Introduction

1. During the 2010 Federal election campaign, the Australian Labor Party (ALP) announced that it would give community organisations the opportunity to apply for direct capital funding for supported accommodation and respite facilities for people with disabilities. The election policy:

• stated that projects could include a modern renovation of an existing home so it can be used for supported accommodation, pooled resources to build a contemporary facility close to local community and health services to provide overnight respite, or expanding an established facility to provide more places;
• outlined that up to 150 additional places were expected to be delivered through the $60 million program; and
• announced that funding would be allocated via an ‘open tender process’ with community organisations, non-government organisations, State and Territory disability authorities and Governments to be encouraged to apply.

2. Funding of $60 million was provided through the 2010-11 Additional Estimates process to meet the Supported Accommodation Innovation Fund (SAIF) commitment. This comprised $3.3 million over four years starting in 2010-11 for departmental costs of administering the program, and $56.7 million for grant funding over three years starting in 2011-12.¹ The funding was allocated to the Department of Families, Housing, Community Services and Indigenous Affairs’ (FaHCSIA) ‘Services and Support for People with Disability’ program.

Program guidelines

3. Guidelines for the ‘Services and Support for People with Disabilities’ program were published in August 2011. Consistent with the approach commonly adopted by FaHCSIA, this overarching program comprises a series of funding ‘activities’, including the SAIF grant program, with a suite of program documentation including:

• the overarching program guidelines, which provided an overview of the program and the activities relating to the program (referred to as Part A of the Program Guidelines Suite);
• a separate document (referred to as Part B of the Program Guidelines Suite) that provided information on the application, assessment, eligibility, selection and complaints processes as well as financial and funding agreement arrangements; and
• activity-specific guidelines that included information on the activity, selection criteria (where an application process was being undertaken), performance management and reporting. For each activity, including SAIF, the relevant guidelines are identified as being Part C of the Program Guidelines Suite (and referred to in this ANAO report as the SAIF-specific guidelines).

4. Of particular significance was that Part B of the Program Guidelines Suite had outlined that the merit assessment of applications for funding activities (such as SAIF) under the ‘Services and Support for People with Disability’ program would involve a six point rating scale. In turn the SAIF-specific guidelines had identified that eligible applications would be assessed against nine technical criteria as well as a value for money criterion. There was no weighting published for any of the criteria.

Funding round outcome

5. Applications for SAIF grants opened on 5 September 2011 and closed on 20 January 2012. On 6 March 2012, FaHCSIA briefed the then Parliamentary Secretary for Disabilities and Carers, Senator the Hon Jan McLucas, on the results of its assessment work. The department recommended that funding be approved for 21 organisations to deliver 27 projects. On 15 March 2012, the then Parliamentary Secretary agreed with the department’s funding recommendation. The award of funding was announced on 3 April 2012.

Audit objectives, criteria and scope

6. The objective of the audit was to assess the awarding of funding under the Supported Accommodation Innovation Fund against the requirements of the Commonwealth’s grants administration framework. The audit had a particular focus on the:

• provision of assessment advice (including clear funding recommendations) by FaHCSIA to the then Parliamentary Secretary; and
• distribution of awarded funding (including the extent to which funding was awarded in a way that was consistent with the relative merits of competing applications, as identified by the department through its application of the published eligibility and selection criteria).

7. The audit followed a request in February 2013 from Mr Jamie Briggs MP, the Member for Mayo, Shadow Parliamentary Secretary for Supporting Families and Coalition Spokesperson on Scrutiny of Government raising concerns about the distribution of funding in electoral terms. Similar concerns were subsequently reported in the media.

8. The audit examined the grant funding round that opened for applications in September 2011, with funding decisions announced in April 2012. The focus was on the application assessment and decision-making processes. These processes were assessed against relevant policy and legislative requirements for the expenditure of public money and the grants administration framework.

Overall conclusion

9. In March 2012, $51.7 million in SAIF funding was awarded for 27 projects to be delivered by 21 organisations. By mid-November 2012, FaHCSIA had entered into a funding agreement in respect to each project. The project proponents have been contracted to deliver eight respite and 161 long‑term supported accommodation places for people with disability, which was above the program target of eight respite and 142 supported accommodation places.

10. The concerns expressed publicly about the outcome of the grants awarded under the SAIF related to the electorate distribution of the approved funding, which appeared to be particularly favourable to the ALP and, to a lesser extent, the Australian Greens. This perception arose due to errors in FaHCSIA’s website reporting on the locations in which funding was being provided. Specifically, the department reported the location of funding according to where the project proponent was located, rather than where the accommodation was to be constructed or purchased as envisaged by the grants administration framework.² Although accommodation located in ALP-held electorates was awarded the majority of program funding, the situation was not as stark as was suggested by the department’s website reporting of proponent locations. For example, accommodation located in Coalition-held electorates received nearly one quarter of the approved funding³ and no funding was awarded for accommodation in the only electorate (Melbourne) held by the Australian Greens.

11. The distribution of program funding reflected the merit ranking list developed by FaHCSIA as a result of the department’s assessment of applications received by the closing date and time. The department provided the then Parliamentary Secretary with a timely and comprehensive briefing on the results of its assessment work. This briefing included a clear recommendation from the department that the then Parliamentary Secretary approve those 27 eligible applications assessed by the department as offering the greatest merit. The then Parliamentary Secretary approved each recommended project and did not approve funding for any other applications.

12. However, in undertaking its assessment, FaHCSIA applied a methodology that departed, in a number of important respects, from the approach that had been outlined in the published program guidelines. In particular: a full eligibility checking process was not undertaken and appropriately recorded to enable unsuccessful applicants to be provided with clear feedback on why they did not proceed to the merit assessment stage; a different scoring methodology was employed in relation to the published merit criteria; the merit criteria were weighted⁴ when the guidelines did not disclose that any weighting would be employed; and some eligible applications were eliminated from consideration before they had been assessed against the value for money merit criterion.⁵ The effect of these departures was twofold. Firstly, the assessment approach altered the relative importance of individual merit and value for money criteria to assessment outcomes without providing the transparency needed for applicants to target their responses to those criteria that the department considered to be most important. Secondly, had the published approach been applied in full, the identity of some of the applications recommended for funding would have differed, with a consequential effect on which communities benefited from the program.⁶

13. This situation has arisen because the department gave insufficient attention to developing internal assessment plans and implementing an assessment methodology that was consistent with the published program guidelines; and in departing from the approach set out in the guidelines, added considerable complexity to the assessment process. In the circumstances, it would be prudent for the department to ensure that the review and approval of application assessment methodologies⁷ for grant programs explicitly address alignment with the published guidelines.

14. Neither the then Parliamentary Secretary or her office played a role in the development or approval of the department’s internal assessment methodology, or in the actual assessment of applications. They were also not made aware by FaHCSIA that the approach taken by the department had departed from the published program guidelines, or that this had changed the identity of some of those applications recommended for funding approval.

15. A recurring theme in ANAO’s audits of grants administration over a number of years has been the importance of grant programs being implemented in a manner that accords with published program guidelines. Similarly, the grants administration framework was developed based, in part, on recognition that potential applicants and other stakeholders have a right to expect that program funding decisions will be made in a manner, and on a basis, consistent with the published program guidelines. Accordingly, ANAO has recommended that FaHCSIA develop and apply assessment methodologies that are consistent with the published program guidelines. ANAO has also recommended that FaHCSIA:

• make a comprehensive record of the eligibility checking process undertaken for grant programs in order to promote transparency around decision-making and enable unsuccessful applicants to be provided with clear feedback on why they did not proceed to the merit assessment stage⁸; and
• adjust its approach to the website reporting of individual grants to promote more accurate analysis of the funding awarded under the programs it administers.

Key findings by chapter

Program Access

16. FaHCSIA facilitated program access through engagement with relevant stakeholders on the draft SAIF program guidelines from June 2011 until the guidelines were published in September 2011. Applications for SAIF funding were accepted between 5 September 2011 and 20 January 2012. In total, 122 applications were received by the closing time and two late applications were not accepted for assessment. A further three applications were subsequently withdrawn by the applicants, resulting in 119 applications proceeding to eligibility checking.

17. A relatively high proportion (26 per cent) of the applications received, and not withdrawn by project proponents, was eliminated at the eligibility checking stage. This comprised: 19 applications identified as not meeting one of the mandatory requirements in the program guidelines; and 12 applications eliminated after FaHCSIA interpreted the program guidelines⁹ as only permitting proposals that involved long-term (rather than transitional) accommodation. The approach taken to applications involving transitional accommodation was clearly outlined by the department in its briefing to the then Parliamentary Secretary on the outcome of the funding round.

18. There were some shortcomings in FaHCSIA’s administration of the eligibility checking process. Firstly, a full eligibility checking process was not undertaken and documented for those applications that did not proceed to the merit assessment stage. The department also did not maintain adequate records of the results of its eligibility checking and did not consistently apply the eligibility criterion relating to the target group (leading to one ineligible project being recommended and awarded funding). In addition, the feedback provided to proponents of applications eliminated at the eligibility checking stage did not transparently reflect the factors that had precluded them from proceeding to the merit assessment stage.

Merit Assessment

19. FaHCSIA documented an assessment methodology (referred to as the ‘Selection Strategy’) and applied it in assessing the merit of SAIF funding applications. The Selection Strategy incorporated the same technical merit and value for money criteria identified in the published program guidelines, but the assessment approach departed in significant respects from the published program guidelines. In particular, FaHCSIA:

• applied a rating scale that placed a different level of emphasis on each merit criterion as opposed to the uniform six-point rating scale identified in the program guidelines;
• applied weightings to the technical merit criteria, resulting in the score for one of the nine criteria comprising more than 36 per cent of the total weighted score for all criteria; and
• did not assess all eligible applications against the value for money merit criterion, an approach that denied the affected applications the opportunity to be considered for inclusion on the final merit list.

20. A more considered approach to assessing value for money would also have improved the quality of the department’s assessment of applications (and been consistent with the program guidelines). In this respect, the department’s assessment of value for money involved calculating an average cost per place figure notwithstanding that the program guidelines had explicitly stated that ‘value for money is not just about price’. This approach was simplistic and, for example, did not acknowledge factors such as the location of accommodation being a driver of cost, or the importance of considering project risks in assessing value for money. In the latter respect, the value for money definition had stated that the relative risk of each proposal would be used to inform a judgment concerning value for money, but risk assessments were only undertaken subsequently to the value for money assessment and on a selection of eligible applications.

21. These issues highlight the centrality of the assessment process to achieving equitable outcomes, consistent with the objectives for the grant program. Because the assessment process drives the compilation of the merit list of applications, it is important for agencies to ensure that a review of the proposed process is undertaken by a responsible senior executive, specialist departmental unit and/or external scrutineer (such as a probity adviser), and that such a review or reviews explicitly address alignment of the methodology with the published guidelines, including program criteria and objectives. For SAIF, the development of the Selection Strategy was informed by input from the department’s Program Frameworks Branch and an external probity adviser and the methodology was approved by the relevant senior executive within the department. However, alignment of the methodology with the published program guidelines was not a matter addressed through these processes.

Advice to the then Parliamentary Secretary, and Funding Decision

22. A timely and comprehensive briefing on the outcome of the funding round was provided by FaHCSIA to the then Parliamentary Secretary. The briefing included a clear recommendation from the department that the then Parliamentary Secretary approve 27 applications assessed by the department as offering the greatest merit within the program parameters.

23. The recommendation was supported by a briefing package that provided the then Parliamentary Secretary with a range of material relevant to her decision-making. This material included a summary of the selection process, copies of the Selection Strategy and Assessment Report, and advice on approving spending proposals under the grants administration framework and grant reporting requirements.

24. On 15 March 2012, the then Parliamentary Secretary agreed to the funding recommendation she received from FaHCSIA. Specifically, the only applications approved for funding were those recommended by the department, and there were no recommended applications that were not approved for funding. All 27 successful projects were announced on 3 April 2012.

Electorate Distribution of Funding

25. FaHCSIA’s website reporting of the SAIF grants included a number of errors. One result was that analysis of the website reporting is unable to provide an accurate outline of the electorate distribution of approved SAIF funding. Specifically, analysis of the data reported by FaHCSIA on its website suggested that very little program funding had been awarded to accommodation located in electorates held by the Coalition. Although receiving less funding than projects involving accommodation located in ALP‑held electorates, the situation was not as stark as analysis of FaHCSIA’s website reporting had suggested. The actual distribution of SAIF funding included 67 per cent of funding being awarded for accommodation to be provided in ALP-held electorates, 24 per cent to Coalition-held electorates and one grant totalling nearly nine per cent of SAIF funding in an electorate held by an independent member of Parliament.¹⁰

26. Further in this respect, the location of the accommodation did not play a role in the SAIF application assessment and decision-making processes. Nevertheless, various departures occurred between the published program guidelines and the methodology employed by FaHCSIA to assess competing applications. In this context, and although not intended nor designed to advantage one political party over another, accommodation that was planned to be located in a Coalition-held electorate was disadvantaged more often by FaHCSIA’s approach than that located in an ALP-held electorate. Specifically:

• 18 of the 27 approved applications (67 per cent) involving 67 per cent of the approved funding involved accommodation planned to be located in an ALP-held electorate. If FaHCSIA had adhered to the assessment methodology outlined in the published program guidelines¹¹, applications on the merit list for accommodation located in an electorate held by the ALP would have fallen to less than 61 per cent, representing some 57 per cent of funding; and
• less than 30 per cent of the approved applications related to accommodation planned to be located in an electorate held by the Coalition (involving less than 24 per cent of approved funding). Adherence to the program guidelines would have seen accommodation in a Coalition-held electorate comprising nearly 35 per cent of applications on the merit list (and just over 34 per cent of funding).

Agency response

27. The proposed audit report issued under section 19 of the Auditor‑General Act 1997 was provided to FaHCSIA and to the Minister for Human Services (who had made the funding decisions), when the Parliamentary Secretary for Disabilities and Carers. The Minister advised ANAO that she had no formal comments to add to the report. FaHCSIA’s summary response to the proposed report is provided below, while the full response is provided at Appendix 1.

The Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) notes the findings in relation to the assessment process, accepts the three recommendations of the report and will work to implement them as soon as possible.

FaHCSIA notes that the location of the accommodation did not play a role in the SAIF application assessment and decision-making process, which goes to the key driver for the audit that there had potentially been some improper political bias.

The new program reform approach being developed by FaHCSIA as an important part of its broader delivery reform agenda will help to address the recommendations raised by ANAO. The reform is aimed at ensuring that all internal programs and processes have clearer roles and responsibilities and that programs are developed and delivered in a consistent way. It will enable FaHCSIA to continually evaluate programs and create opportunities to capture innovation. This reform will produce key changes to processes such as selection processes, introduce new tools and templates and give clearer guidance about how to do business in a consistent way.

Recommendations

Set out below are ANAO’s recommendations and FaHCSIA’s responses.

Footnotes

[1] The program arrangements included setting aside up to $5.67 million as a contingency allowance to meet any increase in project costs, meaning funding in the vicinity of $51.03 million was available to be awarded.

[2] Under the grants administration framework, FaHCSIA was required to publish the accommodation location and related postcode, not the location of the funding recipient.

[3] FaHCSIA’s website reporting had indicated that some 5 per cent of program funding had been awarded in respect to accommodation located in a Coalition-held electorate.

[4] For example, one of the nine technical criteria was so heavily weighted that it was worth more than 36 per cent of the total score that could be achieved against the technical criteria and was more than twice as important as the next highest scored technical criterion.

[5] Specifically, an assessment against the value for money criterion was only undertaken for those applications that had scored the highest against the technical criteria. This meant that eligible applications that offered relatively lower scores against the technical criteria but better value for money were denied the opportunity to be considered for inclusion on the final merit list.

[6] Overall, there were nine applications approved for SAIF funding that would not have been approved had funding been allocated on the basis of the technical criteria (scored on a six point scale and with no weighting of these criteria, as per the published guidelines). There were also five applications that were not approved for funding but would have been recommended for funding had the technical assessment criteria scoring approach outlined in the program guidelines been applied. See further at paragraphs 5.19 to 5.20.

[7] FaHCSIA’s development of its assessment methodology was informed by input from the department’s Program Frameworks Branch and an external probity adviser and the methodology was approved by the relevant senior executive within the department. However, alignment of the methodology with the published program guidelines was not a matter addressed through these processes.

[8] There is an expectation that unsuccessful applicants will be provided with constructive feedback as to how their proposal had been assessed against the published selection criteria. See 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.

[9] The published program and mandatory conditions did not identify transitional accommodation as ineligible for funding.

[10] See further at paragraph 5.12 and in Table 5.2.

[11] On the basis that the then Parliamentary Secretary would not have departed from the department’s recommendations.