Introduction

1. Grants administration is an important activity for many Commonwealth entities, involving the payment of billions of dollars of public funds each year.¹ However, prior to late 2007, there was no official guidance provided to agencies relating specifically to the administration of grant programs. In December 2007, Finance Minister’s Instructions were issued providing information about the Budget and other related processes, including the decision-making processes that were to apply to grants.

2. In particular, the 2007 Instructions introduced a requirement that Ministers should not make any decisions on discretionary grants without first receiving departmental advice on the merits of the grant application relative to the guidelines for that program. The Instructions further provided that two types of grant decisions (the approval of grants that agencies had recommended be rejected and grants within a House of Representatives Minister’s own electorate) were to be referred to a group of Ministers for decision.² In respect to the public reporting of approved grants, the Instructions required that the details of individual grants were to be published on agency websites within two days of the announcement of the grant.

3. In February 2008, the then Minister for Finance and Deregulation (Finance Minister) announced that a comprehensive review of the value of discretionary grants and the transparency and effectiveness of existing programs would be undertaken.³ In establishing and undertaking the review, particular attention was paid to the findings and recommendations of the wide range of audits of grants administration undertaken by the Australian National Audit Office (ANAO). In this respect, the July 2008 report of the Strategic Review of the Administration of Australian Government Grant Programs (Strategic Review) commented that many of these audits had raised significant issues going both to the overall framework for the administration of grant programs and to the quality of administration of individual programs.⁴

4. The Strategic Review recommended the retention of the existing requirement for public reporting of individual grants, albeit with some changes to the operation of the requirement.⁵ In light of the findings and recommendations of the Strategic Review, the Government decided that the requirement for Ministers to refer two types of grant decisions to a Ministerial group would be replaced by an arrangement under which responsibility for such decisions would be retained within the responsible portfolio, but with the associated requirement that Ministers will report to the Finance Minister:

• all decisions to approve a particular grant which the agency has recommended be rejected; and
• for Ministers that are a Member of the House of Representatives, each instance in which they approve a grant in their own electorate.

5. These additional reporting requirements took effect in January 2009 (through revised Finance Minister’s Instructions). They were subsequently retained, with some minor amendments, in the Commonwealth Grant Guidelines (CGGs)⁶ which were issued on 1 July 2009 to give full effect to the Government’s consideration of the recommendations of the Strategic Review. The reporting provisions (and related grant administration requirements) were also supported by the retention in the CGGs of the requirement that Ministers will not approve a proposed grant without first receiving agency advice on its merits. Table S.1 summarises the three key grant reporting obligations that are currently in place.

Table S.1: Grant reporting obligations as at November 2011

Source: Commonwealth Grant Guidelines, Policies and Principles for Grants Administration, July 2009.

Audit objective

6. The objective of the audit was to assess the implementation and effectiveness of the enhanced grants administration requirements for:

• reporting to the Finance Minister on the awarding of grants within their own electorate by Ministers who are Members of the House of Representatives;
• reporting to the Finance Minister on instances where Ministers have decided to approve a particular grant which the relevant agency has recommended be rejected; and
• the website reporting of grants awarded.

7. As part of the audit, a survey was conducted by ANAO of all agencies subject to the Financial Management and Accountability Act 1997 (FMA Act) to identify the grant programs that had been in operation since December 2007, when the first enhancements were made to the grants administration framework. Copies of all advice provided to relevant Ministerial decisions-makers by agencies between 1 January 2009 and 30 June 2010 in which the Minister was asked to make a decision about whether or not to approve a grant were also requested. Based on the survey responses, ANAO examined some 800 Ministerial briefs relating to around 220 programs⁷ across 20 agencies. Examination of the quality of the agency assessments of individual proposed grants (in terms of the relevant program objectives and guidelines) undertaken to support the advice included in each brief was not within the scope of this audit.

Overall conclusion

8. The transparency, accountability and probity with which grant decisions are made have been matters of longstanding Parliamentary and public interest. This is because grants are a widely used means of contributing to the achievement of particular public policy objectives, and involve the use of significant levels of public money to provide financial benefits that recipients would not otherwise have received. In the context of many grant programs, this will involve some potential recipients being successful, while others are not. It is also recognised that there is the potential for electoral advantage to arise, or be sought, from the making of grants.

9. The enhanced grants administration framework that was progressively introduced between December 2007 and July 2009 had the stated aim of improving the quality of administration and ensuring Australian taxpayers receive the best possible outcomes from expenditure on Commonwealth grants. Accordingly, this framework has a particular focus on the establishment of transparent and accountable grant decision-making processes. The various reporting requirements incorporated into the framework are expected to make an important contribution in these respects.

10. Key underpinnings of the grant reporting arrangements are that Ministers not approve a proposed grant without first receiving agency advice on its merits relative to the program’s guidelines; and report to the Finance Minister all instances where they approve grants that the relevant agency recommended be rejected. These requirements, together with other related enhancements to the grants administration framework, do not affect a Minister’s right to decide on the awarding of grants. Rather, they provide for an improved decision-making framework encouraging Ministers to be as well informed as possible when deciding whether to approve grants, and promoting transparency around the reasons for decisions.

11. Providing Ministers with a recommendation as to whether a proposed grant should be approved or rejected enhances the capacity of agencies and Ministers to meet related reporting obligations. It also assists Ministers to identify those occasions where it will be necessary to separately record the basis for any decision to approve a grant to comply with their broader obligations when acting as a financial approver in relation to grants.⁸

12. Consistent with the grants administration framework, it is usual for agencies to provide Ministers with written briefing material to inform decisions about whether to approve or reject proposed grants. However, the quality and nature of agency briefing practices was variable, with a significant proportion of the briefs examined in the course of this audit not clearly identifying those proposed grants that the agency recommended be approved, and those that it recommended be rejected. In particular, while some programs performed well, a clear recommendation was not included in one or more briefs provided in relation to 20 per cent (or one in five) of the programs reviewed, across ten agencies (involving about a third of all briefs provided in respect to the affected programs in the 18 month period examined). In addition, it was relatively common for agency briefings to not clearly identify to the Minister that the spending proposal under consideration involved a grant (more than a third (37 per cent) of the briefs examined); and/or to not outline the decision-making and record-keeping obligations that apply when the approval of grants is being considered. ⁹

13. As a consequence, shortcomings in reporting to the Finance Minister have included that:

• while the incidence of Ministers approving grants within their own electorates is quite low, there were 33 instances in the briefs examined by ANAO where grants approved in a Minister’s own electorate were not reported to the Finance Minister (indicating an underreporting in the relevant period of some 38 per cent¹⁰); and
• there have only been a very small number of instances reported to the Finance Minister as involving a Minister approving a grant that the relevant agency had ‘recommended be rejected.’¹¹ A key factor in this outcome has been the practice of agency briefings not clearly identifying the grants the agency recommends be approved, and those that it recommends be rejected (including where more applications are assessed as being meritorious than can be accommodated within the available funding).

14. There would be benefits in the Grants Framework Unit in the Department of Finance and Deregulation (Finance) engaging more extensively with agencies so as to promote improvements in important aspects of grants administration, including by articulating the minimum standards expected of agencies when advising Ministers on the merits of proposed grants and the interaction of this advice with the reporting of certain types of grant decisions to the Finance Minister.

15. Public reporting of grants by agencies could also be improved. In particular, a small number of agencies had not presented data on individual grants on their websites. There was also mixed performance among agencies in providing the full range of data required to be reported within the required timeframe. This situation was reflected in more than a quarter of the total instances of non-compliance reported by agencies as part of the 2009–10 Certificate of Compliance process relating to the website reporting arrangements.¹² Currently, agencies are required to comply with three separate grant reporting regimes requiring different information to be reported at different points in time. In that context, there would be benefits in seeking to align the various public reporting requirements (where this is practical) in a way that will promote more accurate, timely and complete reporting of grants while not diminishing the availability of quality public information.

16. The promulgation of advice to agencies on the administration of grants, culminating with the issuing of the Commonwealth Grant Guidelines in July 2009, was a significant advance in this aspect of public administration. For the first time, the Government’s expectations for Ministers, agencies and officials when performing duties in relation to grants administration were clearly articulated. However, given the passage of some two-and-a-half years since the CGGs took effect and the findings of this audit, it is timely for aspects of its implementation to be reviewed as there is certainly room for improvement on the part of agencies with assistance and leadership from Finance (as the relevant central agency). Within this context, ANAO has made three recommendations aimed at enhancing the quality of advice provided to Ministers and compliance with the associated reporting obligations. It is also recommended that opportunities for improving the accuracy, completeness and cost-effectiveness of public reporting on grant programs and the awarding of individual grants be examined.

Key findings by chapter

Agency Advice on the Merits of Grant Spending Proposals (Chapter 2)

17. A key focus of the new grants administration framework has been the establishment of specific legislative and policy requirements in relation to the grant assessment and approval process. These include an explicit requirement that Ministers obtain advice from the relevant agency on the merits of a proposed grant before any decision is taken as to whether to approve the grant. This requirement, and other related enhancements to the grants administration framework (including those requiring certain types of grant approvals to be reported to the Finance Minister) are designed to assist Ministers to be appropriately informed when deciding whether to approve grants, and enhances accountability for those decisions. The Joint Committee of Public Accounts and Audit recently reiterated the importance of agencies providing advice on the merits of proposed grants before any funding decisions are taken.¹³

18. ANAO’s examination of Ministerial briefs for proposed grants prepared over the period January 2009 to June 2010 identified a number of areas in which agency briefing practices could be improved. In particular, providing a clear recommendation as to whether a proposed grant should be approved or not is important in the context of promoting the desired improvements to grants administration, as well as assisting Ministers to consistently and demonstrably comply with their obligations. However, within the 800 Ministerial briefs examined by ANAO, briefing practices were variable across agencies and programs. While some programs performed well in this respect, in others it was relatively common for the brief not to incorporate a clear funding recommendation from the agency.

19. A significant factor that influences the necessary content of agency briefings on the merits of proposed grants is the process by which potential funding recipients are identified and are able to access the program. In particular, different issues arise when advising Ministers on the merits of proposed grants depending upon whether the relevant program involves a competitive merit-based selection process or non-competitive and/or non-application based process. ANAO identified significant shortcomings in the briefing practices adopted by agencies in relation to both types of grant selection processes.

20. Over the 18 month period examined, a clear recommendation was not included in one or more of the briefs provided to a Ministerial decision-maker in relation to one in five of the programs reviewed, across ten agencies. These instances represented 34 per cent of the total number of briefs provided to ANAO in respect to the affected programs. Also of relevance to the terms of the reporting requirement set out in the CGGs¹⁴ is that fewer than 10 per cent of the briefs examined included an explicit recommendation that specified proposed grants be rejected by the Minister. It was also relatively common for agency briefings to:

• not clearly identify that the spending proposal on which the agency was advising involved a grant, with this being the case in more than a third (37 per cent) of the briefs examined that were provided to Ministers between 1 July 2009 (when the CGGs came into effect) and June 2010; and/or
• not outline the decision-making and record-keeping obligations that apply when proposed grants are being considered. Specifically, more than half of the briefs examined (55 per cent) did not refer the Ministerial decision-maker to the FMA Act and/or Regulations, and fewer than 29 per cent of briefs prepared after 1 July 2009 contained any reference to the CGGs.

21. In addition to agencies improving these aspects, there would also be benefits if:

• for competitive, merit-based grant programs¹⁵, agency briefings more consistently rated applications in terms of suitability for funding and ranked each competing application in priority order. This ranking would then form the basis of the agency’s advice to the Minister as to which applications are recommended to be approved and which to be rejected, having regard to the program’s objectives and the funding available. In this respect, providing Ministers with groups of similarly-rated proposals without identifying which of those proposals the agency is recommending be approved (and why) is not sufficient to support the Minister’s various obligations in relation to considering, recording and reporting grant approvals (particularly where the projects rated as meritorious under the relevant guidelines exceed the available funding);
• for non-competitive grant programs, clear rules are specified and applied in relation to determining the order in which potential funding recipients will be considered for access to the available funding; and the responsible agency appropriately evaluates, and advises the decision-maker on, the value for money offered by each project under consideration in formulating funding recommendations;
• in circumstances where an agency considers there is merit in providing a Minister with various funding options, the agency advice include a clear recommendation as to which option is preferred, and why. In the absence of such a recommendation, it will be difficult to ensure that all relevant decision-making and reporting obligations that arise under the financial framework and the CGGs are consistently observed; and
• where initial agency assessments are updated and/or changed through a series of two or more agency advices (for example, as further information is obtained and/or further analysis is undertaken), that the reasons for any such changes are clearly documented to enhance the accountability of both agencies and decision-makers.

22. These findings indicate that enhancements to the CGGs and associated guidance and in the role played by Finance in relation to promoting improvements in the application of the grants administration framework would be beneficial. However, they also highlight the importance of agencies understanding the essential elements of the CGGs; and putting in place appropriate arrangements for the preparation, oversight and submission of briefs seeking Ministerial consideration of the approval or otherwise of proposed grants that apply the intent of the Government’s requirements for the administration of grants, which was to improve transparency and accountability.

Reporting to the Finance Minister (Chapter 3)

23. Since January 2009, there has been a requirement for Ministers to report two types of grant decisions that were seen as ‘sensitive and potentially controversial’. Specifically, the Finance Minister is to be advised in writing:

• each time a Minister who is a Member of the House of Representatives awards a grant within his or her own electorate; and
• by 31 March of each year, outlining all instances in the prior calendar year where decisions were taken by Ministers to approve grants that the agency had recommended be rejected.

24. The incidence of Ministers approving grants in their own electorate is quite low, with a total of 77 such instances being reported over the 30 months between January 2009 and July 2011. Of those, 54 had been approved in the 18 month period to June 2010 examined by ANAO. However, within the briefs provided in response to the audit survey, ANAO identified a further 33 grants approved in the same period that should also have been reported to the Finance Minister, but were not. This indicates an underreporting of own-electorate grants in the relevant period of at least 38 per cent. In October 2011, Finance advised ANAO that it agreed that there is merit in reviewing the own-electorate reporting arrangements with a view to advising the Finance Minister of any opportunities for improvement.

25. A potentially more significant issue relates to the identification and reporting of instances where Ministers have not accepted a recommendation that a proposed grant be rejected. In respect of such decisions, the Strategic Review noted¹⁶ that different conclusions about whether to approve a grant can be legitimately drawn from any given set of information and evidence, and it is open to a Minister to reach a decision different from that recommended in an agency’s advice. In this context, the requirement for agencies to provide prior advice to Ministers on the merits of each proposed grant was seen as a prudent control intended to ensure that, where Ministers elect to assume a decision-making role, they are well-informed of the relevant agency’s assessment of the merits of grant applications and suitably briefed on any other relevant considerations.¹⁷

26. In the first two years in which this reporting obligation applied, only a small number of instances were reported to the Finance Minister as involving a Minister approving funding for a ‘recommended be rejected’ project. Specifically, a total of 11 individual grant approvals were reported across all portfolios for the two years to 31 December 2010. While there was variability in the extent and manner in which Ministers recorded the basis for the relevant decisions at the time of approval¹⁸, in each case the Minister provided the Finance Minister with a brief statement of the reasons for having approved the grant (as required under the CGGs). In none of the 11 instances where Ministers had reported the approval of grants in such circumstances did the reporting to the Finance Minister result in Finance recommending to its Minister that any further action be taken, or the Finance Minister otherwise initiating any action in response to the reporting.¹⁹

27. All of the reported instances had been approved in the 18 month period to June 2010 examined in this audit, and represented 0.05 per cent of all proposed grants considered by Ministers in the same period as documented in the briefs provided to ANAO (or nearly one in every two thousand grant proposals). In that context, accurate and complete reporting of instances where a Minister has not accepted a recommendation that a grant be rejected depends upon agencies providing a clear recommendation in that regard, and accurately recording the nature of the subsequent Ministerial decision. As indicated, there remains considerable scope for improvement in that aspect of grant program administration, with the shortcomings in briefing practices identified in this audit having played a significant role in the low level of reported instances.

28. Without detracting from the clear responsibilities of individual agencies, and consistent with the objectives underpinning the Government decision to establish a grants framework unit, there would be benefits in Finance working collaboratively with agencies to assist them in implementing the grants administration framework, including in relation to more effectively meeting the obligation to advise Ministers on the merits of proposed grants. In particular, it would be beneficial for Finance to pursue opportunities to:

• clarify aspects of the CGGs, either within the Guidelines themselves or in related advisory circulars. This is particularly the case in respect to articulating the minimum standards expected of agencies when advising Ministers on the merits of proposed grants, and the interaction of this advice with the reporting of certain types of funding decisions to the Finance Minister; and
• actively encourage improvements in agency practices, such as providing forums for interaction with, and between, agencies on important aspects of grants administration. A role of this nature was clearly envisaged in establishing the Grants Framework Unit and in the associated funding provided.²⁰

29. In addition, while the existing framework requires that records be kept, and the Finance Minister informed, of instances where public money is approved for grants an agency had recommended be rejected, it does not address the situation of funding not being approved for a grant that the agency recommended be approved based upon its assessed merits. ANAO’s examination of Ministerial briefs indicated that this situation may be more common than the form of decision taken contrary to agency advice that is currently required to be reported, with such decisions representing 2.2 per cent of grants considered between January 2009 and June 2010 (compared to the reported instances of ‘recommended be rejected’ grants being approved representing 0.05 per cent of grant proposals in the same period).²¹ Consequently, there may also be benefits in Finance examining, for Ministerial consideration, whether there are opportunities for expanding the kind of Ministerial grant decisions made contrary to agency recommendations that are to be reported to the Finance Minister.

Public Reporting of Grants (Chapter 4)

30. The Strategic Review identified that easily accessible information on the availability of grants and the details of grants awarded is a precondition for public and parliamentary confidence in the quality and integrity of grant program administration.²² In this context, there are three separate, but related, public disclosure arrangements for grants:

• a longstanding requirement for agencies to publish, through their annual report, a list of grant programs for which they are responsible (with the Joint Committee of Public Accounts and Audit being responsible for approving annual report requirements);
• from December 2007, reporting on agency websites of the details of individual grants. Since January 2009, approved grants do not have to be reported until the relevant funding agreement has been signed and (from 1 July 2009) takes effect; and
• since June 2008, for the purposes of informing Senate Estimates hearings, reporting to the Senate on grants approved in the period since the last hearings (with this requirement having been established by way of a Senate Order).

31. The Senate Order approach of reporting on grants within close proximity to the time of approval, rather than delaying public reporting until (and if) a funding agreement takes effect (the CGGs approach), provides more complete and timely information to the Parliament and other stakeholders on Commonwealth granting activity. The inconsistent approaches taken to the grant reporting ‘trigger’ also do not promote efficiencies in agency reporting. In particular, meeting the obligation to publish the details of each grant within seven working days of the relevant funding agreement taking effect requires agencies to monitor and continuously update web-based reporting of individual grants approved under a single program or funding round over a longer period than would be required if all grants were to be published on agency websites within a nominated period following approval.

32. The website reporting arrangements were intended to play an important role in promoting a ‘pro-disclosure culture’²³ in Commonwealth granting activity. However, public reporting by agencies is not always accurate and complete. Of particular note is that:

• not all grant programs are being reported—13 grant programs administered by five agencies had not been reported in the grants reporting section of their website (where relevant) or annual reports or in response to the Senate Order; and agencies informed ANAO that some 11 per cent of the programs identified as having been previously reported as a grant program (either in the relevant agency’s annual report, website reporting or to the Senate) did not actually involve the provision of grants;
• a small number of agencies (four of the 40 agencies that advised ANAO they administered grant programs) did not present grants on their website in the format prescribed for website reporting, and there was also mixed performance amongst agencies in providing the full range of grants data required to be reported on websites; and
• non-compliance with the website reporting arrangements for grants comprised 28 per cent of the total instances of non-compliance reported by agencies as part of the 2009–10 Certificate of Compliance process.

Summary of agency responses

33. In addition to responding to one or more of the audit recommendations, a number of agencies provided summary comments on the audit report, as follows.

Department of Finance and Deregulation

The Department of Finance and Deregulation supports Recommendations No. 1, No. 2 and No. 3.

Attorney-General’s Department

The Attorney-General’s Department supports the recommendations within the report and will review internal controls, guidance and training material to ensure the better practice outlined within the report is incorporated into the department’s practices.

Department of Climate Change and Energy Efficiency

The department strongly supports the view that Ministerial briefing practices for the administration of grant programs should be sufficiently robust to ensure that advice to Ministers is comprehensive and unambiguous. The department is currently reviewing its grant management framework and intends to incorporate the practices expressed in Recommendation No. 1 into departmental Ministerial briefing practices.

The department also welcomes proposed improvements to the clarity and utility of the CGGs with regard to agency advice to Ministers and other important aspects of grants administration.

Department of Families, Housing, Community Services and Indigenous Affairs

The Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) has reviewed the proposed report and supports all of the recommendations within. We also welcome the opportunity to work closely with Finance on Recommendations No. 2 and No. 3.

My department takes its grant reporting obligations seriously and provides detailed policy and instructions to staff to inform them of their obligations under the CGGs, relevant Finance Circulars and the FMA Act. This is done through many formats including information on the department’s intranet, Fact Sheets on relevant topics, and advice to program areas as issues arise.

FaHCSIA will review its instructions and ensure that they clearly state the policy and statutory framework, the merits of adhering to these, and staff will be reminded of their obligations.

Department of Infrastructure and Transport

I agree with the recommendations that are made in the report, and note that a reference has been made to the findings of the audit of the Regional Partnerships program which was administered by a predecessor of this department. I am pleased to advise that the department has continued to improve its processes since then. In particular, work is being undertaken across the department in improving program development, delivery and management, including through a Program Manager’s Toolkit and the development of internal processes such as Review Ready Workshops. The guidance provided by the Program Manager’s Toolkit includes links and references to the CGGs and the Finance circulars about grant reporting obligations.

With regard to Recommendation No. 2 in relation to the strengthening of the grants administration framework by Finance, additional clarity and guidance would be most welcome. I will ensure that my department actively contributes to any consultation processes.

I also strongly support Recommendation No. 3 in seeking alignment of the various reporting obligations as this will streamline a currently duplicated workload on agencies and, importantly, clarify for the audience of these reports the timing and context of the information.

Department of Regional Australia, Regional Development and Local Government

The department agrees with Recommendation No. 1, as provided for in the CGGs, for all future programs. The department also agrees with Recommendations No. 2 and No. 3 as they provide for greater consultation, improvements in the clarity, reporting and awarding of grants.

The Treasury

Treasury is broadly supportive of the recommendations. The report will assist with transparency and accountability surrounding the administration of grant programs, especially with regards to reporting obligations.

Department of Veterans’ Affairs

The Department of Veterans’ Affairs (DVA) agrees with the recommendations of the ANAO report and its current practices are consistent with the enhancements proposed. The ANAO report highlights the need for transparency in agencies’ decision-making in relation to grants administration and approval processes. This needs to be considered in line with the Government agenda on reducing red tape for the not-for-profit sector. DVA will work closely with Finance to achieve these outcomes.

In announcing the Government’s intention to reform grants administration, the then Minister for Finance and Deregulation (Finance Minister) stated that, in 2006, Commonwealth expenditure on discretionary grants alone had totalled $2.7 billion (The Hon Lindsay Tanner MP, Minister for Finance and Deregulation, National Press Club Address, 6 February 2008). The July 2008 report of the Strategic Review of the Administration of Australian Government Grant Programs estimated that Commonwealth expenditure on all forms of conditional grants (including specific purpose payments made under legislation to state, territory and local governments and discretionary grants made to a variety of funding recipients) was likely to be between $40 billion and $50 billion per annum, or about one sixth of total Commonwealth outlays (Mr Peter Grant PSM, Strategic Review of the Administration of Australian Government Grant Programs, 31 July 2008, p. 1).

Footnotes

[1] In announcing the Government’s intention to reform grants administration, the then Minister for Finance and Deregulation (Finance Minister) stated that, in 2006, Commonwealth expenditure on discretionary grants alone had totalled $2.7 billion (The Hon Lindsay Tanner MP, Minister for Finance and Deregulation, National Press Club Address, 6 February 2008). The July 2008 report of the Strategic Review of the Administration of Australian Government Grant Programs estimated that Commonwealth expenditure on all forms of conditional grants (including specific purpose payments made under legislation to state, territory and local governments and discretionary grants made to a variety of funding recipients) was likely to be between $40 billion and $50 billion per annum, or about one sixth of total Commonwealth outlays (Mr Peter Grant PSM, Strategic Review of the Administration of Australian Government Grant Programs, 31 July 2008, p. 1).

[2] The Ministerial Group was never formed, with the then Finance Minister undertaking the role of the Group during 2008 (see further at paragraphs 3.1 to 3.7 of the audit report).

[3]   Minister for Finance and Deregulation, National Press Club Address, op. cit.

[4]   Strategic Review, op. cit., p. 2.

[5]   The Strategic Review had recommended that approved grants be published on agency websites within two weeks of the relevant funding agreement being signed, instead of within two days of the grant being announced (Strategic Review, op. cit., p. 27). The requirement ultimately introduced was for grants to be published on agency websites within seven working days of the funding agreement taking effect.

[6]   The CGGs, issued under Regulation 7A of the Financial Management and Accountability Regulations 1997, represent the whole-of-government policy framework for grants administration and apply to all departments and agencies subject to the Financial Management and Accountability Act 1997 (FMA Act). The CGGs also stipulate a number of policy and statutory requirements with which Ministers must comply when performing the role of financial approver in relation to grants.

[7]   This included a number of programs for which multiple rounds were conducted within the 18 month period to June 2010 examined by ANAO, as well as a number of ad-hoc and one-off grant arrangements.

[8]   One of the statutory requirements introduced as part of the new grants administration framework was the amendment of FMA Regulation 12 from 1 July 2009 to require that, when approving a grant, approvers (including Ministers) must record the reasons for the approval. This does not apply to other types of spending proposals (in respect to which approvers are only required to record the terms of the approval). Between January 2009 and 30 June 2009, Finance Minister’s Instructions required Ministers to record the basis of any approval of a grant the relevant agency had recommended be rejected, and that this should take the form of a written statement of the reasons for the decision.

[9]   Specifically, more than half (55 per cent) of the briefs examined did not refer the Minister to the FMA Act and/or Regulations, and fewer than 29 per cent of the briefs prepared after 1 July 2009 (when the CGGs took effect) contained any reference to the CGGs. In this respect, the CGGs stipulate that: ‘Agencies are responsible for advising Ministers on the requirements of the CGGs, and must take appropriate and timely steps to do so where a Minister exercises the role of a financial approver in grants administration.’ (Commonwealth Grant Guidelines, Policies and Principles for Grants Administration, Department of Finance and Deregulation, July 2009, paragraph 3.23) [Emphasis as per CGGs].

[10]   See paragraph 24.

[11]   Specifically, a total of 11 such grants were reported to the Finance Minister as having been approved over the first two years to 31 December 2010 that the reporting requirement had been in place. All 11 reported grants had been approved in the 18 month period to June 2010 examined and represented 0.05 per cent of all proposed grants considered by Ministers in the same period as documented in the briefs provided to ANAO (or nearly one in every two thousand grant proposals).

[12]   In 2006–07, the Australian Government introduced the Certificate of Compliance process for FMA Act agencies. Agency Chief Executives must certify, having regard to advice provided by the agency’s internal control mechanisms, management and audit committee, the agency’s compliance during the previous financial year with: the FMA Act and Regulations; Financial Management and Accountability (Finance Minister to Chief Executives) Delegation 2010, as amended from time to time; the Australian Government’s foreign exchange risk management requirements; the legal and financial requirements for the management of Special Accounts; and selected financial management policies of the Commonwealth.

[13]   Joint Committee of Public Accounts and Audit, Report 423: Review of Auditor-General’s Reports Nos 39 2009–10 to 15 2010–11, Canberra, July 2011, p. viii.

[14]   Which requires that Ministers report approved grants that the relevant agency ‘recommended be rejected’.

[15]   Which the CGGs state should be adopted, unless specifically agreed otherwise.

[16]   Strategic Review, op. cit., p. 8.

[17]   ibid., pp. 7 and 62.

[18]   See footnote 8.

[19]   Similarly, no further action resulted from the 77 reported instances of Ministers approving grants in their own electorates.

[20]   In particular, in recommending that the Government provide funding to establish a grant framework unit, the Strategic Review commented favourably on the resources invested by Finance in supporting the development and implementation of the procurement policy framework. The Review considered that the cost of a corresponding investment in relation to developing and implementing the new grants framework would be outweighed by the long-term benefits which will accrue from a robust whole-of-government framework for the administration of grants. Similarly, in agreeing to fund the unit, the Government was advised that the establishment of a dedicated unit within Finance would support agencies by providing a single point of contact on the new grants framework, and would be a key factor in mitigating the risk of the new framework not meeting its policy objectives or not being implemented in a consistent and robust manner across agencies.

[21]   In this respect, as outlined in ANAO’s Better Practice Guide on the administration of grants, it is important to recognise that, in the context of a grant program, transparency of the reasons for not approving funding for individual applications is as important to accountability as it is in relation to decisions to approve other applications (ANAO Better Practice Guide.—Implementing Better Practice Grants Administration, June 2010, p. 81.)

[22]   Strategic Review, op. cit., p. 10.

[23]   Department of Finance and Deregulation, Certificate of Compliance 2009-10: Report to the Parliament, Foreword by the Minister, December 2010, p. iii.