Introduction

1. Grants administration is an important activity for many Commonwealth entities, involving the payment of billions of dollars of public funds each year. Commencing in December 2007, significant enhancements have been made to the Australian Government's grants administration framework in light of significant parliamentary and ANAO concerns with the administration of various grants programs over a number of years. The initial enhancements included the introduction of requirements for guidelines to be developed for any new discretionary grant programs¹, and approved by the Expenditure Review Committee (ERC) of Cabinet. The December 2007 Finance Minister’s Instructions further required:

• agencies to have adequate arrangements in place to manage grant programs in accordance with relevant legislation, regulations and guidance; and
• Ministers to receive departmental advice on the merits of grant applications relative to the guidelines for the relevant program before making any decisions on discretionary grants (where funding decisions are made by Ministers).

2. Revised Finance Minister’s Instructions issued in January 2009 retained these requirements and expanded their coverage to all types of grant programs (rather than being limited to discretionary grant programs). These revised Instructions were introduced to reflect Government decisions made in December 2008 in response to the July 2008 report of the Strategic Review of the Administration of Australian Government Grant Programs (Strategic Review). Also consistent with the recommendations of the Strategic Review, with effect from 1 July 2009, the Commonwealth Grant Guidelines (CGGs)² were issued and related changes were made to the Financial Management and Accountability Regulations 1997 (FMA Regulations). The CGGs set out a number of policy and agency requirements in respect of grant program guidelines, as summarised in Table S 1.³

Table S.1: Key requirements for grant program guidelines under the Commonwealth Grant Guidelines

Notes: 1. As required by Section 44 of the FMA Act and FMA Regulation 9.

Source: Commonwealth Grant Guidelines, Policies and Principles for Grants Administration, July 2009, pp. 9 and 11.

3. In September 2010, in light of experience with the grant program approval arrangements and broader changes being made to Cabinet processes, it was decided that not all grant program guidelines would require approval by the ERC. Draft program guidelines were now to be submitted for ERC approval on a case-by-case basis, according to a risk assessment undertaken by the administering agency. The Department of Finance and Deregulation (Finance) was to be consulted on all risk assessments, with these assessments being used to decide whether a program⁴ was:

• low risk (such that the guidelines could be approved and issued by the relevant portfolio Minister, subject to the agreement of the Minister for Finance and Deregulation (Finance Minister) with the risk assessment);
• medium risk (in these circumstances, the Finance Minister is empowered to either consider and agree to the release of the guidelines or propose that they be referred to the ERC); or
• high risk/sensitive (in which case, the program guidelines are to be referred to the ERC unless they need to be issued urgently, in which case the Finance Minister is able to approve them).

Audit objectives and scope

4. The objective of the audit was to assess the implementation and effectiveness of the enhanced grants administration requirements relating to the development and approval of new grant guidelines and revision of existing grant guidelines.

5. The scope of this audit included the administration of the grant program approval processes that were first introduced in December 2007, as well as analysis of trends with the September 2010 changes to the approval requirements. In addition, ANAO analysed 369 grant program guidelines prepared by agencies between December 2007 and June 2010.⁵ As the enhanced grants administration framework progressively introduced since December 2007 has a particular focus on the establishment of transparent and accountable decision-making processes for the awarding of grants, the focus of ANAO’s analysis was on the extent to which those guidelines identified how:

• potential funding recipients would be able to access the program; and
• decisions would be made about the awarding of grants (including by outlining the selection criteria that will be used and the identity of the person that would make the funding decisions).

6. This audit is the second cross-agency audit looking broadly at the implementation of key aspects of the enhanced grants administration framework. The first of these audits, which examined the administration of the various grant reporting obligations, was tabled in January 2012.⁶ ANAO also continues to include performance audits of grant programs in its performance audit work program. These audits provide an opportunity to examine the extent to which the enhanced grants administration framework is having the desired effect, as well as to identify any opportunities to further improve the framework. In addition, in light of the significant enhancements made to the grants administration framework, in June 2010 ANAO updated its better practice guide on grants administration.⁷

Overall conclusion

7. 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.

8. The introduction of a requirement for program guidelines to be developed and appropriately approved for all grant programs was a key part of the Government’s response to the concern⁸ that grant program planning and design had not been sufficiently robust. In addition, the approach taken in the development of the enhanced grants administration framework reflected the recognition that potential grant program applicants and other stakeholders have a right to expect that program funding decisions will be made in a manner, and on a basis, that is consistent with the published program guidelines.⁹ In this respect, the CGGs highlight that guidelines for a particular program are a policy of the Commonwealth to be addressed when consideration is being given to approving a spending proposal under a particular grant program. This, and other measures taken, were a positive response by government to deficiencies in earlier arrangements for administering grants.

9. The appropriate level of content for a set of grant guidelines will vary depending upon the size, scope and nature of the relevant program, having regard to the need for all aspects of the program to conform to the key principles established for grants administration, including proportionality; governance and accountability; and probity and transparency. In that context, the guidance provided to agencies through the CGGs provides a sound framework to support the development and publication of sound grant program guidelines.¹⁰ However:

• a small number of agencies continue to administer a significant number of one-off or ad hoc grants, with this form of granting activity not subject to the requirement that grant program guidelines be developed;
• the quality of grant program guidelines remains quite variable, with a significant proportion of the guidelines examined by ANAO not clearly identifying the person or persons who would make funding decisions; the threshold and assessment criteria that would be applied in making those decisions; and/or the way in which value for money considerations would be taken into account.¹¹ These are key matters to be addressed in any set of grant program guidelines in order to support transparent and accountable grants administration; and
• notwithstanding the preference expressed in the CGGs for competitive, merit-based selection processes that are based upon clearly defined selection criteria, more than one-third of the grant program guidelines examined by ANAO which outlined the selection process that was to be employed indicated that a non-competitive process would be adopted.¹²

10. One factor contributing to this situation was that there was a relatively high level of non-compliance by agencies with the approval requirements for draft program guidelines. Specifically, more than 62 per cent of the new guidelines and changes to existing guidelines developed in the two-and-a-half-year period examined by the ANAO had not been submitted for the required Ministerial approval. Against this background, the September 2010 decision to adopt a risk-based approval framework is sound in principle, but will need to be supported by agencies giving increased attention to program planning and design considerations, and improved oversight by Finance of agency practices in this area.¹³

11. Within the above context, the enhanced grants administration requirements relating to the development and approval of program guidelines have yet to be fully and effectively implemented. Accordingly, ANAO has made four recommendations. The first is aimed at limiting the extent to which grants related to a common type of activity are administered without a set of program guidelines being developed and approved. The second is aimed at enhancing Finance’s oversight of the program guideline risk assessment and approval arrangements. A third recommendation relates to agencies taking steps to ensure guidelines developed before the enhanced framework was introduced are consistent with the CGGs and associated legislative provisions. The final, and most important, audit recommendation relates to greater efforts being made by agencies to establish, through the relevant program guidelines, transparent and accountable decision-making processes for the awarding of grants.

12. This audit of grant program guidelines complements ANAO’s recent audit of the administration of various grant reporting obligations, which tabled in January 2012.¹⁴ The two audits examined related aspects of grants administration over the same two-and-a-half-year period. Since the first report was tabled, ANAO has worked closely with Finance to identify opportunities for improving the CGGs as well as ways in which Finance can provide greater assistance to agencies. Nevertheless, it is important to emphasise that responsibility for adhering to the requirements of the grants administration framework and improving the quality of grants administration depends to a significant extent on agencies improving their own practices.

Key findings by chapter

Ministerial Approval of Grant Program Guidelines (Chapter 2)

13. The development of grant program guidelines is a significant activity in the Commonwealth. In the two-and-a-half year period examined by ANAO, each week, on average, agencies collectively produced one set of guidelines for a new grant program and one set of guidelines for a new round of an existing grant program. Agencies also undertake work revising guidelines for existing programs as changes are made to the program arrangements.

14. There also remain a small number of agencies that administer a large number of one off and ad hoc grants, and the CGGs do not require that guidelines be developed to cover this type of granting activity. Accordingly, particularly where a number of proposed or potential one-off and ad-hoc grants relate to similar purposes, there would be benefits in the relevant agencies working with Finance to identify any opportunities to incorporate more of their grant-giving activities within the structure of a grant program.¹⁵

15. Since December 2007, a series of decisions have been taken by the Government in respect to the arrangements applying to the consideration and approval of grant program guidelines. Between December 2007 and September 2010, there was a requirement for new program guidelines, and significant revisions to existing guidelines, to be considered by the ERC, the Prime Minister or, where approval was urgently required, the Finance Minister. It was intended that these approval arrangements would provide assurance that a robust planning process had been undertaken, and that the proposed grant program was appropriately structured to achieve its intended outcomes. However, in the period examined by ANAO up to June 2010, more than 62 per cent of new grant program guidelines or changes to existing guidelines were not submitted for the required approval. In September 2010, the Government decided that consideration of draft grant program guidelines would be removed from the Cabinet agenda¹⁶, with the level of approval required to be decided on the basis of a risk assessment.

16. In light of experience with the prior approval arrangements, Finance has advised ANAO that it will develop an integrated strategy to improve compliance with the CGGs and reduce the risk of grant program risk assessments not being undertaken. In this respect, there would also be considerable benefits in Finance having a central record of all risk assessments undertaken by administering agencies and the results of the related approval processes to inform its oversight of the revised approval arrangements. For example, there would be value in the data that could be captured being used by Finance’s Grants Framework Unit to identify and reinforce identified better practices across agencies, as well as to provide a focus on any apparent systemic shortcomings in the development and approval of grant program guidelines.

17. Even where a program is longstanding, and the applicable guidelines themselves (subject to minor updates) are also longstanding, there remains a requirement for the relevant agency to ensure that the guidelines and related operational guidance being applied in the administration of the grant program are consistent with the CGGs.¹⁷ In light of government expectations in promulgating the CGGs, it would be reasonable to expect that guidelines developed before the enhanced framework was introduced would likely require amendment to ensure consistency with the CGGs and associated legislative provisions. However, there are a number of grant programs that are still operating under guidelines that have not been subject to any significant change since the CGGs were issued in July 2009; including programs that are still operating under guidelines that have not been the subject of any significant revisions since the first enhancements were made to the grants administration framework in December 2007.

Content of Grant Program Guidelines (Chapter 3)

18. The appropriate level of content of grant guidelines will vary depending upon the size, scope and nature of the program. Nevertheless, all aspects of a grant program need to conform to the key principles established for grants administration, including proportionality; governance and accountability; and probity and transparency. In that context, the underlying principle is that program guidelines will address the matters necessary to promote transparent and equitable access to grants (while minimising wasted effort being applied to the submission of proposals that are ineligible or unlikely to be funded); and will inform the efficient, effective and accountable administration of the program. In particular, amongst other matters, program guidelines should identify:

• how potential funding recipients will be able to access the program;
• who will make the funding decisions; and
• how decisions will be made about the awarding of grants (including outlining the selection criteria that will be used).

19. The CGGs outline that, unless specifically agreed otherwise, competitive, merit-based selection processes should be used, based upon clearly defined selection criteria.¹⁸ However, the promulgation through the July 2009 CGGs of a preference for competitive, merits-based selection processes (no such preference had previously been expressed) did not result in a marked increase in the extent to which these types of processes have been adopted.¹⁹

20. Clarity about roles and responsibilities also aids the efficiency of grants administration by avoiding unnecessary procedures and practices. However, within the grant program guidelines provided to ANAO in response to the audit survey, it was relatively common for the guidelines to not identify who would be the decision-maker, with this being the case with 30 per cent of the guidelines examined.²⁰

21. Agency performance has also been quite mixed in terms of developing program guidelines that clearly outline the selection criteria²¹ to be employed in deciding upon the award of grants under the relevant program.²² Specifically:

• consistent with the key principles for grants administration included in the CGGs, almost all (97 per cent) of the program guidelines examined by ANAO identified one or more threshold criteria that applicants would be required to meet. However, agency practices varied in terms of whether all threshold requirements were grouped and clearly identified as such in the program guidelines²³; and
• similarly, a high proportion (86 per cent) of the program guidelines examined identified assessment criteria that would be used in selecting funding recipients.²⁴ However, notwithstanding the critical importance of published assessment criteria to efficient, effective and transparent grants administration, a significant proportion (14 per cent) of the grant program guidelines examined did not include assessment criteria.²⁵

22. In addition to adopting a more consistent approach to specifying, and clearly identifying, in grant program guidelines all of the threshold and assessment criteria that will be applied in selecting funding recipients, audit analysis indicates that there would be benefits from agencies:

• assigning relative weightings, rankings or priority to individual assessment criteria, in order to assist in targeting available funding at projects that exhibit particular characteristics having regard for the program objectives. Specifically, whilst 29 per cent of the guidelines examined by ANAO that included assessment criteria had also identified a weighting, ranking or priority associated with the criteria, this practice was not commonly adopted by most agencies²⁶;
• greater attention being paid to identifying value for money as an explicit consideration in the awarding of grants; and
• where practical, developing a single program guidelines document that represents the reference source for guidance on the grant selection process, including the relevant threshold and assessment criteria, and how they will be applied in the selection process. Where more than one document is produced and each outlines important aspects of the grant selection process, it is important that agencies recognise that, collectively, all such documents constitute the program guidelines for the purposes of the CGGs. Accordingly, these should collectively be subject to the grant program approval requirements and made available to stakeholders.

23. In this respect, the CGGs outline an expectation that value for money will be a core consideration in determining funding recipients under a grant program. However, whilst 30 per cent of the program guidelines examined by ANAO had identified value for money as either a separate assessment criterion, or an overarching issue to be taken into account in the grant selection process, 70 per cent of guidelines did not make any such reference to value for money. Again, the explicit referencing of value for money as playing a role in the selection of grants was a predominant feature in the program guidelines developed by only a small number of agencies (three), with the majority of program guidelines developed by most agencies in the period examined by ANAO not addressing value for money.

Summary of agency responses

24. 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 the four recommendations in the report.

In relation to Recommendation 2, Finance agrees to develop and implement systems and procedures to support the analysis of grant program guidelines, and their relevant risk assessments. This risk based analysis should prove useful for Finance to better target guidance, training and support for agencies.

Finance will offer to assist agencies with their consideration and implementation of the other ANAO recommendations. Finance will also develop and implement strategies to improve agency compliance with the CGGs, particularly in relation to the development and approval of grant program guidelines.

Australian Prudential Regulation Authority

APRA has only a modest grant program. That said, APRA generally supports the four recommendations contained in the proposed audit report. APRA’s grant guidelines and reporting procedures have been reviewed since the Commonwealth Grant Guidelines were issued in July 2009, and the recommendations are not expected to have a significant impact on APRA’s operations.

Australian Research Council

The ARC welcomes the report and agrees with the recommendations. The ARC will continue to review its processes for the development and approval of grant guidelines to ensure that they comply with the better practice processes identified in the Commonwealth Grant Guidelines.

Australian Securities and Investments Commission

Overall, the Australian Securities and Investments Commission accepts the ANAO’s findings and agrees with the key recommendations contained in the report. The recommendations will assist agencies with complying with the Commonwealth Grant Guidelines.

Attorney-General’s Department

The Attorney-General’s Department (AGD) welcomes and agrees with the recommendations within the ANAO audit report on the Development and Approval of Grant Program Guidelines.

In relation to paragraphs 2.8 and 2.13 of the report, AGD agrees with ANAO’s finding that the results, as presented in Table 2.3, reflect the uncertainty about the requirement for Ministerial consideration of revisions to existing grant program guidelines.²⁷

The department will implement the recommendations, including their incorporation into internal policy guidance, training material and assurance processes.

Cancer Australia

Cancer Australia commenced operations on 3 May 2006. As of 30 June 2011 Cancer Australia and the National Breast and Ovarian Cancer Centre (a Body under the Commonwealth Authorities and Companies Act 1997 (CAC Act)), were amalgamated and as part of this process we have been reviewing those areas where the Financial Management and Accountability Act 1997 (FMA Act) requirements may impact on work previously undertaken under the CAC Act.

The audit provides a valuable tool to support this review process as well as guiding Cancer Australia’s current grant arrangements. In recognition of the priority that Cancer Australia places on compliance with the legislative and policy requirements under the FMA Act particularly as they relate to grant arrangements, Cancer Australia has invested in a dedicated resource with extensive grants and procurement expertise to oversight the compliance framework for grants and procurement, and lead an extensive training program targeted to the needs of the agency. Cancer Australia recognises both the important role that the CGGs play in maximising value for money and the ongoing need to ensure that the grant processes, as well as the outcomes of the grant programs, deliver value with public money and achieve government policy objectives.

Department of Agriculture, Fisheries and Forestry

DAFF has established practices, including consultation with the Departments of Finance and Deregulation and Prime Minister and Cabinet on grant program risk assessments, to ensure grant program guidelines are developed and approved in accordance with the Commonwealth’s grant policy framework. As a part of our continuous improvement of internal practices, we regularly review the department’s guidance and templates to ensure clear and consistent grant program guidelines.

DAFF differs with the ANAO on the interpretation of the Department of Finance and Deregulation’s guidance and advice. While DAFF does not agree with the inclusion of its programs in Table 2.3 based on ANAO’s interpretation²⁸, it supports the recommendations of the report which will ensure consistent application of the Commonwealth’s grant policy requirements in the future.

Department of Climate Change and Energy Efficiency

The Department of Climate Change and Energy Efficiency (the Department) welcomes the report and agrees with the ANAO’s recommendations.

Since the conclusion of the audit, the Department has invested considerable resources in grants management. In mid-2011, a dedicated Grants Management Unit was established and, in early 2012, a new Grants Management Framework introduced. The Framework aligns with the requirements of the Commonwealth Grant Guidelines-Policies and Principles for Grants Administration and incorporates the better practice processes and procedures expressed in the ANAO’s Better Practice Guide: Implementing Better Practice Grants Administration.

The Department will now review its Grants Management Framework to ensure that processes for the development and approval of grant program guidelines are consistent with the recommendations of this report.

Department of Education, Employment and Workplace Relations

The Department of Education, Employment and Workplace Relations is committed to the sound administration of government grant programs.

The recommendations in this report are supportive of a whole of government approach aimed at continuous improvement and transparency in relation to grant funding arrangements. The Department will review internal controls, guidance and training material to ensure the better practice outlined in the report is incorporated into the Department’s practices.

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 the four proposed recommendations.

FaHCSIA seeks guidance on the development of its program guidelines and any related issues through the Department of Finance and Deregulation (Finance). From advice received, compliance with the Commonwealth Grant Guidelines is not always ‘black and white. Accordingly, the department has been advised to use its discretion and judgment when making decisions about whether grant guidelines need to be reviewed and/or approved by the Expenditure Review Committee of Cabinet (ERC) or Finance. As a result, the department did not believe it was necessary to submit some guidelines for existing programs to ERC.²⁹

As part of routine ‘good businesses’, all of FaHCSIA’s program guidelines are currently being reviewed to ensure they meet the latest requirements of the Commonwealth Grant Guidelines.

Department of Immigration and Citizenship

The Department is supportive of all the recommendations outlined in the ANAO’s proposed report, Development and Approval of Grant Program Guidelines, and welcomes the opportunity for the Department of Finance and Deregulation to provide more guidance to agencies on a program specific basis.

Department of Industry, Innovation, Science, Research and Tertiary Education

The Department of Industry, Innovation, Science, Research and Tertiary Education agrees with recommendations 1 – 4. The department considers that the number of one-off grants made by the former Department of Innovation, Industry, Science and Research during the study period was overstated, due to a number of sponsorships of a procurement nature being reported as grants. The department’s guidance on sponsorships was updated in 2011 to address this and these payments are now managed in accordance with the Commonwealth Procurement Rules.

Department of the Prime Minister and Cabinet

The Department of the Prime Minister and Cabinet welcomes the report of the ANAO into the Development and Approval of Grant Program Guidelines. Australian Government grants programs provide support to a wide range of community activities and endeavours and enable the payment of billions of dollars to the community each year. In order to ensure that public confidence is maintained in the integrity of government grant programs, it is vital that payments made under the programs are transparent and comply with the CGGs.

As such, the Department of the Prime Minister and Cabinet supports the recommendations of the ANAO which seek to ensure the ongoing effectiveness of the CGGs and consistency across risk assessment of programs. Commonwealth Government departments and agencies must ensure that their administered grant programs operate consistently across the Commonwealth and that public confidence in the system is maintained.

Department of Regional Australia, Local Government, Arts and Sports

The Department of Regional Australia, Local Government, Arts and Sport has adopted a continuous improvement approach to our grants management priorities and uses this, as well as inter-agency consultative groups and various audit reports, as one of the many tools to assist us to refine and enhance our grants management processes.

I agree with all recommendations made, and note that many of these recommendations are already standard practice within the Department of Regional Australia, Local Government, Arts and Sport.

Department of Sustainability, Environment, Water, Population and Communities

The Department of Sustainability, Environment, Water, Population and Communities (DSEWPaC) generally agrees with the audit recommendations and is grateful for the opportunity to provide comment. It recognises the need for robust program guidelines that include clearly defined objectives and evaluation criteria and that seek proper approval.

DSEWPaC has a growing maturity in the development and evaluation of grant programs and since the audit’s reporting period has implemented a new and robust grants administration framework and dedicated resources to assist with this important activity. In June 2011, DSEWPaC implemented a framework which comprised comprehensive administrative tools for staff in order to provide policy and legislative guidance and better practice on how granting activities should be properly developed and managed.

DSEWPaC is committed to further development of already strong engagement and relationships with the Department of Finance and Deregulation and the Department of the Prime Minister and Cabinet; combined with a drive to identify opportunities and receive guidance on better practices and contribute to whole of government activities.

Department of Veterans’ Affairs

The two grants administration sections within the Department of Veterans’ Affairs have conferred and agree with the findings and recommendations of the proposed report. Specific agreed responses to the recommendations are provided.

The Department of Veterans’ Affairs administers the following ongoing grants programs:

• Saluting Their Service Commemoration Grants (STS);
• Building Excellence in Support and Training Grants to Ex-service organisations (BEST) (including Grants-in-Aid to national ex-service organisations); and
• Veteran and Community Grants to organisations that support veterans (V&CG).

In the 2011/12 financial year the Department of Veterans’ Affairs also administered a one-off Service Delivery Integration Grant.

National Health and Medical Research Council

The National Health and Medical Research Council (NHMRC) operates within a strict legislative and regulatory framework. The National Health and Medical Research Council Act 1992 charges NHMRC with raising the standard of individual and public health, fostering national consistency in health standards, supporting health and medical research and training, and fostering consideration of ethical issues relating to health. NHMRC administers health and medical research funding in strict accordance with the legislation and operates to ensure competition, transparency and the best value for money, consistent with the CGGs.

NHMRC embodies these policies and principles in the design and administration of its funding programs. In administering funding for health and medical research the NHMRC seeks research applications through annual or targeted calls in line with requirements set out in detailed funding rules for each scheme. These applications are subject to rigorous assessment by peer review to identify the best as judged by criteria such as scientific quality, significance and innovation and the ability of the researchers to achieve results.

Consistent with the principles set out in the CGGs, the NHMRC works continually to strengthen its probity and compliance arrangements, particularly around transparency of assessment through peer review guidelines, confidentiality and managing conflicts of interest. The NHMRC is working to streamline the administration of its many funding programs through the simplification and standardisation of funding rules into a universal set of funding rules, and the establishment of a single funding deed. The NHMRC will endeavour to structure any new funding guidelines to be as clear as possible in separately identifying the elements identified as being best practice in the constitution of funding guidelines

Office of the Fair Work Ombudsman

The Fair Work Ombudsman is in agreement with the recommendations contained in the draft audit report. The Fair Work Ombudsman in particular believes the changes made in September 2010 regarding the approval process for grant program guidelines has significantly improved the timeliness of delivering grant programs.

Footnotes

[1]   Discretionary grants were defined as: ‘grants where the minister or agency has discretion in determining whether or not a particular application receives funding and may or may not impose conditions in return for the funding’ and not including ‘entitlement-based and demand-driven payments or rebates.’

[2]   The CGGs, issued under Regulation 7A of the FMA Regulations, 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.

[3]   The emphasis reflected in Table S 1 is as per the CGGs. In this respect, obligations set out in the CGGs that must be complied with in all circumstances are denoted by the use of the term must or mandatory.

[4]   This approval framework applies to all programs, not just grant programs.

[5]   As part of the audit, a survey was conducted by ANAO of all agencies subject to the FMA Act to identify grant programs that had been in operation since December 2007, when the first enhancements were made to the grants administration framework. Agencies were requested to provide a copy of the final approved guidelines for each program and advice on the process by which those guidelines had been approved. This material, together with examination of relevant records concerning Ministerial consideration and approval of grant guidelines held by Finance and the Department of the Prime Minister and Cabinet (PM&C), provided the basis for the analysis undertaken for this audit. ANAO also examined records held within Finance as to that department’s analysis of draft grant program guidelines submitted for consideration by relevant agencies.

[6]   ANAO Audit Report No.21 2011–12, Administration of Grant Reporting Obligations, Canberra, 24 January 2012.

[7]   Since 1994, the Australian National Audit Office’s (ANAO) suite of Better Practice Guides has included a publication focused on grants administration. In respect to grant program guidelines specifically, the previous 2002 version of the ANAO Better Practice Guide (the version extant at the time enhancements to the grants administration framework were first introduced in December 2007) had emphasised that clear, consistent and well-documented program guidelines are an important component of an effective grant program administration system (see further in ANAO Better Practice Guide—Administration of Grants, May 2002, p. 37). Similar guidance is set out in the current version of the Better Practice Guide, which was published in June 2010 (see further in ANAO Better Practice Guide–Implementing Better Practice Grants Administration, June 2010, pp. 51–67).

[8]   See, for example, Mr Peter Grant PSM, Strategic Review of the Administration of Australian Government Grant Programs, 31 July 2008, pp. 6 and 54-71.

[9]   ibid, p. 56.

[10]   The requirement to publish program guidelines applies where eligible persons and/or entities are able to apply for a grant under a program.

[11]   Achieving value for money is one of the seven key principles of grants administration outlined in the CGGs.

[12]   Through the conduct of this audit, Finance consulted with ANAO to identify ways in which the CGGs could usefully be enhanced to increase the number of grant programs, and therefore grant selection processes, that operate through competitive, merit-based processes. Areas of particular interest were additional guidance from Finance to agencies in respect to choosing the selection process for grant programs during the program design phase, together with agencies being required to document the reasons for any decision not to use a competitive, merit-based selection process (such an obligation exists in respect to procurement activity under the Commonwealth Procurement Guidelines).

[13]   In particular, it will be important that Finance has systems in place to be assured that agencies are consulting with it on draft program guidelines and are not bypassing the approval processes (as had occurred under the prior arrangements).

[14]   ANAO Audit Report No.21 2011–12, Administration of Grant Reporting Obligations, Canberra, 24 January 2012.

[15]   An example of this approach being adopted related to the Better Regions Program, which was established solely to fund 105 commitments made by the Australian Labor Party (ALP) in the context of the 2007 election campaign. Consistent with the enhanced grants administration framework, Better Regions Program Guidelines were developed, approved by the ERC and published. See further in ANAO Audit Report No.24 2010–11, The Design and Administration of the Better Regions Program, Canberra, 27 January 2011.

[16]   With the objective of supporting strong and effective Cabinet Government, this change was one of a number made to remove items of a more routine nature from the Cabinet agenda (see paragraph 3).

[17]   The obligation for program guidelines and related operational guidance to be in accordance with the CGGs is separate to the obligations requiring the development and appropriate approval of guidelines for new programs and significant changes made to existing guidelines.

[18]   Department of Finance and Deregulation, Commonwealth Grant Guidelines, Policies and Principles for Grants Administration, July 2009, p. 29.

[19]   For 94 per cent of the program guidelines provided to ANAO by agencies as having been developed over the period between December 2007 and June 2010, the nature of the selection process that would be employed was clearly outlined, but in only 62 per cent of those instances were grants to be awarded through a competitive process.

[20]   For the 70 per cent of program guidelines where the decision-maker was identified, it was common (72 per cent of instances) for the guidelines to outline that decisions would be made by a Minister (including Parliamentary Secretary).

[21]   Selection criteria comprise:

• threshold criteria, which are the criteria that a proposal must satisfy in order to be considered for funding. These are also variously expressed as ‘eligibility criteria’, ‘mandatory criteria’, ‘compliance criteria’ or ‘gateway criteria’; and
• assessment criteria, which are used to assess all eligible, compliant proposals in order to determine their merits against the program objectives and, for competitive programs, other competing applications.

[22]   As outlined in ANAO’s Better Practice Guide, selection criteria form the key link between a program’s stated objectives and the outcomes that are subsequently achieved from the funding provided. Accordingly, they are important in attracting good potential candidates for funding and encouraging entities that are unlikely to be successful not to invest unnecessary resources in preparing an application. See further in ANAO Better Practice Guide-Implementing Better Practice Grants Administration, June 2010, pp. 61–62.

[23]   For just under one-third of guidelines, the threshold criteria were not identified in a separate section or sections of the guidelines. In addition, for some guidelines that did include a specific section or sections identifying threshold criteria, additional statements included in other sections of the guidelines also represented mandatory requirements that were required to be satisfied in order to receive funding. This often involved the use of expressions such as ‘must’, ‘must not’, ‘will’ or ‘will not’. However, this presentation did not assist in ensuring applicants were aware of all mandatory requirements, or that all such criteria would be consistently applied in the assessment of applications.

[24]   Also of note was that there were very few instances (under two per cent of relevant program guidelines) where the guidelines provided any capacity for the assessment criteria to be amended, and even fewer (just under one per cent) where the program guidelines outlined that the assessment criteria could be waived.

[25]   In addition, similar to the situation with threshold criteria, whilst most (93 per cent) guidelines with assessment criteria separately grouped and identified those criteria, for nearly 13 per cent of those guidelines, the benefit of adopting this approach was diminished by additional assessment criteria also being stipulated in other parts of the guidelines (without any cross-referencing to ensure potential applicants were aware of the need to also address these additional criteria in their application, and that all relevant criteria were consistently taken into account in the assessment process).

[26]   Of the program guidelines examined that did include weightings, rankings or identified priorities, 44 per cent related to programs administered by only two agencies.

[27]   A significant proportion of the grant program guidelines that did not receive the required approval related, as indicated by AGD, to revised guidelines for existing programs. However, as outlined at paragraph 2.14, notwithstanding the clear and consistent guidance since December 2007 requiring consideration by the ERC (or other relevant authority) of guidelines for all new grant program guidelines, 36 per cent of such guidelines provided to ANAO in response to the audit survey had not been submitted for the required approval processes. These instances represented 26 per cent of all program guidelines developed between December 2007 and June 2010 that were not submitted for ERC or other relevant approval in accordance with the requirements of the enhanced grants administration framework.

[28]   In order that any guidelines not previously identified as having been approved could be brought to ANAO’s attention, or errors with ANAO’s analysis otherwise identified, in February 2012 ANAO provided Finance with details of each individual instance included in Table 2.3 of the required Ministerial approval of program guidelines not being obtained. The Department of Agriculture, Fisheries and Forestry (DAFF) was also provided with this information in relation to those of its guidelines that had been included in Table 2.3. Where DAFF provided evidence that demonstrated the guidelines had either obtained the required approval, or that approval was not required (for example, changes to the guidelines for an existing program were minor or the CGGs did not apply due to the nature of the program), they are no longer included in Table 2.3. Nevertheless, there remained three sets of revised grant program guidelines where the changes from the prior version were not minor in nature. For example, there had been changes to the objectives/targets for program funding, changes to program eligibility requirements and/or assessment criteria and/or changes to the selection process (including, for one program, the introduction of an external panel to assess applications rather than this being undertaken within the department). DAFF was provided with details of ANAO’s analysis that led to ANAO concluding these three sets of guidelines required approval. DAFF did not provide ANAO with any further advice or evidence to inform any ANAO re-consideration of the audit assessment.

[29]   In each of the six relevant instances, ANAO sought from FaHCSIA evidence (such as prior versions of the relevant guidelines) that would support an assessment that the changes made in the revised guidelines were minor such that they did not require Ministerial consideration and approval. In two instances, the available documentation evidenced significant changes in the revised guidelines from those that previously applied. In the remaining four instances, FaHCSIA advised ANAO it was not in a position to provide additional documentation for analysis.