Introduction

1. Australia’s higher education and vocational education and training (VET) sectors make a significant contribution to Australia’s economic and social development. In undertaking research work, the higher education sector also contributes to, or otherwise works in collaboration with, Australia’s public research agencies, and with industry-based organisations and other private sector bodies that undertake research.

2. In the 2008–09 Budget, the Government announced the establishment of the Education Investment Fund (EIF) to provide funding to help meet the capital costs of developing or renewing major infrastructure in the higher education, research and VET sectors.¹

3. The EIF was established by the Nation‑building Funds Act 2008 (the Act), and became operative on 1 January 2009. By funding infrastructure projects in the higher education, research and VET sectors, the EIF aims to:

• transform Australia’s knowledge generation and teaching capabilities;
• boost participation in tertiary education;
• position Australia to meet domestic skills needs now and into the future;
• enhance Australia’s innovation capacity;
• invigorate the growth of Australia's research capabilities; and
• enhance Australia's international competitiveness in education and research.²

4. The EIF replaced the Higher Education Endowment Fund (HEEF) that had been established in 2007 under the Higher Education Endowment Fund Act 2007 to provide funding to support infrastructure projects in the higher education sector. By 31 December 2012, $6.5 billion had been allocated to the EIF; $4.6 billion of these funds had been committed in the form of grants over eight funding components³, and $3.4 billion of the committed funds had been paid to grant recipients.

The EIF Special Account and the EIF Investments

5. The EIF comprises two inter-related parts—the EIF Special Account and the EIF investments.

6. The EIF Special Account, which is administered by the Department of Finance and Deregulation (Finance), was established under the Act. The Act provides that money held against the EIF Special Account may be used, among other things, to make grant payments to eligible organisations in relation to the creation or development of infrastructure in the higher education, research and VET sectors.

7. The Future Fund Board of Guardians is responsible for managing the EIF investments. Specifically, the Act provides that the Future Fund Board of Guardians is responsible for maximising the EIF’s returns and, in doing so, enhancing the Australian Government‘s ability to make payments towards the EIF’s objectives.

Administering the EIF

8. Under the Act, responsibility for the EIF is shared by the Minister responsible for Part 2-2 of the Higher Education Support Act 2003 (described in the Act as the Education Minister) and the Minister responsible for the Australian Research Council Act 2001 (described in the Act as the Research Minister). As shown in Table S.1, during the period 1 January 2009 to 1 March 2012, separate Ministers were responsible for the Education and Research Minister functions described in the Act. From 2 March 2012, responsibility for the Education and Research Minister functions described in the Act vested in the Minister for Tertiary Education, Skills, Science and Research.

Table S.1 Responsibility for the Education and Research Minister functions described in the Nation-building Funds Act 2008

Source: ANAO analysis.

9. Prior to machinery of government changes announced by the Prime Minister on 11 December 2011, the EIF was jointly administered by the Department of Education, Employment and Workplace Relations (DEEWR) and the then Department of Innovation, Industry, Science and Research (DIISR). Under the Administrative Arrangements Order made on 14 December 2011, the then DIISR was renamed the Department of Industry, Innovation, Science, Research and Tertiary Education (DIISRTE)⁴—since late March 2013, the Department of Industry, Innovation, Climate Change, Science, Research and Tertiary Education (DIICCSRTE).⁵

The EIF Advisory Board

10. The EIF Advisory Board (the Advisory Board) was established under the Act to assess applications against the EIF evaluation criteria and provide advice to the Education and Research Ministers about making grants from the EIF, including advising which projects satisfy the evaluation criteria.

Consideration and approval of proposals

11. The process of assessing, advising and approving projects for funding from the EIF⁶ was complex and involved a number of administrative and legislatively determined steps, as follows:

• DIISRTE undertook a preliminary analysis to determine the extent to which eligible applications addressed the evaluation criteria;
• the Advisory Board assessed the eligible applications against the evaluation criteria and advised the Education Minister and the Research Minister on which projects satisfied the evaluation criteria;
• following receipt of the Advisory Board’s assessments, the Education Minister and the Research Minister submitted, for government consideration, details of the projects assessed by the Board as satisfying the evaluation criteria and a proposed funding envelope;
• project proposals were considered by the Government⁷ in the context of agreeing a funding envelope for each grant round;
• as required by the Act, the Education Minister and the Research Minister wrote to the Minister for Finance and Deregulation (Finance Minister) recommending authorisation to enable future grants payments to be made for those projects within the funding envelope;
• under the Act, the Finance Minster may authorise the release of funds from the EIF for the nominated projects; and
• DIISRTE provided the necessary financial management approvals to enable the commitment of the grant funding, and if approved, entered into a funding agreement for individual projects.

Audit objective and scope

12. The audit objective was to assess the effectiveness of DIISRTE’s administration of the Education Investment Fund grants program. To address this objective, the design and operation of processes were examined against the following high level criteria:

• grant application assessment and approval processes were planned and undertaken effectively;
• appropriately structured funding agreements were established and managed for approved grants; and
• performance information was collected, evaluated, reported and used to inform the administration of the EIF.

13. The audit focused on processes and decision-making associated with the EIF’s second, third and sustainability funding rounds.⁸ The audit did not examine the administration of the EIF Special Account by Finance or the functions of the Future Fund Board of Guardians associated with the EIF investments.

14. As DIISRTE was the department that had responsibility for the administration of grants from the EIF during the course of the audit, this report mainly refers to DIISRTE’s administration. The recommendations and suggestions for improvement are, however, directed to DIICCSRTE because this department now has responsibility for the administration of the program.

Overview of the funding rounds examined

15. A total of 50 projects were approved for funding from the EIF in the second and third⁹ funding rounds—31 in the second funding round and 19 in the third funding round. In the second funding round, the Australian Government agreed to a funding envelope of $934 million on 17 April 2009, sufficient for the 31 projects; the successful projects were announced in the 2009–10 Budget. In the third funding round, the Government agreed to a funding envelope of $350 million on 19 May 2010, sufficient for 11 of the 19 projects, and agreed to fund the remaining eight projects (a further $200 million) on 27 May 2010; the successful projects were announced progressively over the period 21 May to 15 July 2010.

16. The level of funding approved for these 50 projects is shown in Table S.2.

Table S.2 Details of approved funding in the second and third funding rounds

Source: ANAO analysis.

17. The value of the 50 approved grants in the second and third funding rounds ranged from $5 million to $90 million. The smallest grants were provided to two organisations in the VET sector for the construction of new trades-related teaching and learning facilities. The largest grant was provided to a university to expand its science education and research facilities. Details of each of the 50 projects funded in the second and third funding rounds are shown in Appendix 3.

Overall conclusion

18. The Australian Government has allocated $6.5 billion to the EIF to support the development, renewal and refurbishment of infrastructure in the higher education, research and VET sectors. By 31 December 2012, a total of $4.6 billion in funding has been committed from the EIF across eight grant funding rounds, including $1.5 billion for 50 projects in the second and third funding rounds—the subject of this audit. At the end of September 2012, 17 of the 50 projects approved in the second and third funding rounds had been completed, with the majority of the remaining projects proceeding in accordance with their approved schedules. Responsibility for EIF grants administration changed in late 2011 to become the responsibility of the Department of Industry, Innovation, Science, Research and Tertiary Education (DIISRTE).¹⁰

19. The administration of the second and third EIF grant funding rounds by DIISRTE and its predecessor departments has been in the main satisfactory. While aspects of the departments’ grants administration were managed well, such as program planning and design and recipients’ funding agreements, there were also some shortcomings in administration relating to the maintenance of complete records of the EIF Advisory Board’s assessments, the extent of advice provided to Ministers, and the provision of financial approvals. There is also scope to develop a longer‑term performance framework to monitor and report on achievement of the EIF’s strategic outcomes.

20. The department published clear and informative program guidelines for potential grant applicants, and developed and executed formal plans for the conduct of the funding rounds. The department also supported the Advisory Board by providing preliminary assessments of grant applications against the evaluation criteria. Further, the department put in place effective arrangements for overseeing the funded projects, including monitoring compliance with the terms and conditions of their grant funding agreements.

21. To further inform its administration of the program, DIISRTE developed an evaluation strategy for the EIF focussing on three broad elements: administrative processes; the implementation and management of funded projects; and the projects’ contribution to achieving the EIF’s objectives. At the date of preparation of this report, the department has completed work on the first element of the evaluation strategy, and the second element of the strategy is programmed to be conducted during 2013.

22. In terms of shortcomings in administration, the department did not maintain records of the Advisory Board’s assessments against the individual evaluation criteria. However, the Board’s overall merit assessment of projects against the evaluation criteria was clear and well documented. This was the case in both of the funding rounds examined. The department advised that pertinent details of the Board’s consideration of the individual evaluation criteria were recorded by the departmental secretariat during Board meetings and documented in supporting records. However, the supporting records containing this information could not be located during the course of the audit.¹¹

23. The other areas where there was scope for improvement in DIISRTE’s administration of the funding rounds examined by the ANAO included that:

• the departments’ advice to the responsible Ministers for the third funding round did not inform the Ministers that should they decide not to support some projects, due to funding constraints or other reasons, the Ministers should have regard to the EIF’s evaluation criteria in setting out the basis for their decisions. In the event, the Ministers recommended to government that 19 of the 22 projects that had been proposed by the Advisory Board should be funded. While the reasons advanced for two of the projects aligned with the evaluation criteria, the reasons advanced in the third case did not;
• contrary to the requirements of the Australian Government’s financial management framework, officials in DIISRTE’s predecessor departments did not obtain relevant approvals for the commitment of public monies totalling $912 million for 34 of the 50 projects funded.¹² The majority of financial management framework breaches occurred after the release of the Commonwealth Grant Guidelines (CGGs) in July 2009; a time of heightened awareness around improving the accountability of grants administration; and
• six of the 24 projects examined by the ANAO, with combined grant funding of $222 million, were scheduled to receive all of their funding relatively early during the life of the project. In these cases, there would have been merit in DIISRTE establishing whether there was a net benefit to the Commonwealth in providing these grant funds early, and advising the financial approvers accordingly.

24. DIISRTE did not have processes in place for monitoring and reporting on progress against the Australian Government’s strategic objectives in establishing the EIF. While the department captured information on the implementation of individual infrastructure projects, the construction of infrastructure and the acquisition of attendant equipment are only a means to the achievement of the EIF’s strategic objectives, not an end in themselves. To better assist the department and stakeholders assess the outcomes achieved by the EIF, the Department of Industry, Innovation, Climate Change, Science, Research and Tertiary Education (DIICCSRTE) should take steps to develop a longer-term performance monitoring and reporting framework for the EIF.

25. The audit has made two recommendations aimed at improving the recording (and retention) of details of the Advisory Board’s assessment of applications, as well as improving the performance measurement and reporting arrangements for the EIF.

Key findings by chapter

The Second Round of Assessment and Selection (Chapter 2)

26. DIISRTE adopted a planned approach to the conduct of the second funding round. Significant activities included:

• a series of consultations with key stakeholders, including other departments involved in the administration of the Government’s Nation-building funds;
• the development of a formal plan for the conduct of the funding round, including identifying key tasks and deliverables;
• identification and assessment of potential risk factors;
• the design and publishing of program guidelines containing clear and informative guidance for potential applicants; and
• the development of an assessment plan to help guide staff in the conduct of preliminary assessments—each of the assessments examined by the ANAO had assessed the application against the EIF’s evaluation criteria.

27. The support provided to the Advisory Board by DIISRTE in the second funding round enabled the Board to fulfil its responsibilities under the Act, and was particularly important in view of the truncated timeframe requested by the Government. The department’s secretariat functions for the Board included providing guidance on probity issues faced by the Board and preparing the minutes of Board meetings. To further support the Board in their assessment of applications for funding from the EIF, the department provided the Board with details of the department’s preliminary assessments, and other analysis of the applications. The Chair of the Board acknowledged the support provided by the secretariat in his advice to the Education and Research Ministers.

28. The CGGs state that good record keeping of the assessment of applications for grants helps agencies meet accountability obligations and demonstrates that due process has been followed in actions and decisions.¹³ The department advised that pertinent details of the Board’s assessment of applications was captured by secretariat staff during Board meetings and either recorded in the meetings’ minutes or in other supporting records.

29. The minutes of Board meetings in the second funding round describe the approach taken by the Board to assess applications and contained details of the Board’s overall merit assessment for each application. Other details relating to the Board’s assessment of each application—such as the Board’s overall assessment comment and details of assessments against the individual evaluation criteria—were not reflected in the final minutes. Rather, the department advised that this information was documented in supporting spreadsheets. While details of the Board’s overall assessment comments were available, details of the Board’s assessments at the individual criteria level were unable to be located by the department during the course of the audit.

30. The Education and Research Ministers, and the Australian Government, were each provided with sufficiently detailed information to assist their decision-making in the second funding round. This included the results of the Advisory Board’s assessment of applications, clear recommendations about the projects that should be funded and an analysis of the merits of each of the projects recommended for funding. In April 2009, the Australian Government agreed to fund the 32¹⁴ projects that had been recommended for funding by the Ministers—these 32 projects had previously been recommended to the Ministers by the Advisory Board.

The Third Round of Assessment and Selection (Chapter 3)

31. DIISRTE also adopted a planned approach to the conduct of the third funding round. In particular, the design of the third funding round was informed by a review of the department’s experiences from the second funding round and further consultations with relevant stakeholders. This approach enabled the department to build on the arrangements and processes that it had put in place for the second funding.

32. DIISRTE continued to provide the Advisory Board with a high level of support during the third funding round. Again, the Chair of the Board acknowledged the work of the secretariat in his correspondence with the Ministers. However, as was the case with the second funding round, and as discussed in paragraph 29, details of the Board’s assessment of applications at the individual evaluation criteria level, which the department advised were documented in supporting records, could not be located by the department during the audit.

33. In the main, the advice provided to the Education and Research Ministers and the Australian Government to assist decision-making in the third funding round was clear, detailed and informative. Nevertheless, the departments’ advice to the responsible Ministers did not inform the Ministers that any decisions by them not to support some of the projects recommended by the Advisory Board should have regard to the EIF’s evaluation criteria. Providing such advice to the Ministers in the third funding round was important given the context in which the Ministers made their recommendations to government—that is, that the funding envelope announced by government was not sufficient to fund each of the 22 projects recommended to the Ministers by the Advisory Board.

34. In May 2010, the Government agreed with the Ministers’ recommendation that the level of financial assistance provided in the third funding round should stay within the funding limit that had previously been announced in the 2009–10 Budget ($550 million). The Ministers recommended and the Government agreed to fund 19 of the 22 projects that the Advisory Board had assessed as meeting the evaluation criteria. The Government was provided with the details for each of the 22 projects, together with advice on the basis of the Ministers’ recommendation not to fund three of the projects. While the documented basis for not supporting two of the three projects aligned with the EIF’s evaluation criteria, in one case, the documented reason was not framed in the context of the EIF’s evaluation criteria.

Implementing and Managing Funding Agreements (Chapter 4)

35. The funding agreements for the 50 projects approved in the second and third funding rounds were generally signed in a timely manner. However, the time taken to execute several funding agreements was affected by the then DIISR’s decision to delay negotiations with project proponents due to competing priorities. In one case, the department delayed the commencement of the negotiation of the funding agreement by more than a year. With one exception, the funding agreements examined by the ANAO contained terms and conditions that were commensurate with the size and nature of the funded projects. Only the funding agreements administered by the former DIISR contained requirements relating to the development and reporting of performance measures during the projects’ construction. Rather than require regular reporting against performance measures, the proponents of the projects formerly administered by DEEWR are only required to provide, as part of their final report, information on the project’s achievements. While accepting that the most beneficial performance information is likely to be available following the completion of construction of the infrastructure, the performance information captured for the projects administered by DIISR usefully informed the department about the early benefits of these projects.

36. For each of the 24 projects examined, the approved grant amount was scheduled to be paid in instalments, on the receipt (and acceptance) of a performance report showing satisfactory achievement against one or more milestones. In 18 of the examined projects, the scheduled instalment payments were generally well spread over the project’s life and the scheduled milestones. However, six projects with combined grant funding of $222 million were scheduled to receive the full amount of their funding relatively early in the life of the project. DIISRTE advised, and project proponents interviewed by the ANAO confirmed, that the scheduling of payments was designed to meet the cash flow requirements of each project.

37. The department required any interest earned on EIF funds held by project proponents to be spent on the funded project. To help monitor whether proponents are complying with this requirement, the department captured details of interest earned (and used) in project reports. The opportunity for project proponents to earn interest effectively increases the quantum of the grants provided by the Australian Government and represents an opportunity cost for the Commonwealth. In this regard, DIISRTE advised the ANAO that because the ‘interest earned by the project proponent is required to be used for the benefit of the funded project and enhance its outcomes, any short-term gain by the Commonwealth from withholding funding would be offset by the long-term gain for the project and the nation’.

38. Making early payments provides the funded projects, rather than the Commonwealth, with the benefits from holding the funds, and it is desirable to weigh-up the respective interests of the parties when considering this course of action.¹⁵ While there was evidence that DIISRTE had queried some of the individual proponents’ funding requests, in the case of the six projects scheduled to receive the full amount of their funding relatively early in the life of the project, there would have been merit in DIISRTE establishing whether a net benefit to the Commonwealth could be demonstrated.¹⁶ Providing financial approvers with such advice would have helped inform their decision‑making on the proper use of Commonwealth resources, including whether interest on funds clearly surplus to immediate project requirements should accrue to a project or to the Commonwealth.¹⁷

39. DIISRTE actively monitored the progress of each approved project, primarily through the review of performance reports. The assessments of project reports examined by the ANAO were thorough, well documented, and generally completed in a timely manner. However, the records of when reports from project proponents are due to be received, as well as the dates reports are received and assessed, were not being accurately maintained. Each quarter, DIISRTE provided an EIF project progress report to the Advisory Board. The report for 30 September 2012 shows that 17 of the second and third round projects have been completed and the constructed infrastructure is in use, 21 projects are on (or ahead of) schedule and 12 projects are slightly behind schedule or behind schedule.

40. The Australian Government’s financial management and accountability framework, as set out in the FMA Act and the FMA Regulations, applies to the EIF. FMA Regulation 9 requires an approver to decide if a proposal to commit public money represents a proper use of Commonwealth resources. Approvals under FMA Regulation 9 were not obtained by DEEWR officials for the 33 second and third funding round grants in the higher education and VET sectors worth $857 million. The failure to obtain the necessary financial approvals for the two funding rounds represents a breach of the Australian Government’s financial framework. While the requisite approvals (under FMA Regulation 9) were obtained for the 17 second and third round projects in the research sector, in one case, further approval was not obtained for a variation in the timing of the spending proposal agreed to before the funding agreement was signed.¹⁸ This also represents a breach of the financial framework.

41. Most of the financial framework breaches occurred in the second half of 2009 and during 2010–11, after the release of the CGGs in July 2009. The CGGs were released by the Australian Government as a means of improving the transparency and accountability of grants administration, and emphasise the importance of properly applying framework requirements.

Performance Measurement and Monitoring (Chapter 5)

42. Following completion of the third funding round, the department developed an evaluation strategy for the EIF. A formal program of ongoing evaluation activities is important to help assess the EIF’s processes and performance, particularly given the longer-term nature of many of the infrastructure projects funded. Specifically, the strategy is designed to examine:

• administrative processes associated with the conduct of the funding rounds;
• implementation and management of the funded projects; and
• the funded projects’ impact on achieving the EIF’s objectives.

43. The department commenced a review of the EIF’s administrative processes in November 2010. The report was finalised in September 2011 and concluded that the program’s processes were operating satisfactorily. The department advised that implementation of the evaluation strategy had, at times, been delayed by competing demands on staff resources. Nevertheless, the department advised that it anticipates conducting the next phase of the evaluation strategy—the implementation and management of the funded projects—during 2013.

44. At the time of the audit, the only publicly reported performance indicators for the EIF related to the number of projects funded. While these indicators provide a measure of the level of financial support provided by the EIF, they provide no insights into the continuing performance of the EIF, including the progress of infrastructure construction and the program’s long term benefits and outcomes. A broader set of performance measures would assist DIICCSRTE, and other interested stakeholders, to measure project implementation, as well as progress against the program’s objectives. The development of a performance monitoring and reporting framework focussing on the achievement of longer-term outcomes is of particular benefit as the program moves out of the infrastructure construction phase.

45. The department advised that the issues surrounding performance indicators for the EIF are complex because the stated outcomes of the program are generally broad and long term and, in most cases, may not eventuate or be easily measured, until the projects are completed. Nevertheless, preliminary work undertaken by the department in 2009 on the development of performance indicators, together with further scheduled evaluation work, particularly the examination of the funded projects’ contribution to achieving the EIF’s objectives, provide a basis for DIICCSRTE to enhance the longer‑term performance framework for the EIF.

Summary of agency’s response to the proposed report

46. DIICCSRTE’s summary response is provided below, while the full response is shown at Appendix 1.

The Department welcomes the ANAO’s assessment that the competitive funding rounds of the Education Investment Fund (EIF) have generally been administered effectively, with good program planning and design, particularly given the short timeframe in which the Department had to deliver EIF rounds two and three.

The Department agrees with ANAO’s recommendations to improve records management for grant assessment decisions by the EIF Advisory Board, and to develop and report against performance indicators relevant to the Australian Government’s objectives for the EIF.

The Department will develop performance indicators that are in line with current departmental activities in relating to key performance measures.

Recommendations

Footnotes

[1] As well as the EIF, the 2008–09 Budget also included the establishment of two other infrastructure related funds—the Building Australia Fund, which is designed to provide funding for transport and communications infrastructure and the Health and Hospitals Fund, which is designed to provide funding for health infrastructure.

[2] Australian Government, EIF Program Guidelines—Round 2, p. 4 and EIF Program Guidelines—Round 3 and Sustainability Round, p. 7.

[3] The eight funding components are outlined in Appendix 2.

[4] The then DIISR’s responsibilities were expanded to incorporate DEEWR’s tertiary education functions, including DEEWR’s responsibilities in relation to the EIF.

[5] On 25 March 2013, DIISRTE’s responsibilities were expanded to incorporate parts of the former Department of Climate Change and Energy Efficiency and the department was renamed the Department of Industry, Innovation, Climate Change, Science, Research and Tertiary Education (DIICCSRTE). Throughout this report the department is referred to as DIISRTE; the department’s name at the time the audit was being undertaken.

[6] The audit examined the EIF’s second, third and sustainability funding rounds.

[7] Estimates Memorandum 2009/36, Payment Arrangements for the Nation-building Funds advises that the Government is not providing approval to commit public moneys pursuant to the financial framework at this stage. The responsible Ministers or departmental officials provide the requisite financial approval after the Ministers have sought the Minister for Finance and Deregulation’s authorisation (under the Act) to release funds from the EIF, but prior to entering into funding agreements, taking into account whether all necessary legal and procedural steps have been complied with.

[8] The second, third and sustainability funding rounds were each conducted as open, merit-based, and competitive funding rounds. In each round, applications for funding were publicly invited from eligible organisations.

[9] The EIF’s third funding round and the EIF’s sustainability funding round were conducted concurrently. References in this report to the third funding round, include the sustainability round.

[10] Prior to December 2011, the EIF was jointly administered by the Department of Education, Employment and Workplace Relations (DEEWR), which was responsible for administering grants in the education and VET sectors, and the then Department of Innovation, Industry, Science and Research (DIISR), which was responsible for administering grants in the research sector. References to DIISRTE and the department in this report summary include those functions in DEEWR and the then DIISR that were formerly responsible for the administration of the EIF. As explained in footnote 5, since 25 March 2013, responsibility for the administration of the EIF rests with the Department of Industry, Innovation, Climate Change, Science, Research and Tertiary Education.

[11] The adequacy of agency record-keeping in grants administration, particularly in support of advisory bodies, has arisen in recent ANAO audits. See ANAO Audit Report No.1, 2012–13, The Administration of the Renewable Energy Demonstration Program, p. 22, and ANAO Audit Report No.17, 2012–13, Design and Implementation of the Energy Efficiency Information Grants Program, p. 17.

[12] In giving approval, the officials would be expected to have appropriate regard to the Advisory Board’s assessment of the merits of the applications, government decisions on the funding of projects, and whether all necessary legal and procedural requirements had been completed with.

[13] Department of Finance and Deregulation, Commonwealth Grant Guidelines: Policies and Principles for Grants Administration, Financial Management Guidance No. 23, July 2009, p. 25.

[14] 31 of these projects were funded from the EIF’s second funding round and one project was funded from the EIF’s Super Science Initiative. The administration of the Super Science Initiative was outside the scope of this audit.

[15] The issue of advance payments also arose in the administration of the Health and Hospitals Fund, examined in ANAO Report No.45 2011–12, Administration of the Health and Hospitals Fund, June 2012, pp. 20–21 and pp. 103–104.

[16] Finance Circular 2004/14, Discounts for prepayment and early payment, provides advice on calculating opportunity costs.

[17] During the second and third funding rounds, ‘proper use’ was defined in subsection 44(3) of the Financial Management and Accountability Act 1997 (FMA Act) to mean ‘efficient, effective and ethical use that is not inconsistent with the policies of the Commonwealth’. Often, this is referred to as a ‘value for money’ test.

[18] In this case, the department brought forward payment of the total grant of $55 million from 2011–12 to 2010–11.