Sports grants controversy puts national entities on notice

And at least one affected group is headed for court, with a disgruntled tennis club – which missed out on a grant despite ticking “all the boxes” and scoring 78 of a possible 100 points in a merit assessment – launching legal action.

Changes to grants management processes for corporatised Commonwealth entities appear certain, which would bring them into line with other federal bodies.

Authorities have also suggested that all Commonwealth entities would benefit from using those same guidelines.

The highly critical assessment of the program by the Australian National Audit Office (ANAO), tabled in January, found that the $100 million scheme “was not informed by an appropriate assessment process and sound advice”.

Those millions of dollars were distributed to 684 projects aimed at boosting access to sporting facilities.

There were three grant rounds in the lead-up to the last federal election, with funds approved by the office of former sports minister Bridget McKenzie.

In the wake of the ANAO report, Ms McKenzie was found by the Prime Minister’s office to have breached ministerial standards by failing to declare the memberships of two beneficiary organisations, and a conflict with the Wangaratta Clay Target Club. She subsequently stood down as the minister and the National Party’s deputy leader. The issue continues to play out in Senate Estimates and on the floor of Parliament.

The ANAO reported, “A significant shortcoming was that, while the program guidelines identified that the Minister for Sport would approve CSIG funding, there are no records evidencing that the Minister was advised of the legal basis on which the Minister could undertake an approval role, and it is not evident to the ANAO what the legal authority was.”

Sport Australia, which assessed the grant applications, used a merit-based ranking system. But the ANAO found that 61% of the awarded grants scored less than Sport Australia’s cut-off score for funding.

The ANAO found that “Sport Australia’s assessment of applications was largely in accordance with the published program guidelines”, but that the minister’s office conducted a separate and “parallel” assessment program using considerations “inconsistent with published guidelines”.

Amid the continuing political fallout, the ANAO has made four recommendations to address the issue, including a recommendation that would require all corporate Commonwealth entities to comply with Commonwealth Grant Rules and Guidelines (CGRGs).

The CGRGs are obligatory across Commonwealth departments, but there are scores of corporate Commonwealth organisations, such as Sport Australia, that are not currently required to meet those guidelines.

This oversight appears certain to change, after both the ANAO recommendation and a review of the ANAO findings by the secretary of the Department of Prime Minister and Cabinet, Philip Gaetjens.

Prime Minister Scott Morrison last month confirmed that the government would adopt the recommendations of the report, while Mr Gaetjens wrote in his review that the new rule on corporate entities would “ensure that shortcomings identified with this program will be avoided in the future”.

Sport Australia, while at the centre of the storm, avoided strong criticism. In fact, the ANAO found that “the program guidelines were well structured and included clear assessment criteria with transparent weightings”.

But the ANAO suggested the program’s design would have been improved by “greater analysis and planning around the likely high demand for funds”.

It found that Sport Australia could have implemented strategies to manage risks to the quality of the assessment process, and could have increased the standard of conflict of interest management arrangements to a “consistently high standard”.

In total, four recommendations will be adopted:

• The Australian Government will amend the CGRGs to require that the advising, decision-making and reporting requirements applying to situations where a minister approves grant funding be extended to corporate Commonwealth entities in situations where a minister, rather than the corporate entity, is the decision-maker. This will mean that there will be a single framework in place for all circumstances where a minister decides upon the award of grant funding.
• When designing competitive, applications-based grant programs, Sport Australia will identify strategies to manage the expected level of demand for the amount of funding available.
• Sport Australia will require declarations to be made as to whether or not employees involved in the design and oversight of funding programs have a conflict of interest.
• Sport Australia will strengthen its assessment records for grant programs by concisely recording not only assessment scores but also the reasons for them.

The ANAO issued a series of “key learnings” and instances of good practice that were identified by the audit and could be relevant to other Commonwealth entities.

• Entities not subject to the CGRGs can benefit from basing their grants administration framework and practices on those rules and guidelines.
• An important element in designing a robust governance framework for a grant program is clearly identifying who will be deciding which applicants will receive a grant and ensuring that this person has the necessary legal authority to make those decisions.
• Decision-making in competitive grants programs is best supported by entity advice that prioritises applications on the basis of their assessed merit against each of the published criteria. The highest ranked applications should be those recommended for funding approval.
• 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.
• It is poor practice for entities to be instructed what their advice should recommend, or for entities to recommend what they understand to be a preferred approach rather than providing their own recommendations that are developed through an evidence-based approach.
• The reasons for decisions to award or not award grant funding should be recorded in a manner that promotes transparency and accountability. Where the guidelines allow consideration of factors in addition to the published criteria to be taken into account, those factors should be identified in the decision-making records and their impact on the success or otherwise of individual candidate projects recorded.