Grants watch 2023: Audits, investigations and reviews

Update: Monday, November 13, 2023

Good probity could prevent grants probes

The nation’s top financial watchdog, the Australian National Audit Office (ANAO), has released new guidance on probity, which will be especially useful for the many government grantmakers with governance and oversight responsibilities.

The ANAO, which has conducted a string of high-profile grants audits in recent years, notes that probity is “routinely assessed” in grants administration. It defines probity as “the evidence of ethical behaviour … complete and confirmed integrity, uprightness and honesty in a particular process”.

Under law, including the Commonwealth Grants Rules and Guidelines (CGRGs), federal public servants must “meet high standards of governance, performance and accountability” while remaining “an apolitical public service that is efficient and effective in serving the government, the Parliament and the … public”.

The ANAO has earmarked the following probity risk areas for public service leaders:

• code of conduct
• public interest disclosures
• conflict of interest
• regulatory risks
• fraud
• credit cards
• gifts, benefits and hospitality
• procurement
• senior executive remuneration.

It suggests that organisations wanting to remain above board with their activities should:

• promote a culture that supports probity
• identify probity requirements and risks
• develop policies and procedures
• inform personnel of probity requirements
• check that internal controls for managing risks are effective
• promote, check and follow up compliance with probity requirements
• keep records to demonstrate probity.

The ANAO said that while the probity guidance drew on audits by financial regulators, “the lessons for managing probity risks can be applied across the public sector”.

Read more of the ANAO’s advice, including access to resources

Watchdog eyes mobile blackspot program

The ANAO is reviewing the federal Mobile Black Spot Program, after allegations last year by federal Liberal MP David Coleman that 74% of the target locations were in Labor electorates.

More than 1200 locations have been funded through several rounds of the program since 2014, but in April last year, Mr Coleman claimed: “In my view … Round 6 of the program was designed for political purposes and represents a misuse of taxpayer funds.”

He called on the watchdog to act, and the ANAO subsequently scheduled a review that will examine whether:

• the program was designed in a manner consistent with Commonwealth Grants Rules and Guidelines (CGRGs)
• applications were assessed in accordance with guidelines
• funding decisions were informed by clear advice and guidelines.

Submissions close on Sunday, November 26.

CSIRO could be under the microscope

The ANAO’s work plan for 2023–24 includes a possible investigation of the “effectiveness of CSIRO grants allocation and administration”.

If conducted, the audit would look at the awarding and administration of funding by the Commonwealth agency, including whether it met federal guidelines.

The auditor says it is likely to examine programs such as CSIRO Kick-Start, the SIEF Ross Metcalf Fellowship, the SME Connect team, and the STEM+ Business and Innovation Connections programs.

Push for better grants governance in NSW

The NSW Government has flagged all future “fast-track” disaster funding grants as “high risk grants” under changes to its grants framework, and has asked the state's auditor- to conduct regular performance audits.

The decision represents a new mandate for the Audit Office of NSW, the organisation’s latest work plan shows, and is in line with a series of government moves to improve grants administration.

Since July, new laws have required ministers to approve only grants that are efficient, effective, economical and ethical and provide value for money.

The new grants rules required multiple changes to existing finance and government information legislation.

As well as bringing into force the ministerial edict, the rule changes mean that any decision-maker approving or declining a grant must have regard to seven principles in the administration of grants: robust planning and design, collaboration and partnership, proportionality, an outcomes orientation, achieving value with relevant money, governance and accountability, and probity and transparency.

Other changes will mean more grants information is declared “open access information”, which must be publicly available unless there is an overriding public interest against disclosure.

The changes are a response to the former NSW government’s handling of bushfire grants, criticism of grants management by Service NSW, and a review of the state’s community grants scheme.

More about the review of grants administration in NSW

WA to examine community sport and recreation grants

The WA auditor-general will examine the “millions of dollars” the state government there spends on community sport and recreation.

The audit will assess whether government entities “apply sound administration practices to assess and approve grants”.

The investigation will look at policies and procedures, as well as whether applications are assessed and approved in a transparent and equitable manner.

It is expected the report will be lodged before the end of the year.

Queensland dishes out billions more in grants, boosts transparency

Queensland grant spending continues to rocket, reflecting the state’s powerhouse economy.

Grant expenses are set to rise by $3.6 billion in the coming financial year, following a $1.2 billion hike the previous year.

The Queensland budget shows grant expenses will rise from $13.618 billion in 2022–23 to $17.195 billion in 2023–24, with details outlined in budget papers. (See section 5.3.6 of Budget Paper 2, Budget Strategy and Outlook 2023–24: Expenses).

The increased grant spending reflects Queensland’s status as one of the strongest economic performers in the country, largely on the back of high coal and oil prices, which generated more than $10 billion in royalties last year.

Grant watchers will soon be able to examine that spending in great detail, via an interactive grants dashboard that displays where grant funds are flowing.

The dashboard is part of a three-part strategy by the Queensland auditor-general to create clearer grants information, improve grants management processes, and measure programs better.

According to the latest available statistics from the Queensland Audit Office (QAO), the $4.1 billion grants expenditure (up from $2.8 billion in the 2021 financial year) reflects new priorities for the government, with the biggest amounts for 2021–22 being spent in these areas:

• employment ($1.3 billion)
• communities ($1.3 billion)
• transport ($870 million)
• education ($395 million)
• health and safety ($116 million)
• environment ($111 million)

Spending spikes in communities (up by $662 million) and employment (up by $591 million) make up most of the increased grant spend.

The QAO said in a statement that there had been a $2 billion boost to grants in the 2021–22 financial year, largely due to a “waste reform payment” paid in advance to local councils, which had been classified as a “communities” spend by the Environment and Science Department. More information about those payments has been published in the State Entities 2022 report.

The figures show there were 27,892 grant payments made to 14,419 recipients in the 2022 financial year, with the biggest benefactors being:

• Department of Employment, Small Business and Training ($893 million)
• Department of Environment and Science ($881 million)
• Queensland Reconstruction Authority ($582 million)
• Department of State Development, Infrastructure and Local Government and Planning ($463 million)
• Department of Transport and Main Roads ($378 million)

Queensland’s nation-leading push for grants transparency and best practice has been generating a lot of interest among government departments and grant nerds alike.

A spokesperson for the QAO said it would keep seeking “engaging ways to share our insights with our stakeholders, clients, and Queenslanders”.

“Our “Understanding Grants” dashboard brings together data from the Queensland Government Open Data Portal and extra information relevant to understanding the local context for grants. Its aim is to present the data in an easy-to-use and clear tool so that anyone can understand who gets grant funding in Queensland and how much is received.”

The QAO said the dashboard was now updated yearly, upon the release of new datasets ­– usually in November. Those datasets provide a consolidated view of grant payments by government departments and the Queensland Reconstruction Authority.

The Queensland Audit Office’s annual report says the Improving Grants Management report has been viewed nearly 4000 times and has helped departments apply its “grants management maturity model”, informed government recommendations, identified risks for agencies, and encouraged more collaboration.

“We project it will become one of our most read and long-lasting better practice offerings,” the report said.

More than 700 readers have examined the grant maturity model, and several grantmaking entities have acted on its recommendations. The QAO is expected to detail their progress next year.

Read more about the Improving Grants Management project

Victorian watchdog wins new term of office

The Victorian Parliament has appointed Andrew Greaves as Victoria’s auditor-general for another seven-year term.

Mr Greaves has been Victorian auditor-general since 2016, after holding a similar role in Queensland.

Treasurer Tim Pallas said the role would ensure the state’s public resources were used efficiently and effectively.

The office’s most significant recent audit affecting grantmaking was its 2022 report into fraud control in local government grants, in which it made nine recommendations to Victorian councils urging them to strengthen fraud controls and improve guidance and training on grant-related fraud.

Community grants examined in Tassie

Tasmania’s auditor-general plans to begin examining community grants and contracted services this financial year.

According to the office’s work plan, the performance audit will affect several departments including the Department of Premier and Cabinet, Department of State Growth, and Department for Education, Children and Young People, as well as various non-government organisations.

The assessment will examine whether those departments have “a transparent and strategic approach” to grants and procurement of services.

The audit will also examine the existence of “robust controls” for working with service providers, for ensuring compliance with agreements, and for monitoring outcomes of services provided by non-government organisations.

Update: Tuesday, August 8, 2023

Sweeping changes recommended for federal grants

Another federal inquiry into Coalition-era grants has called for a major revamp of Commonwealth grants rules.

The Joint Committee of Public Accounts and Audit – a parliamentary committee which holds Commonwealth agencies to account – examined seven different grant programs and recently tabled its findings.

The inquiry found a string of instances of non-compliance with the Commonwealth Grants Rules and Guidelines (CGRGs), which outline rules aimed at achieving fairness, generally competitive processes, transparent decisions and value for money.

The inquiry uncovered a growing trend towards non-competitive grant processes, a lack of definition of election commitments, inadequate records of decisions taken by officials and ministers, and the growing use of unspecified “other factors” in grants assessments.

The inquiry supported the extension of CGRGs to all Commonwealth entities, and proposed that “grants hubs” used to administer funding should be better planned, face more stringent performance measures, and improve their data quality.

The committee’s chair, Labor MP Julian Hill, said the inquiry’s eight recommendations were aimed at strengthening processes and transparency for funding. Those recommendations are summarised as follows:

1. That decision makers be required to adhere to CGRGs.
2. That the definition of “election commitment for the purpose of delivering grants” be clarified.
3. That competitive, merit-based processes be adopted by default, and that decision makers be forced to document reasons why any are not. This recommendation also set out a string of other requirements tightening controls on stakeholders, decision-makers, timelines, assessments, recommended grants, and the transparency of decisions.
4. That the department of finance develops examples of good record keeping and CGRGs compliance.
5. That the Australian National Audit Office audits the manner in which the finance minister is told of grant approvals which don’t match agency recommendations.
6. That the CGRGs are amended to include all corporate Commonwealth entities by default, aside from legal exceptions issued by the minister.
7. That the department of finance reports back by the end of June 2024 on progress with implementing recommendations for its grants hubs.
8. That the ANAO produce an additional information report on Australian government grants reporting next year.

(Read the recommendations in full here.)

All committee members supported the recommendations, but the report itself was disputed, with the Labor-dominated committee scathing in its assessment of the former Coalition Government’s approach to grants.

Liberal and National Party members lodged a dissenting report.

Mr Hill said the committee found “clear and concerning evidence of serial non-compliance with the Commonwealth Grants Rules and Guidelines (CGRGs) and program guidelines”.

“The requirements are not overly complex or onerous, yet both the letter and the spirit of rules were routinely disregarded by ministers and officials.

“Instead of transparently allocating public funds, the previous government pursued industrial-scale rorting for blatantly partisan purposes.

“Rorting grants programs in this way not only wastes money, but also degraded public trust. The committee was especially appalled to receive evidence that politicisation of regional grants programs corroded public trust to the point some councils stopped applying due to the belief they would never get a fair go.

“Principles of fairness, a competitive process by default, transparency and value for money were simply disregarded and records of critical decisions were not made or kept.

“It's difficult to know what is more perplexing. That the previous government did what they did with billions of taxpayer dollars? Or that they still do not acknowledge that what they did was utterly wrong?”

He said that “assessment processes were repeatedly, systematically and systemically perverted”, with funding decisions repeatedly resulting in “ridiculously partisan outcomes”.

The dissenting report lodged by Coalition MPs argued that some of the report was “politically motivated”.

While the group agreed that “urgent action is needed across the public service to reform how grants are administered”, it took aim at the “politically charged rhetoric in the report, not backed up by ANAO findings or witness evidence”.

The group also stressed “there were no findings of illegality by ministers or public officials by the ANAO or in evidence received by the committee” and pointed to the fact that “ministers had been let down in the advice and support they received from public sector officials on the administration of grants”.

Read the full report here.

Auditor to keep a close watch on federal grants

Australia’s auditor-general will continue to keep a close eye on grants administration in the coming year, following a string of critical reports relating to grants in the past few years.

The Australian National Audit Office (ANAO) recently released its 2023-2024 work program, with “grants assessment, decision-making and management” listed among several other priorities.

In a published report, the ANAO wrote that the inclusion of grants followed an environmental scan that “identified key considerations and risks across government activities”.

It found that there were “cross-cutting themes” involving grants, given that grants administration was “a significant activity of Australian government entities”.

“ANAO audits have shown that there is often a focus on compliance with only the small number of mandatory requirements listed in the framework rather than the overarching principles. This leads to a lack of transparency and accountability over funding decisions, and impacts value for money.”

The ANAO has previously highlighted the value of ethics in good grants management.

“These matters are related to the promotion within entities of an ethical culture that supports effective compliance with mandatory requirements and good practice, including financial (such as in procurement and grants) and non-financial requirements, which is essential for good governance, the proper use of resources and entity success. An ethical culture is one that focuses on compliance with both the letter and intent of requirements.”

Read the full work program here.

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UPDATE: Thursday, May 4, 2023

Hearings wrap up in Commonwealth grants probe

A federal inquiry into Coalition-era grants has hosted the last of three hearings, after accepting 22 submissions from interested parties.

The Joint Committee of Public Accounts and Audit, a parliamentary committee, is reviewing seven Commonwealth grants programs:

• Building Better Regions Fund
• Operation of Grant Hubs
• Safer Communities Fund
• Commuter Car Parks
• Urban Congestion Fund
• Regional Growth Fund
• Modern Manufacturing Initiative.

The inquiry has received submissions from past critics of poor grants governance, including the Grattan Institute, constitutional law expert Professor Anne Twomey, the Centre for Public Integrity, the Law Society of NSW and several government agencies, including the key regulator, the Australian National Audit Office (ANAO).

The ANAO, understandably, drew attention to its past criticisms of several of the grant programs, as well as the recommendations it had made to the appropriate departments.

It acknowledged that the framework governing the administration of Commonwealth grants under existing laws and guidelines “had not achieved its original objective”.

It nominated financial management, policy principles and better “concepts and definitions” as crucial areas for the inquiry to address. And the ANAO believed renewed attention to its already published “Better Practice Guides” was warranted.

It proposed a series of changes to Commonwealth grant rules and guidelines, such as boosting merit-based selections, ensuring more government entities comply with those guidelines, adopting online reporting, and implementing more recommendations from audits in recent years.

The ANAO presented its findings to the final March 31 public hearing with a five-member delegation, headed by Auditor-General Grant Hehir.

In its opening statement to the committee, it detailed the following key issues for consideration:

• the low use of open and competitive grant selection processes compared with other less competitive mechanisms
• grant opportunity guidelines not accurately conveying the application and assessment processes adopted
• the application of processes not set out in the published grant opportunity guidelines
• the building of high levels of flexibility into guidelines such that the use of documented specific criteria can be made less relevant through clauses allowing broad discretion
• the omission of important information from the guidelines, such as identification of all stakeholders, including parliamentarians and their staff, who will play a role in the assessment and award of grant funding
• shortcomings in the advice provided to decision-makers, poor record-keeping, and inconsistent approaches to reporting “overturns” to the Finance Minister.
  

The Grattan Institute had previously alerted the committee to its fulsome examination of grants rorts, first made public at the 2022 SmartyGrants Grantmaking Intelligence Conference, in which Institute CEO Danielle Wood argued that:

• grant programs should be open, competitive, and merit-based
• ministers, while able to establish grant programs and define selection criteria, should not be involved in choosing grant recipients
• a standing multi-party parliamentary committee should oversee compliance
• funding for auditors-general should be increased to allow more frequent auditing.

You can read a summary of the report here.

Prof Twomey said in her submission that “there remain some significant problems that need to be resolved to ensure that public spending is lawful as well as being fairly and effectively allocated”.

And the Centre for Public Integrity said in its submission that good grantmaking must have clear criteria, robust reporting and “augmented accountability”.

Its submission echoed the views of the Grattan Institute, and called for an “independently enforceable code of conduct”, for the requirement for ministers to report on decisions that deviated from departmental advice, and for tougher guidelines for any programs worth over $100 million.

In summary, it argued that the implementation of many past recommendations for improvements to grants administration was well overdue.

“There is a manifest and urgent need to create a grants administration framework that facilitates transparency and accountability: public funds are not infinite, and more must be done in order to guarantee that grant expenditure is for proper, public purposes, and achieves value for money … If the public is to be able to regain trust in the expenditure of public funds by the Commonwealth, reform of the nature we have set out above is indispensable.”

Chair Julian Hill MP said the committee’s scrutiny would ensure future grants programs met Commonwealth guidelines and community expectations.

Learn more about the inquiry here.

Research grants review handed down

A review of the Australian Research Council Act has sought to rein in ministerial intervention and rebuild trust in the sector.

The 80-page report, published on April 20, is titled Trusting Australia’s Ability, and finds that trust in the Australian Research Council (ARC) had been “dramatically eroded” following several ministerial interventions since 2001.

The review suggested more “checks and balances” were needed and that the minister should only intervene in funding decisions in the event of “a potential threat to national security”.

Instead, recommendations and approvals “should be made by those best placed to judge the intrinsic merit of the proposals”.

These were among 10 recommendations aimed at rebuilding trust and restructuring the grantmaking decision framework of the ARC. The review also proposed clear separations between ARC grants programs and other funding that meets strategic government research objectives.

The review was led by the former CEO of the ARC, Professor Margaret Sheil, now Vice Chancellor and President of the Queensland University of Technology.

The ARC administers more than $800 million worth of grants each year.

The former federal government used its veto powers on Christmas Eve in 2021 to cancel $1.4 million in funding awarded by the ARC for six humanities projects, triggering a petition by academics and intellectuals.

Federal Education Minister Jason Clare ordered the review in August 2022 amid sustained criticism of the way the ARC had handled grants.

In April, Mr Clare said the government would respond to the report “in due course”, but last year had said delays and political interference should end and the review would help ensure that “the Australian Research Council has competent leadership and is functioning well, that its objectives are clear and that its processes are rigorous and transparent”.

A March 2022 Senate review of the ARC Act found it “prescriptive, inflexible, and outdated”, weighed down by “a high level of old-fashioned administrative and legislative burden”.

Alongside perceptions of political meddling, the research community has long been concerned about the ARC’s independence, long delays in assessing applications, difficult application processes, grant review methods, lack of focus on “basic research”, funding levels, success rates and flagging international partnerships.

Among the 223 submissions were statements from Australia’s top eight universities, supporting major changes to the ARC’s governance, role and focus.

Read the final report.

NSW bushfire grants program feels the heat

A NSW grants program designed to help bushfire-affected areas recover from the 2019–20 blazes has been referred to the state’s corruption watchdog.

The former Perrottet government provided the auditor-general’s report to the Independent Commission Against Corruption (ICAC) in early February.

Days earlier, the Audit Office of NSW found that the fast-track stream of the $542 million Bushfire Local Economic Recovery (BLER) program, worth $108 million, had not been effectively administered by the Department of Regional NSW.

Instead, it found that the process “lacked integrity, given it did not have sufficiently detailed guidelines and the assessment process for projects lacked transparency and consistency”.

The audit also noted that then Deputy Premier John Barilaro’s office applied a $1 million threshold and projects below that "were not approved for funding”.

That threshold meant “a number of shortlisted projects in areas highly impacted by the bushfires [were] excluded, including all shortlisted projects located in Labor Party-held electorates”.

It also found that “conflicts of interest were not effectively managed” in another “sector development grants” stream, worth $73 million, while the remaining open round, worth $283 million, also demonstrated “weaknesses” in the approach to conflicts.

Read the full auditor-general’s report: Bushfire Recovery Grants.

Service NSW has grants homework to do

Another NSW auditor-general’s report from December 2022 has uncovered improvements needed in grants administration in that state, particularly in the light of the rapid increase in the size and scope of programs.

The audit examined the operation of 26 government agencies as part of a customer service study and found that a key issue was the growth in the size and number of Service NSW-administered grant programs in response to emergency events.

According to the report, Service NSW’s grant programs grew from $263 million across five programs in 2020–21 to $11.6 billion across 17 programs in 2021–22.

While the office noted the significance of the work, and the speed at which many of those programs were implemented, it said a series of problems remained:

• late assessment of revenue, resulting in misstatements
• withdrawal of funds without approval from NSW Treasury
• late request for approval to recover 2021–22 grant administration costs
• inability to quantify administration costs for each grant program
• system errors resulting in overpayments.

The audit found: “Improvements are required to address gaps in Service NSW's policies, systems and processes in administering and financial reporting of grant programs.”

It suggested that Service NSW needed “improvements … in the timeliness and quality of grant administration revenue assessment and controls over the recovery of grant administration costs”.

Read the full auditor-general’s report: Customer Service 2022