 2015, the government was advised that the introduction of a data warehouse⁶² would deliver efficiencies for government by providing capability to analyse whole-of-government grants administration and payment data to better manage and target grants. Better targeting grants was linked to better outcomes for users and better policy outcomes.

2.62 In April 2015 the government was advised that the:

• government currently does not have the ability of either providing a whole-of-government view of grants administration and payments or analysing grants data;
• implementation of a data warehouse was to build upon existing capability and provide a whole-of-government analytic capability; and
• the interim DTO was to deliver the data warehouse at a cost of $2.4 million⁶³ by June 2016 for hub data and by June 2017 for whole-of-government (and possibly other jurisdiction) data.

2.63 Government transferred responsibility for the data warehouse to Finance in December 2015. Finance engaged Callida Consulting to conduct a scoping study, which recommended in October 2016 the use of existing systems and whole-of-government data capabilities⁶⁴ to provide the data warehouse capability. In response to the scoping study recommendation, the Governance Board noted that a separate data warehouse was not considered necessary and the consolidation of GrantConnect and the hubs’ grants management systems should provide all the information that is required for achieving SGGA Program objectives, although central control of the data was necessary. The Governance Board agreed that a virtual data warehouse would be established; and the Governance Board would assume additional responsibilities associated with ensuring the effective use of whole-of-government grants data.

2.64 Between February 2017 and April 2018, a project approach and roadmap was agreed, a ‘Discovery Phase’ report and the prototype stage were completed, and memoranda of understanding were signed and a working group was established involving Finance and the hubs. CGH was appointed technical lead⁶⁵, and a draft project management plan was developed. Delivery would occur in four stages, with all work to be completed at a cost of $3.7 million⁶⁶ by 30 June 2019. This was three years later than the original advice to government about delivery of an operational data warehouse combining hub and GrantConnect data.

2.65 In July 2020 the SGGA Reference Group was advised that core functionality for the data warehouse had not been delivered. The SGGA Reference Group was advised that there was a lack of interface between different systems and that incomplete and inadequate data affected accuracy and currency of reporting. Implications were that recipients could be double funded due to gaps in common source data, and data was not being used to better manage and target grants funding. In October 2020 the PwC post-implementation review found that the hubs used different grants management systems involving variations in data and formats. These arrangements did not support simple grants management and reporting through a single system.

2.66 In June 2021, the end-stage gateway review concluded that the data warehouse had not been achieved.

Market test

2.67 In April 2015, as part of the 2015–16 Budget measure Digital Transformation Agenda — Stage One, the government agreed to undertake a market test as part of the SGGA Program. Government was advised that the market test could assess grants management ICT systems and grants administration services; whether to expand the program beyond the 12 main granting entities; and/or innovative arrangements for grants administration. The outcome of the market test would inform transition to a single grants management ICT system or grants administration service provider from July 2018.

2.68 Prior to undertaking the market test, it was necessary for standard business processes to be adopted and grants administration to be consolidated to deliver a mature contestable service by September 2017. All versions of the implementation plan in place between April 2015 and June 2016 planned to complete the market test by December 2017.

2.69 In May 2017, as part of the 2017–18 Budget measure Public Service Modernisation Fund, the government agreed to provide further funding to the hubs to support a more rapid consolidation of government grants administration for six participating entities. The Minister for Finance was to report back to government by no later than the 2019–20 Budget with the market test results.

2.70 In August 2017, the first mid-stage gateway review concluded that market testing was unlikely to meet the schedule due to a lack of clarity around scope, the timing of transition of programs to the hubs and the form of the approach to market. The review recommended the SGGA Program clarify the scope, method, pricing model and proposed timing for market testing. In September 2017 Finance advised the Minister that there was insufficient time to undertake a market test according to the agreed schedule. Finance recommended and the Minister agreed to delay market testing until 2019–20.

2.71 In November 2017, Finance proposed two contestability initiatives to the Minister. The first was to include the NHMRC as an interim hub to introduce competitive tension. The second was to conduct a contestability scoping study and report back to government in the 2018–19 Mid-Year Economic and Fiscal Outlook. The Minister for Finance agreed to these initiatives in November 2017. In December 2017 the Assistant Prime Minister agreed to these arrangements, including deferring market testing to beyond the 2019–20 Budget, on the understanding that the initial benefits of the program will not be realised until 30 June 2019.

2.72 Between May 2018 and December 2019, two additional reviews commissioned by Finance of the SGGA Program’s readiness for contestability and options for market testing were undertaken.

2.73 Finance received advice from PM&C in July 2019 that the SGGA Program Update comeback to government had been extinguished. Finance advised the ANAO that this eliminated the requirement to market test. It is not clear to the ANAO why the decision to extinguish the report back was interpreted by Finance to mean the program did not need to be implemented.

2.74 Finance’s subsequent reporting on SGGA Program progress to governance bodies did not include an update on market testing and the Minister for Finance also was not informed about progress towards market testing.

2.75 In June 2021, the end-stage gateway review noted that:

• government had agreed not to progress market testing due to a lack of contestable options in the market⁶⁷;
• a recommendation from the March 2019 second mid-stage gateway review to develop options and scope for the market testing activities had been fully addressed; and
• the work completed to date provided a sound base for the second phase of the market testing envisaged in the original government consideration of the SGGA Program.

2.76 In summary, of the four core deliverables outlined in Table 1.1, only one has been largely delivered. Plans for their delivery have not been agreed with government. Finance advised in November 2021 that no Ministerial agreement or authority has been sought regarding the future of the SGGA Program.

3.1 The hubs were expected to be operational by 1 July 2016. The Department of Industry, Science, Energy and Resources (Industry) and the Department of Social Services (DSS) commenced building the Business Grants Hub (BGH) and Community Grants Hub (CGH), respectively, in 2015. The hubs commenced operation from 1 July 2016.

3.2 In November 2021, BGH advised there were about 300 staff delivering BGH grants administration services. The staffing profile for CGH was 921 as at 21 October 2021.⁶⁸

3.3 The objective of the SGGA Program was to deliver simpler, more consistent and efficient grants administration across government. This approach would enable government to deliver grants more effectively at lower cost and risk. The audit considered whether:

• the hubs have assessed the effectiveness and efficiency of grants administration;
• there is more effective grants administration; and
• there is more efficient grants administration.

Have the hubs assessed the effectiveness and efficiency of grants administration?

3.4 The ANAO examined the measures established and reported by the hubs to assess effectiveness and efficiency.

Hubs effectiveness measurement

3.5 The July 2017 SGGA Program Implementation Plan sets out that it is the responsibility of the hubs to assist with the measurement of SGGA Program benefit outcomes by collecting and reporting data in relation to agreed performance measures for the hubs.

3.6 The first step in establishing an effective performance framework is to determine the intended outcomes, or benefits, of the program. The hubs did not have benefit frameworks, measures or baselines in place when they commenced operation that would allow them to demonstrate the hubs’ impact over time. Between June 2018 and June 2020 BGH developed three benefits realisation frameworks. CGH planned, developed and refined key components of its benefits realisation framework between September 2015 and May 2018.

3.7 Figure 3.1 provides an overview of the development and implementation of benefits realisation frameworks and performance measures.

3.8 Table 3.1 compares the final BGH and CGH benefits frameworks to the SGGA Program Benefits Realisation Framework from October 2018. This shows the frameworks aligned with one exception—BGH benefit outcomes do not address the SGGA Program benefit area of improved policy outcomes.⁶⁹

Table 3.1: BGH’s and CGH’s alignment of SGGA Program Benefits Realisation Framework to BGH and CGH final benefit frameworks

Note a: In the SGGA Program Benefits Framework 2018 Finance is the benefit owner for this benefit outcome in relation to whole-of-government grants data informing government decision-making. Consuming entities and hubs are benefits owners to the extent that administration by the hubs leads to better designed grants programs.

Note b: In the SGGA Program Benefits Framework 2018 Finance is the benefit owner for this benefit outcome. Consuming entities and hubs are benefits owners to the extent that they contribute to this measure through meeting their reporting responsibilities for in-scope grants in the whole-of-government grants data set.

Source: ANAO summary of SGGA Program, BGH and CGH benefit realisation documentation.

3.9 The hubs have not adopted the common set of measures developed for the SGGA Program. Over time, the BGH and CGH frameworks contained 33 and 62 performance measures, respectively, which included both effectiveness and efficiency measures.

• BGH developed 13 effectiveness measures through its benefits framework, with its most recent benefit framework comprising 12 effectiveness measures.⁷⁰ BGH established a baseline for 11 of the measures and, between 2017–18 and 2020–21, reported on between seven and 10, depending on the year. Not all measures had targets. For the four to eight measures that had targets, targets were met for between zero and one measure, depending on the year.
• CGH initially developed 24 effectiveness measures, with its most recent benefit framework containing 16 effectiveness measures.⁷¹ CGH established a baseline for eight of the 16 measures. In 2017–18 and 2018–19 CGH reported on four measures; each had targets and targets were met for three in 2017–18 and four in 2018–19.

3.10 Between 2016 and 2018 CGH measures changed each year, limiting ability to demonstrate improvements over time. Similarly, BGH measures changed (to a lesser extent) between June 2018 and June 2020.

3.11 From 2018–19 CGH developed hub business plans that included a purpose statement, priorities, key activities, key performance indicators and targets. There were two measures of effectiveness in 2019–20 and three in 2020–21.⁷² CGH did not report against these measures. The AusIndustry Division’s business plans in 2017–18 and 2018–19 included BGH priorities and key activities but did not include performance measures.

3.12 Neither hub consistently monitored or reported on benefit framework measures between 2016 and 2021.

• Prior to the introduction of the June 2020 BGH Benefits Realisation Framework, BGH did not establish reporting requirements for benefits measures. From June 2020 BGH introduced a requirement to undertake benefit measurement biannually. BGH reported on 74 per cent of benefit measures in July 2020, and 69 per cent in April 2021.⁷³
• CGH planned to monitor and report against benefit measures on a six monthly basis. In practice, CGH reported or established baselines for fewer than half of its measures and did not report on any benefit measures in any year except 2018–19. CGH ceased use of the benefits realisation framework to demonstrate performance in January 2019.

3.13 The ANAO assessed the appropriateness of CGH and BGH effectiveness indicators and found that almost half were not measurable.⁷⁴

• Seven of the 13 BGH effectiveness indicators were measurable. The methodology for measuring four effectiveness measures changed, impacting the hub’s ability to accurately convey performance over time.
• For both BGH and CGH, the methodologies do not always appropriately capture the intended measure.⁷⁵
• Five of 24 CGH effectiveness measures and the business plan effectiveness measures did not have specified methodologies.

3.14 Due to the lack of measurability, changes in measures over time and a lack of monitoring, the hubs could not consistently demonstrate the achievement of intended benefits.

Hub efficiency measurement

3.15 Resource Management Guide (RMG) 131 indicates that efficiency is generally measured as the price of producing a unit of output and is generally expressed as a ratio of inputs to outputs. A process is efficient where the production cost is minimised for a certain quality of output, or outputs are maximised for a given volume of input.⁷⁶

3.16 Requirements for BGH and CGH efficiency measures were established as part of the benefits realisation frameworks of the hubs.

• Between 2017–18 and 2019–20 BGH established 19 efficiency measures (including measures of timeliness).⁷⁷ The most recent benefit framework contained 15 efficiency measures. BGH established a baseline for 10 of the 15 measures. A varying subset of measures were reported between 2017–18 and 2020–21. For the 12 measures that had targets, targets were met for between zero and two measures, depending on the year.⁷⁸
• Between 2016–17 and 2020–21 CGH established 33 efficiency measures, with its most recent benefit profile containing 10 efficiency measures (including timeliness measures).⁷⁹ CGH established a baseline for seven of the 10 measures. Reporting on six efficiency measures was presented in 2018–19; all reported measures had targets and four measures met the target. CGH did not report on efficiency measures in other financial years that the hub has operated.
• CGH business plans also included one measure of efficiency in 2019–20 and 2020–21: ‘grants administration services are delivered in a cost-efficient manner on a full cost recovery basis’. This is the only efficiency measure at November 2021. CGH did not report against this measure.

3.17 The ANAO assessed the appropriateness of BGH and CGH efficiency measures and found that the indicators were often not measurable.

• Seven of the 19 BGH indicators were measurable. Twelve did not have a measurement methodology, and the methodology for one measure changed limiting the ability to assess efficiency over time.⁸⁰
• Twenty-one of the 33 CGH measures were measurable. Twelve did not have a methodology.⁸¹ The 2019–20 and 2020–21 business plan efficiency measure methodology did not address the intent of the measure.⁸²

3.18 The hubs and client entities participated in Finance benchmarking activities including a 2014–15 cost baseline study and a cost review completed by PricewaterhouseCoopers (PwC) in June 2020. Both of these studies highlighted difficulties in entities sourcing and defining cost data. The reports identified other factors impacting cost benchmarking such as significant variation in grants administration approaches within and across entities, potentially impacting the robustness of any comparisons.

3.19 In summary, as a consequence of deficiencies in efficiency measurement and benchmarking, the hubs were unable to clearly demonstrate efficiency outcomes.

Have the hubs supported more effective grants administration?

3.20 To determine whether the hubs have supported more effective grants administration, the ANAO examined the effectiveness of the hubs in relation to: compliance with legislative requirements; establishing business workflows; managing grants data; entity usage of the hubs; meeting service level standards; and supporting client entities.

Compliance with legislative requirements

3.21 The ANAO tested levels of compliance for select requirements under the Public Governance, Performance and Accountability Act 2013 (PGPA Act), Commonwealth Grant Rules and Guidelines (CGRGs), and resource management guides.⁸³ This analysis was done using data extracted from the hubs’ grants management information and communications technology (ICT) systems and from GrantConnect; and, where relevant, relied on the work of ANAO financial statement audits in 2019–20 and 2020–21 including systems control testing.

3.22 Table 3.2 shows for BGH services, there were high levels of compliance with selected requirements.⁸⁴

Table 3.2: BGH compliance with select legislative requirements

Note a: This result was based on an examination of hub documentation, such as authority to proceed with grant opportunity/funding round, spending minute approval, grant agreement, invoices and acquittal letters.

Source: ANAO analysis based on Industry grants administration system data.

3.23 For legislative requirements A, B, F and J, ANAO financial statement audits concluded that for 2019–20 and 2020–21, relevant CGH controls were operating satisfactorily, with one exception.⁸⁵ For reasons outlined in paragraph 3.36, the ANAO 2021–22 Interim Report on Key Financial Controls of Major Entities will further examine CGH compliance with legislative requirements.

3.24 Consistent with Finance’s Shared Service Arrangements Guide: 04/2017 Governance (Assurance) Framework, the hubs provide assurance over the operation of their systems through formal representations and independent assurance statements on the operation of their control frameworks.⁸⁶ These assurances include identification of breaches of legislative requirements and business processes. Hub assurances are required because when hubs administer grants, the client entities’ accountable authorities retain ultimate responsibility for having appropriate systems relating to risk and internal controls in place to support the proper use and management of the relevant grant funds.

3.25 From 2017–18 both hubs provide annual management assurance letters (MALs) to their client entities.⁸⁷ While the type of assurance provided in the respective hubs’ 2019–20 management assurance letters is broadly the same, there are some differences as shown in Table 3.3.

Table 3.3: Assurances contained in management assurance letters, 2019–20

Note a: The MAL indicates the financial information provided by the hub to the client entity is true and fair in accordance with the requirements of the PGPA Act and PGPA Financial Reporting Rule 2015, and that financial accounts and records have been maintained and can be generated in accordance with the PGPA Act and Financial Reporting Rule and other legislation. DSS advised the ANAO that the CGH MALs ‘provides assurance’ that the hub ‘adheres to the requirements of the PGPA Act …[and that] … the CGRGs, being a legislative instrument under section 105C of the [PGPA Act] are therefore also being adhered to.’

Note b: Reportable breaches include ‘high volume, high value and/or systemic instances of non-compliance’ of the CGRGs. Department of Finance, Notification of significant non-compliance with the finance law (RMG 214) [Internet], Finance, updated September 2020, paragraph 10, available from https://www.finance.gov.au/government/managing-commonwealth-resources/notification-significant-non-compliance-finance-law-rmg-214 [accessed March 2022].

Note c: CGH reporting of breaches includes reporting instances of breaches of the CGRGs. MALs did not consistently include a report on Finance Law breaches: none of the MALs in 2017–18 (seven) and 2018–19 (nine) included Finance Law breaches; two of nine MALs did not include these in 2019–20; and one of nine MALs did not include these in 2020–21.

Source: ANAO analysis of BGH and CGH 2019–20 management assurance letters.

3.26 In 2020–21 BGH changed the nature of assurance provided. Rather than providing assurance, the 2020–21 BGH management assurance letters reported the results of testing against a sample of key obligations. The intent was to provide confidence that the client entity’s granting programs were being managed in compliance with frameworks. In 2020–21 the nature of CGH management assurance letters was generally the same as in 2019–20.

3.27 Between 2017–18 and 2019–20, one significant breach was identified for a BGH-managed grant program.⁸⁸ Other common BGH deficiencies related to risk management and late publication of grants (a breach of the CGRGs). In 2020–21 Industry reported 25 instances of publication of grants outside the 21-day reporting period, and 113 instances of non-compliance arising from independent testing. For CGH, 302 breaches were identified in 2019–20. The late publication of grants outside the 21-day reporting period accounted for 292 out of 302 deficiencies.⁸⁹ A further 68 breaches were identified in 2020–21. Two related to financial delegation deficiencies, and 66 related to late publication of grants.⁹⁰

3.28 There were opportunities for BGH and CGH to improve reporting in management assurance letters.

• BGH could advise client entities of remedial action in response to breaches and deficiencies.
• CGH could report control weaknesses identified through independent testing to client entities.⁹¹
• CGH could provide explicit assurance of compliance with the CGRGs.

Establishment of business processes and workflows

3.29 The SGGA Program implementation plan assigned responsibility for development of standard business processes, including six workflow processes, to the hubs. To underpin these business processes and workflows, the hubs needed to develop policy, procedures and templates. These policy and procedures form part of the hub’s internal control framework which includes measures to ensure compliance with finance law.⁹²

3.30 The hubs developed standard business processes and workflows for grants management and these were supported by internal policy and procedures documents.

• BGH policy and procedures were available to staff on DocHub (the Industry core recordkeeping system). In March 2021 there were 258 resources comprising internal policy, procedures, templates and process maps.
• CGH policy and procedures were available on HubNet (a web-based portal). Links were provided to relevant procedures, guidance material and process maps. At March 2021, there were 307 links to procedures, guidance material and process maps, of which 232 were accessible and 75 were not. Sometimes, multiple records had the same or similar names in DSS’s recordkeeping system. Where links to documents did not work, this made it difficult to identify the right reference. Some CGH staff indicated that relevant or current documents and records were not accessible on HubNet. In early 2021 CGH undertook a project to refresh and update HubNet and CGH policies and procedures were migrated to a new team site in September 2021.

3.31 The ANAO examined the BGH grants management data extract for evidence that 17 key business processes and workflows established in policies and procedures had been met (see Appendix 6). The ANAO was unable to conduct a similar analysis of CGH data extract for the reasons identified at paragraph 3.36.

3.32 For six of 17 BGH processes examined, poor data quality impacted the assessment of whether business processes and workflows were followed.⁹³ Where the ANAO was able to undertake the analysis, there were inconsistencies with processes and workflows. These inconsistencies were widespread (between 40 and 75 per cent of relevant records) for five of the 17 business processes examined.⁹⁴ More isolated inconsistencies (between one instance and 25 per cent of relevant records) were observed across 11 of the 17 business processes examined.⁹⁵ The ICT system did not have system controls to identify outlier responses or prevent errors or practices that were not consistent with business processes from occurring.⁹⁶

Management of grants data

3.33 Under the SGGA Program, it was intended that each hub would maintain its own grants management ICT system but adopt common business processes and workflows across the two hubs. These arrangements were to support a whole-of-government data warehouse capability. The data warehouse was intended to improve cross entity reporting and enable data analytics of grants administration and payments.

3.34 On 1 December 2020, the ANAO requested a single dataset of grants transactions between 1 July 2016 and 30 November 2020. BGH and CGH provided the ANAO with a data extract in December 2020 (for applications received by BGH between 1 July 2016 and 30 November 2020) and February 2021 (for applications created by CGH between 1 July 2016 and 19 February 2021).

3.35 The ANAO found data quality issues with the extracts.

• The number of BGH applications recorded in the data for each lifecycle phase was not consistent with expectations from the standard business workflows. Additional anomalies in BGH data are outlined in Appendix 6.
• CGH constructed queries to generate the datasets from its grants management ICT system. The manner in which it did this introduced errors.⁹⁷
• The hubs were unable to provide sufficient information to give the ANAO assurance over the completeness and accuracy of the data, and whether there was information loss during the extraction and delivery process. Although there is some automated population of data fields, the hubs do not have quality assurance arrangements for testing the completeness and accuracy of data in the grants management ICT systems across programs and entities.
• Lack of or insufficient data dictionaries and the use of non-mandatory fields for client entity data entry, also impact on the useability of the data.

3.36 Subsequent to the provision of the datasets, CGH advised the ANAO that its extract included non-hub related grant records. The ANAO determined that the CGH data extract was not suitable for analysis. The ANAO 2021–22 Interim Report on Key Financial Controls of Major Entities will further examine CGH compliance with business processes and legislative requirements.

Hub usage

3.40 The SGGA Program implementation plan and Estimates Memorandum 2017/40 Whole-of-Government Grant Administration Arrangements set out that participating entities⁹⁸ would adopt end-to-end grants administration services offered by the hubs across the grants lifecycle for all existing grant programs and NPPs.⁹⁹

3.41 Schedules to head agreements with client entities form the basis for specifying services to be delivered by a hub. To ensure there is sufficient clarity of service uptake, schedules should clearly specify services to be provided to client entities under the agreement.

3.42 Hub agreements with client entities form the basis for specifying services to be delivered by a hub.

• BGH — Of 130 schedules to head agreements, 15 contained no details of services to be provided. In addition, 73 did not include the final quote.
• CGH — Of 53 schedules to head agreements, nine contained no details of services to be offered. In addition, 30 did not include the final quote. In December 2020, CGH advised that the schedules to head agreements provided generic services offered and final services to be provided are outlined in the accepted quote document, which is attached to a schedule.
• In summary, out of 183 CGH and BGH schedules, 54 contained no information that identified the services provided.

3.43 The ANAO examined the BGH and CGH agreements to determine if the agreements specified a fee for service and compared this to actual cost recovery through invoicing. Neither hub consistently included fees for service in agreements, with BGH¹⁰⁰ more likely than CGH¹⁰¹ to include this information. The absence of information about fees for service in agreements impacts the hubs’ and client entities’ ability to determine whether invoices reflected agreed prices. Where fees for service were included in agreements, invoices could generally be reconciled to agreements for BGH.

3.44 To enable the hub to understand the effectiveness of its grants administration services, the hub needs to understand the uptake of those services. CGH agreements should clearly specify services to be provided to client entities under the agreement, where this information is contained in an accepted quote document, the final agreement should include or adequately reference all associated accepted quote documents.

3.45 Table 3.4 shows how often services relating to a particular grants lifecycle phase were specified in client entity agreement documents.

Table 3.4: Services specified (BGH) or offered (CGH) in client entity agreements

Source: ANAO analysis based on DSS and Industry client entity agreement documentation between 1 July 2016 and 30 July 2020.

3.46 The hubs advised the ANAO that reasons for non-usage of service may include legislation preventing delegation of elements of the select phase by the client entity (for example, selection decisions for the Medical Research Future Fund); or lack of appropriate expertise in the hubs.¹⁰² Neither hub had sought feedback from client entities about why the evaluate function was not used. The hubs advised that possible reasons might include:

• evaluation services are considered to be expensive;
• evaluation services require expertise not currently available in the hubs;
• evaluation services are provided by hub entities’ evaluation functions or outsourced; and
• evaluation is most relevant to new programs, and most of the CGH’s work is with established grant programs.

3.47 Both hubs decided to remove evaluation services from their standard service offer in 2021–22. This is inconsistent with the original SGGA Program intention. BGH considered evaluation activities were best placed with the policy owner; limited take up of evaluation by client entities; cost of evaluation ready services exceed quoted costs by 56 per cent; and noted to the ANAO that its Evaluation Unit had not received additional staff to provide evaluation services.¹⁰³

3.48 The SGGA Program funding proposal envisaged that by attaining sufficient scale through all in-scope programs using hubs service offerings, the hubs would reduce the cost of grants administration. Given the limited take up of core CGH services, and of evaluation services for both hubs, there is a risk that expected cost efficiencies intended to be achieved through the hubs will not be realised.

Meeting service level standards

3.49 CGH agreements with client entities establish service level standards for the hub’s performance. The service level standards define targets for eight system availability service level areas and five grant round administration service level areas.¹⁰⁴ CGH reports on these standards in Monthly Partnership Reports.

3.50 ANAO examined 103 CGH monthly partnership reports for eight client entities from September 2016 to September 2020.

• When reported, the targets for four of the eight system availability service level areas were met in 100 per cent of reports¹⁰⁵, and the remaining four targets were met in 85 to 95 per cent of reports.¹⁰⁶
• When reported, the targets for one of the five grant round administration service level areas was met in 100 per cent of the reports¹⁰⁷, and the remaining four targets were met in 86 to 94 per cent of reports.¹⁰⁸

3.51 BGH service level standards are established in the BGH service catalogue for each phase of the grants lifecycle, and include targets.¹⁰⁹ BGH does not report against its service level standards.

3.52 The ANAO surveyed client entity staff managing grant programs about satisfaction with hub services (see Appendix 5).

• Overall, respondents were generally more satisfied with BGH than CGH services.
• BGH respondents were more satisfied with design, manage and establish services, than with select or evaluate services.
• CGH respondents were more satisfied with design and select services, than with establish, manage and evaluate services.

3.53 Reasons for dissatisfaction with hub services included cost¹¹⁰; quality of services¹¹¹; lack of information or delays in providing information; perceived siloed services in CGH with lack of interaction between teams from various phases and within phases; lack of clarity on the respective responsibilities of the hubs and the client entity; duplication of effort between the hubs and the client entities¹¹²; perceived increased administrative burden associated with using the hubs; and services offered not aligning with grant program requirements.

3.54 With regard to compliance with the CGRGs, meeting finance law requirements and effectiveness of risk management, fewer than 20 per cent of grant program managers were dissatisfied with each hub’s performance. With regard to meeting grant program timelines, managing grant program risks, clarity of roles and responsibilities, and governance arrangements fewer than 20 per cent of program managers were dissatisfied with BGH’s performance, and between 30 and 40 per cent were dissatisfied with CGH’s performance.

Supporting client entities

3.55 BGH and CGH have published vision or purpose statements on their websites which emphasise the importance of working with policy partners, Australian Government agencies, grant applicants and grant recipients.

Design phase

3.56 Budget Process Operational Rules (BPORs) and Estimates Memoranda established requirements for consultation between hubs and participating entities when developing grant policy proposals.

• All implementation (including administration and ICT) costs across the five stages of the grants lifecycle must be prepared in consultation with the grants hubs.
• Hubs and participating entities must reach agreement on implementation costs and present the outcome of the agreement in the New Policy Proposal (NPP).¹¹³
• Participating entities must provide to the hub the final NPP submitted to government by the client entity.¹¹⁴
• Where an NPP is agreed to by government, hubs and client entities must execute formal agreements for the provision of grants administration services.¹¹⁵

3.57 From the outset, both hubs included consultation in their range of engagement and design services to client entities — through a Design and Liaison Team and Program Managers in the BGH and Client Managers in the CGH. This included establishing quoting processes for determining NPP costs.

3.58 Finance identified 105 NPPs relating to grant programs since 2016. These NPPs were examined by the ANAO to determine whether hubs were identified as affected entities and specified hub administration costs. NPPs did not consistently refer to the hubs or specify the administration costs attributable to the hubs.

3.59 The ANAO examined 145 costing agreements provided by Finance with a view to following them through to hub agreements. The ANAO was unable to definitively match any costing agreement with any program specified in hub agreements. Matches could not be made because Finance, BGH and CGH use different naming conventions for programs and quote registers contained insufficient information to allow for matching. Matching costing agreements with hub agreements was also impeded by some costing agreements not identifying a hub; or including hub costs; and most agreements not including costs from a hub quote.

3.60 In the survey of client entity staff managing grant programs, the ANAO found that one of 13 BGH client entity staff surveyed was dissatisfied with the level of consultation during the initial design phase of the grants lifecycle, compared to nine of 30 CGH client entity staff (see Appendix 5). Two of 21 BGH client entity staff were dissatisfied with the consultation when establishing agreements, compared with 12 of 31 CGH client entity staff.

Use of hub services

3.61 The SGGA Program implementation plan sets out responsibilities of the hubs including the development of a service offering and catalogue; transition plans and readiness checklist for establishing individual grants in a hub environment; and a common set of costing and pricing models across the grants lifecycle.

3.62 In late 2015 the Governance Board endorsed a Service Catalogue Framework¹¹⁶, Costing Methodology¹¹⁷ and Transition Principles. These framework documents were intended to guide the development of hub documentation. Table 3.5 shows the month and year in which SGGA Program framework documents and hub supporting tools were developed, if at all.

Table 3.5: Timing of development SGGA Program transition framework documents and hub supporting tools

Note a: Finance provided client entities with a Transition Plan Template for preparing and communicating an entity’s Grants Administration Transition Plan. Completion of the Transition Plan was primarily the responsibility of the client entities; collaboration with the hubs was required to provide quotes and determine the feasibility, timeframe and requirements for transition of each program. The hubs used the transition plans to develop transition schedules.

Note b: Each hub developed its own costing and pricing model commencing in the 2016–17 financial year. The BGH costing model is not made available to client entities and is used to generate quotes. The CGH costing model was the basis for a services rate card (price list) that is available to client entities.

Note c: The price list was included in a presentation about the BGH cost model to Finance in July 2020.

Source: ANAO based on Finance, DSS and Industry documents.

3.63 While service offerings and catalogues were developed by the hubs, they were not based on whole-of-government business processes. The format of other tools did not support price comparisons by entities. BGH did not publish a price list on its public facing website or its portal. A common costing and pricing model was not developed. The approach to costing and pricing models did not support the SGGA Program to demonstrate the realisation of financial benefits or support effective market testing.

3.64 The hubs advised the ANAO in November 2021 that a common costing model is not appropriate as there is a fundamental difference in the types of grant programs being delivered by each hub, and because each hub is underpinned by differing ICT systems, processes and departmental structures. The hubs advised that their different operating models have evolved from what was originally envisioned by the SGGA Program, based on client requirements and lessons learnt. The hubs’ position is inconsistent with advice included in the SGGA Program funding proposal, which said grant programs could be implemented using one of six standard patterns (workflows).

3.65 Self-service portals were to be developed by the hubs to facilitate client entities’ access to information. Despite commencing development of the BGH portal in 2018, it was incomplete in March 2021, with the majority of pages on the site containing no material for client entities, or content that had not been periodically updated. In November 2021 Industry advised ANAO it has not updated the portal as the primary mechanism for engagement with external parties is through a dedicated account manager.

3.66 CGH’s portal, HubNet, hosts extensive guidance and explanatory material. In 2020 CGH commenced a review of HubNet. At September 2021 CGH planned to refresh the HubNet site.

3.67 The ANAO surveyed client entity staff managing grant programs about the adequacy of hub support and guidance. More than 80 per cent of BGH client entity staff were satisfied, compared with less than 40 per cent of CGH client entity staff. In relation to the CGH, the most common concerns were the clarity, accuracy and reliability of guidance.

Have the hubs supported more efficient grants administration?

3.68 The SGGA Program implementation plan states that the objective of the SGGA Program was to establish a whole-of-government approach to streamlining grants administration, taking into consideration user needs. The implementation plan acknowledges that the great majority of the benefits for government are to be achieved by streamlining administrative processes¹¹⁸ rather than rationalising the grants ICT environment. Standardised business processes in combination with improved scheduling and productivity of specialised staff in hub shared services centres were intended to lead to potential efficiencies of approximately $50 million annually (representing a 20 per cent reduction in administrative costs). Finance completed or commissioned benefits measurement exploring cost efficiencies but did not establish efficiencies were achieved (see paragraphs 2.40 to 2.42).

Standardisation of streamlined grants administration processes

3.69 The implementation plan assigned responsibility to the hubs for the development of standardised whole-of-government business process and workflow patterns.¹¹⁹ The July 2017 SGGA Program Implementation Plan indicates that in December 2016 the SGGA Governance Board endorsed a whole-of-government grant program delivery model that set out the standardised business processes, although SGGA Governance Board meeting records do not document this.

3.70 To support streamlining the hubs designed business processes around the grant lifecycle phases, engaged in processes to increase automation, assigned responsibility to internal governance committees to oversight streamlining, and reviewed and improved the description of grant phases, business processes, and reduced workflow steps. At times these activities to support streamlining have not resulted in the intended improvement¹²⁰, including agreed common business processes.

3.71 It was the intention that each hub maintain its own grants management ICT system (Table 1.1). The primary grants management systems are GPS (CGH) and BGM (BGH). However, both hubs rely on attachments and records stored in multiple systems (Table 3.6).

Table 3.6: Grants management ICT systems

Source: BGH and CGH advice and documentation.

3.72 The multiplicity of systems used by both BGH and CGH is inconsistent with the SGGA Program funding proposal, which specified that the use of a single grants management ICT system by each hub was critical in driving business process change and achieving cost efficiencies.

Pricing of grants administrations services

3.73 In April 2015 government agreed that the operational costs for hub grants administration services would be recovered using a user pay cost recovery model based on a unit priced service catalogue. To support cost recovery, the SGGA Program implementation plan requires the hubs to develop a common service catalogue and pricing model, maintain cost information and report costs to Finance as required.

3.74 Both hubs sought to understand grants management costs before developing a pricing structure. PwC was engaged by Industry and DSS to analyse the grants management process of the two entities and assist with the development of a high-level costing approach. The objective was to ensure that implementation of two grants hubs was supported by a consistent understanding of cost drivers and an agreed approach to pricing. The results of the PwC analysis were presented to the hubs in August 2015. The report noted that neither department was capturing the end-to-end costs of the grants administration process, therefore it is unlikely that pricing would fully recover costs.

3.75 BGH initially developed a costing model that was based on estimates of effort involved in delivering each phase of the grants lifecycle.¹²¹ Following a February 2020 management initiated review, this was changed to a ‘self-serve’ model¹²² based on activity volumes rather than estimates of effort. This was viewed as potentially improving certainty about agreed costs. BGH developed a new pricing schedule to commence from 1 July 2020.

3.76 As at February 2021 BGH manages programs under both the old and new approaches based on the costing model that was in place when an agreement was entered into.

3.77 CGH developed and maintained an activity-based costing model. DSS believes there have been improvements over time in the confidence that can be placed on the underlying data.

3.78 Over time there have been adjustments to achieve greater cost recovery.

• In April 2017 CGH identified 25 hub-related activities that had not been included in the original 147 activities listed in the service catalogue. Subsequently, CGH adjusted its service catalogue, price list and costing model.
• In 2020 BGH determined that it was undercharging for evaluation services. It also found that costing did not include the cost of the ICT systems. The costing model was adjusted to include the cost of ICT systems.

3.79 Due to differences in the two grants hubs’ pricing approaches, including different units to measure volume of hub services, it is not possible to produce a reliable overall price comparison.

Appendix 1 Entity responses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appendix 2 Improvements observed by the ANAO

1. The existence of independent external audit, and the accompanying potential for scrutiny improves performance. Improvements in administrative and management practices usually occur: in anticipation of ANAO audit activity; during an audit engagement; as interim findings are made; and/or after the audit has been completed and formal findings are communicated.

2. The Joint Committee of Public Accounts and Audit (JCPAA) has encouraged the ANAO to consider ways in which the ANAO could capture and describe some of these impacts. The ANAO’s 2021–22 Corporate Plan states that the ANAO’s annual performance statements will provide a narrative that will consider, amongst other matters, analysis of key improvements made by entities during a performance audit process based on information included in tabled performance audit reports.

3. Performance audits involve close engagement between the ANAO and the audited entity as well as other stakeholders involved in the program or activity being audited. Throughout the audit engagement, the ANAO outlines to the entity the preliminary audit findings, conclusions and potential audit recommendations. This ensures that final recommendations are appropriately targeted and encourages entities to take early remedial action on any identified matters during the course of an audit. Remedial actions entities may take during the audit include:

• strengthening governance arrangements;
• introducing or revising policies, strategies, guidelines or administrative processes; and
• initiating reviews or investigations.

4. In this context, the below actions were observed by the ANAO during the course of the audit. It is not clear whether these actions and/or the timing of these actions were planned in response to proposed or actual audit activity. The ANAO has not sought to obtain assurance over the source of these actions or whether they have been appropriately implemented.

5. Department of Finance actions included completing an End Stage Gateway Review in June 2021 and engaging PricewaterhouseCoopers to undertake user experience research to support benefits realisation measurement in 2021. In February 2022, Finance advised the ANAO that it had engaged services to further develop business process mapping.

6. Department of Industry, Science, Energy and Resources actions included updated hub grants administration workflows in early 2021 and in October 2020, the hub reviewed its service offerings recommending changes be made to the service catalogue for external entities.

7. Department of Social Services (DSS) actions included:

• commencing a review of its portal, HubNet, in 2020 and in September 2021 migrating the hub policies and procedures to a new SharePoint team site which included an online manual for grants administration;
• bringing together assurance activities in an overarching document to consolidate its framework in December 2020; and
• reviewing the hub’s service offering in 2021 and making subsequent changes to its service catalogue and price lists.

8. Digital Transformation Agency actions included reporting to government on the outcomes of the DSS information and communications technology investment project to deliver a single grants process across departments in November 2021.

Appendix 3 Funding for the SGGA Program and related initiatives

1. The funding amounts in Table A.1 includes direct funding to the SGGA Program as well as funding to information and communications technology (ICT) initiatives (including gateway reviews) and other initiatives integral to delivery of the SGGA Program.

Table A.1: Funding for the SGGA Program, Public Service Modernisation Fund and grants systems initiatives

Note a: Initially referred to as the Australian Government Grants System, grants.gov.au was rebranded as GrantConnect in 2017. GrantConnect is the Australian Government’s grants information system. It provides centralised publication of forecast and current Australian Government grant opportunities and grants awarded. GrantConnect [Internet], Finance, available from https://www.grants.gov.au/ [accessed March 2022]. GrantConnect is discussed at paragraph 1.12.

Note b: Between 1 July 2013 and 25 September 2020, Finance estimates the development and maintenance costs for GrantConnect to be $10.9 million.

Source: Summary of related budget measures between 2013–14 and 2017–18, and program planning documentation.

Appendix 4 Hub grants management information and communications technology systems

Table A.2: Hub grants management information and communications technology systems, and type and number of systems users

Note a: FaHCSIA was the former Australian Department of Families, Housing, Community Services and Indigenous Affairs.

Note b: Note users of eSGMS and the Business Grants Hub portal may have multiple access or account types resulting in inflated user numbers.

Note c: Client entities include Department of Agriculture, Water and the Environment, Attorney-General’s Department, Department of Education, Skills and Employment, Department of Health, Department of Home Affairs, Department of the Prime Minister and Cabinet, Department of Social Services (DSS), Department of Veterans’ Affairs and National Disability Insurance Agency.

Note d: 442 organisations were on-boarded in 2018. CGH offered 701 grant recipient organisations access to the grant recipient portal between December 2020 and March 2021, and 96 of these organisations accepted the offer.

Note e: CGH has different access points (systems/portals) depending if you are an applicant or an existing Grant Recipient. The total number of applications received from 2018–19 through to 2021–2022 is 64,667. These applications were not received through the Grant Recipient Portal.

Source: Summary of Industry and DSS advice and documentation.

Appendix 5 ANAO survey

1. Between November and December 2020, the ANAO surveyed all 28 entities that published grant opportunities and/or awards on GrantConnect in 2018–19 and/or 2019–20, including entities that use and do not use hub services.

2. The survey sought entities’ views to inform audit findings directed towards the Department of Finance and the hubs. The survey had two parts:

• Part 1 — Was to be completed by both users and non-users of hub services at the entity level. A single response was sought for this part of the survey.
• Part 2 — Was directed to users of either or both the Business Grants Hub (BGH) and Community Grants Hub (CGH) services. Part 2 was to be completed by at least one grant program area from each entity. In some cases, the ANAO received responses from more than one grant program area in an entity.

Appendix 6 Consistency of Business Grants Hub practices with a selection of business processes and workflows