Executive summary
1.1
The Joint Committee of Public Accounts and Audit’s (JCPAA) Inquiry into Commonwealth grants administration was based on four Auditor-General’s reports: Delivery and Evaluation of Grant Programmes (No. 25 of 2015–16); Award of Funding under the 20 Million Trees Programme (No. 4 of 2016–17); The Design of, and Award of Funding under, the Living Safe Together Grants Programme (No. 12 of 2016–17); and Indigenous Advancement Strategy (No. 35 of 2016–17).
1.2
By taking a thematic approach to some of its Commonwealth public sector inquiries, the Committee seeks to encourage improvements and shared learning in key areas of public administration. Effective Commonwealth grants administration will continue to be a strong focus of the JCPAA in its role in scrutinising the governance, performance and accountability of Commonwealth agencies.
1.3
Public hearings inquiring into the latter three reports were held on 24 March 2017. Based on the evidence from the public hearings, submissions to the Inquiry and the Australian National Audit Office’s (ANAO) findings, the Committee’s report focused on the following areas:
Application and assessment processes—Chapter 2.
Advice to decision-makers to approve funding—Chapter 3.
Evaluation and implementation of lessons learned—Chapter 4.
1.4
In response to the Committee’s lines of inquiry, a number of the departments involved in the Committee’s review also discussed their respective engagement with the new whole-of-government Streamlining Grants Administration Initiative (the Grants Initiative). The Grants Initiative is discussed in the grants overview section of this chapter below.
1.5
Grant programmes are a well-established mechanism that are commonly designed and implemented to support governments to achieve their stated policy objectives. Commonwealth departments are responsible for developing their own grants administration practices in accordance with the Commonwealth Grants Rules and Guidelines (CGRGs). Given the common approach of grant programmes to deliver government funding, the Committee was concerned to find that granting departments continue to deliver grant programmes contrary to the requirements of the Commonwealth’s framework. Significant administrative issues remain across granting departments—in particular, grant application and assessment processes, advice provided to Ministers, and programme evaluation. The Committee concluded that departments must give immediate attention to, and remedy the shortcomings identified through the Inquiry, including through training to assist in shifting cultures and behaviours.
Application and assessment processes
1.6
The Committee was concerned that the application and assessment processes across the respective departments showed that: eligibility requirements were not clearly set-out in programme guidelines; applicants were treated inconsistently in relation to the stated eligibility requirements; and eligibility assessments were not being conducted in a transparent or timely manner. In particular, as outlined in Chapter 4 of this report, programme design was adversely affected by a failure to assess and report to the respective Minister on the risks associated with short implementation timeframes.
1.7
Instances where ineligible applications proceeded through to merit assessment, and in some cases, ultimately funded were also identified. The Committee viewed the matter of ineligible applications being recommended for further assessment (which may also result in funding), as an important public administration issue. If grant applications do not meet policy objectives, as expressed in eligibility criteria, they should not receive funding.
1.8
The Committee acknowledged the importance of the two Grants Hubs (created as part of the Grants Initiative), in fostering consistency, thoroughness, and compliance with the CGRGs across these front-end processes. During this period of transition, these shared arrangements may create risks where responsibilities are not clearly articulated or understood and intentions and outcomes may misalign. Notwithstanding the different levels of service departments have chosen (and will choose) to engage with through the Grants Hubs, policy control and activities such as programme design and implementation decisions, as well as advice to Ministers for funding approval, remain the granting department’s responsibility. The Committee recommended that the departments establish formal partnership agreements with their respective Grants Hub (where they have not already done so), and ensure that new or existing arrangements: outline individual and shared responsibilities; provide for joint risk identification and complementary risk management arrangements; and clearly articulate overarching assurance processes that support the balance between better practice administration and the achievement of policy outcomes.
Advice to decision-makers to approve funding
1.9
The Committee emphasised that advice to Ministers must be accurate, complete and contain sufficient information to comply with the Government’s grants policy framework. The Committee highlighted that the evidence presented on this matter revealed that the issues were not just system or process related, but also cultural. The Committee considered the need for departments to instil cultural change, drawing attention to training as one of the fundamentals to influencing a department-wide cultural shift. The Committee recommended that each department measures the number of staff formally trained with regard to the CGRGs and quickly rectify gaps to retain sufficient expertise.
1.10
The Committee also recognised the issue of inadequate record keeping as one of the ANAO’s recurring audit findings. Regarding written advice to decision-makers, the Committee highlighted that departments must maintain detailed, contemporaneous records to support recommendations provided for funding so that there is adequate assurance regarding those specific projects/activities that have been approved and the terms of that approval. The Committee considers that the maintenance of appropriate records is a fundamental aspect of compliance with the CGRGs and should be a focus of training and expertise.
Evaluation and implementation of lessons learned
1.11
Programme evaluation is a key part of departments implementing effective granting processes. The Committee was concerned with the Auditor-General’s observation that departments may develop evaluation frameworks quite late in a grant programme’s lifecycle (and sometimes, not at all).
1.12
The Committee noted the ANAO finding that departments need to take a ‘strong early focus’ on formulating an evaluation strategy. The Committee strongly endorsed the four recommendations contained in the ANAO’s cross-portfolio report on the Delivery and Evaluation of Grant Programmes, which include for departments to: provide more realistic advice to Ministers on programme delivery timeframes during new programme design; as well as develop implementation plans to follow through on evaluation findings and recommendations.
1.13
Regarding the $4.8 billion Indigenous Advancement Strategy (IAS), the Committee was advised that money had been spent on evaluation and that an additional commitment of $40 million to strengthen IAS evaluation activities was announced by the Minister for Indigenous Affairs in February 2017. However, the Committee was concerned that the Department of the Prime Minister and Cabinet, nearly three years since the commencement of the IAS, could not point to a formal overall evaluation strategy.
1.14
The Committee identified that outside of formal grant programme evaluation frameworks, departments can capture other considerable benefits by addressing learnings from their own experience, as well as that of others. The evidence presented as part of this Inquiry, illustrated that similar issues in public grants administration continue across different granting departments as well as within individual departments. Two of the departments that appeared before the Committee were found by the ANAO not to have made sufficient progress on the lessons learned from previous audits, including fully implementing past recommendations. The Committee stressed the importance of departments actively collecting, sharing and acting upon lessons learned.
1.15
The Committee strongly supported the seven recommendations in the three ANAO reports focussed on during this Inquiry. Full implementation of these recommendations is essential for continued shortcomings to be rectified. The Committee recognised the current backdrop to implement these recommendations includes the whole-of-government changes to the grants administration environment. Within this context, the Committee recommended that the three respective departments report back on progress against the Auditor-General’s recommendations, including clearly indicating whether full implementation of the recommendations has been achieved.
1.16
Additionally, the Committee encouraged departments to continue to establish and strengthen ‘communities of practice’, as well as develop other model guidance documents (which can be tailored to individual programmes within, and, across departments) to share and implement learnings. However, the Committee noted that while it is prudent to disseminate learnings from audits and other evaluation activities across a department, it is not simply enough to do so. Similar to many of the issues canvassed in this Inquiry, a supporting culture led by the Executive cohort (along with complementary expertise, quality controls and monitoring at important points across a grant’s life-cycle), is required and should be supported as part of any training with respect to compliance with the CGRGs.
1.17
Based on the Committee’s findings in this Inquiry, future Committee scrutiny of departments’ grants administration in the context of the whole-of-government arrangements will pay attention to whether:
departments understand their underlying culture; and
departments have made a conscious effort and achieved any necessary cultural shifts so that risks that feed into prior deficiencies are mitigated, and that full alignment with the Government’s overarching grants policy framework occurs.
Grants overview
Grants policy framework
1.18
Grants administration is an important activity for many Commonwealth entities and is central to a government achieving its policy objectives.
1.19
The Government’s overarching grants policy framework is established through the Commonwealth Grants Rules and Guidelines (CGRGs), which outline the Government’s expectations for entities involved in grants administration. The CGRGs support the objective of grants administration, which is to promote the ‘proper use and management of public resources’ to achieve policy outcomes.
1.20
The CGRGs came into effect on 1 July 2014 and apply to all non-corporate Commonwealth entities. The rules and guidelines establish the mandatory requirements that apply to all Commonwealth grants, as well as outlining how entities should apply the seven key principles for better practice grants administration—robust planning and design; collaboration and partnership; proportionality; an outcomes orientation; achieving value with relevant money; governance and accountability; and probity and transparency.
1.21
The CGRGs apply to all elements of the grants process, including:
selection and decision-making;
the management of grant agreements;
the ongoing relationship with grants recipients;
1.22
As part of the mandatory requirements within these elements, the CGRGs specify the minimum that must be met when administering officers provide written advice to Ministers (where Ministers exercise the role of an approver). Included in the requirements is that the advice must ‘at a minimum’:
… outline the application and selection process, including the selection criteria, that were used to select potential grant recipients; and include the merits of the proposed grant or grants relative to the grant guidelines and the key consideration of achieving value with relevant money.
1.23
Building on these requirements, the CGRGs also articulate what administering officers should indicate, at a minimum, when briefing Ministers on the merits of a specific grant (or group of grants):
… [that is] which grant applications fully meet the selection criteria; which applications partially meet the criteria; and which applications do not meet any of the criteria. Any specific recommendations regarding grant applications for approval can be in addition to this information.
1.24
The rules and guidelines also contain a ‘small’ number of requirements that apply to Ministers, including ‘grants-specific decision-making and reporting requirements’. Ministers are not to approve a grant without first receiving advice in writing—advice that must meet the aforementioned briefing requirements of the CGRGs—from administering officials on the merits of the proposed grant. Also included, are any legislative requirements that are applicable where Ministers approve proposed expenditure.
Streamlining Grants Administration Initiative
1.25
In the 2015–16 Budget, the Australian Government provided $254.7 million over four years (from 2015–16) to support the initial implementation of the Digital Transformation Agenda. This measure also provided funding for the implementation of projects to form Stage One of the Digital Transformation Agenda, including:
$106.8 million for streamlining government grants administration by adopting standard business processes, a common ICT platform, improved reporting arrangements and a single portal to search and apply for grant opportunities.
1.26
The Streamlining Grants Administration Initiative (the Grants Initiative), led by the Department of Finance (DoF), is one of the key Stage One projects. Two grants administration hubs (the Grants Hubs) have formed under the Grants Initiative to help create a standardised and common grants management process across government.
1.27
In its submission to this Inquiry, the Department of Social Services (DSS) outlined that the two Grants Hubs are the:
Business Grants Hub—for grants made to businesses, which is operated by the Department of Industry, Innovation and Science (DIIS); and
Community Grants Hub—for grants made to the community sector and individuals, which is operated by DSS.
1.28
The grants administration processes for both Grants Hubs leverage off the ‘Program Delivery Model’—a high level, whole-of-government business process framework to be used by departments with grants programmes. The Model provides a ‘comprehensive, consistent and structured approach to the design and administration of programs’. DSS further submitted that while the Model guides the work of the Grants Hubs, ‘client agencies’ retain all policy control for grant programmes including responsibility for design and implementation decisions, communications, ministerial briefings and service provider relationships.
1.29
The Grants Hubs also support the new integrated grants management system, govGPS, which supports the end-to-end management of grants. Key components of govGPS include: a Client Relationship Management system; a Grants Processing System; and online portals for agencies and grant recipients to undertake a level of self-service. According to DSS, govGPS achieves the Grants Initiative’s aims of ‘a consistent approach to grants administration and reduces costs across government… [whereby] individual client agencies no longer need to invest in purpose built IT platforms to support their granting activities.’
1.30
Furthermore, DSS also highlighted that an improved performance reporting system—the Data Exchange system—was in-place, describing that:
the system is easy to use, providing flexible ways for grant recipients to submit performance information; and
analysis of the data collected through this system will shape future program design.
1.31
DSS informed the Committee on the status of the Community Grants Hub (the Community Hub), noting that it was established on 1 July 2016. The main government granting agencies are in the process of progressively transitioning to the Community Hub, with the full transition expected to be completed in 2019. As at March 2017, six agencies signed partnership agreements with the Community Hub.
1.32
DSS further explained that the Community Hub offers three different levels of services to the partnered entity—Basic, Premium and Premium Plus. The entity is able to choose what level of service they would like the Community Hub to provide. For example, The NDIA opted for the Premium Plus package. The level of service from the Community Hub includes grant programme design, selection preparation, application assessment and the establishment of agreements. DSS informed the Committee that the Community Hub has delivered these services for several NDIA grants rounds. In contrast, the Department of the Prime Minister and Cabinet (PM&C) and the Department of Agriculture and Water Resources took up the basic service package, to self-manage their respective grants programs. Through this package they are given access to the hub’s grant management system (govGPS).
1.33
PM&C further outlined their engagement with the Grants Initiative and advised the Committee that:
the department purchased its ‘primary grant system’ from DSS, with formal governance arrangements in-place; and
along with all other departments administering grants across the Commonwealth, PM&C participate in ‘at least four’ governance forums related to the Grants Initiative, and the work of the Grants Hubs.
1.34
At the time of the public hearings, the Attorney-General’s Department (AGD) had also transitioned two of its grants programmes under the Grants Initiative and advised that it will continue, over time, to transition additional programmes to the Business Hub. AGD stated that through this new arrangement, the department hoped to ‘achieve efficiencies’ and ‘leverage off the expertise’ from the Business Hub so as to ‘ensure a level of expertise and adoption of best practice that is a bit difficult to achieve in areas that have multiple responsibilities’. As part of managing the transition exercise, AGD raised the issue of maintaining balance between achieving policy outcomes and applying best practice grants administration—posing the question, ‘how do you ensure that your policy outcomes continue to be achieved?’ With respect to this matter, AGD highlighted the need for ‘close interaction’ between the policy area and those administering the grant programmes, which in the case of the new Grants Initiative, will largely be the Grants Hubs.
1.35
The ANAO reiterated to the Committee the importance of the question posed by AGD—balancing between policy intent and the CGRGs, particularly as the CGRGs has a ‘degree of government expectation’ and that:
… the Minister for Finance’s introduction to them does comment on them being “one-off, low-value grants or long term, high-value activities”. So they are contemplated as being able to be applied across the whole. That connectivity between the policy officer and the grants officer becomes quite important in that, because the rules have to be followed.
1.36
As part of this discussion, the ANAO noted that while grants are a popular and common mechanism for distributing programme funding, agencies should still ask ‘what is the best mechanism’ to use to assist in meeting policy objectives. The ANAO drew attention to the Department of the Environment and Energy demonstrating the use of an alternative mechanism to grants—the procurement of service providers—to deliver the 20 Million Trees programme.
1.37
Conclusions and recommendations of the Committee on the new whole-of-government arrangements and departments’ engagement with the Grants Hubs into the future are addressed in subsequent chapters.