References

[1] The Strategic Review further reported that the use of grants (that is, excluding Commonwealth specific purpose payments) had increased from fewer than 4 000 with a total value of about $580 million in calendar year 2000 to around 49 000 with a total value of $4.5 billion in calendar year 2007. Source: Mr Peter Grant PSM, Strategic Review of the Administration of Australian Government Grant Programs, 31 July 2008, p. 1.

[2] ibid., p. 3.

[3] ibid., pp. 3 and 23.

[4] Also on 16 January 2009, the Department of Finance and Deregulation released detailed guidance to agencies regarding the new Instructions, in the form of an Estimates Memorandum.

[5] The revised Instructions also retained the requirement for details of individual grants to be published on agency websites, although this was now required to occur within seven days of the funding agreement being signed by both parties, rather than the earlier requirement of within two days of the grant being announced.

[6] See FMA Regulation 7A. The introduction of a statutory basis for the issuing of grant guidelines placed the administration of grant programs on the same footing as procurement activities, which are subject to the requirements of the Commonwealth Procurement Guidelines (CPGs). The CPGs are issued under FMA Regulation 7, which stipulates that officials performing duties in relation to the procurement of property or services must act in accordance with the CPGs.

[7] See, for example, Finance Circular No. 2009/03, Grants and other common financial arrangements, 29 June 2009 (which provides guidance in relation to distinguishing a grant from other common types of financial arrangements, and the relevant framework that applies to the administration of each arrangement) and Finance Circular No. 2009/04, Grants—Reporting Requirements, 29 June 2009 (which provides guidance on the grant reporting requirements of the CGGs). Both Circulars are available at <http://www.finance.gov.au/publications/finance-circulars/index.html> [accessed 24 May 2010].

[8] See, for example, Finance Circular No. 2009/05, Commitments to spend public money (FMA Regulations 7 to 13), 29 June 2009; Finance Circular No. 2007/01, FMA Regulation 10, 21 June 2007; and Finance Circular No. 2009/06, Certificate of Compliance—FMA Act Agencies, 11 August 2009. Each Circular is available at <http://www.finance.gov.au/publications/finance-circulars/index.html> [accessed 24 May 2010].

[9] See Australian Government Solicitor, Legal Briefing 83, Grants and Funding Programs: Legal Issues, 17 November 2009, available at
<http://www.ags.gov.au/publications/agspubs/legalpubs/legalbriefings/index.htm> [accessed 7 December 2009].

[10] Report by the Commonwealth Ombudsman, Prof. John McMillan, under the Ombudsman Act 1976, Report No.12 2009, Executive Schemes, Canberra, August 2009, available at <http://www.ombudsman.gov.au/files/investigation_2009_12.pdf> [accessed 7 December 2009].

[11] Department of Finance and Deregulation, Commonwealth Grant Guidelines—Policies and Principles for Grants Administration, Financial Management Guidance No. 23, July 2009, p. 14.

[12] For further guidance, see Finance Circular No. 2009/06, as referred to in footnote 8.

[13] FMA Regulation 6 authorises Chief Executives to give instructions to officials in their agency on any matter necessary or convenient for carrying out or giving effect to the Act or the Regulations.

[14] Public money means money in the custody or under the control of the Commonwealth; or money in the custody of any person acting for and on behalf of the Commonwealth in respect of the custody or control of the money (including such money that is held on trust for, or otherwise for the benefit of, a person other than the Commonwealth) (Section 5, FMA Act).

[15] Section 65 of the FMA Act provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed, for carrying out or giving effect to the Act.

[16] These may include, but are not limited to, policies relating to privacy; government advertising; anti-discrimination and equity of access; social inclusion; freedom of information; sector specific policies, such as health and transport policies; and, in the case of construction projects, the National Code of Practice for the Construction Industry.

[17] Commonwealth Grant Guidelines, op. cit., paragraphs 3.16–3.17.

[18] Strategic Review of the Administration of Australian Government Grant Programs, op. cit., p. 3.

[19] A recipient means a recipient that is external to the legal entity of the Commonwealth. Notional payments and receipts by agencies within the meaning of section 6 of the FMA Act are not grants.

[20] Commonwealth Grant Guidelines, op. cit., paragraph 2.7.

[21] Finance Circular No. 2009/03, op. cit.

[22] In this respect, the Strategic Review reported that, in relation to past classification practices: 'Convenience rather than principle has often been at work: for example, some agencies have openly acknowledged that a factor underlying their large number of grant programs has been a wish to avoid the application of the Commonwealth Procurement Guidelines.' (Source: Strategic Review of the Administration of Australian Government Grant Programs, op. cit., p. 3.) As discussed, subsequent to the Strategic Review, the CGGs have been issued, which include mandatory requirements for grants administration. Further, additional mandatory requirements have been introduced into the FMA Regulations relating solely to the approval of grants, which require the approver to record the basis for the approval. This additional requirement does not apply to the approval of any other type of spending proposal, for which the approver is only required to record the factual terms of the approval.

[23] Finance Circular No. 2009/03, op. cit., p. 1.

[24] See Note 1 to Figure 5.

[25] Finance Circular No.2009/03, op. cit., p. 4. Further guidance on act of grace, ex gratia and discretionary compensation payments and the waiving of debt is provided in Finance Circular 2009/09, Discretionary Compensation and Waiver of Debt Mechanisms, 25 November 2009, available at <http://www.finance.gov.au/publications/finance-circulars/index.html> [accessed 24 May 2010].

[26] FMA Regulation 3A(2)(f) stipulates that a loan of public money is to be taken not to be a grant and, therefore, not subject to the CGGs. Finance has advised agencies that, while an amount of money which is required to be repaid without interest or at a concessional rate of interest should generally be considered a concessional loan rather than a grant, some forms of financial assistance provided by way of concessional loans may be subject to the CGGs (Finance Circular No.2009/03, op. cit., pp. 3 and 6). Agencies should consult with Finance if they are unsure whether the CGGs apply in particular circumstances.

[27] Subsidies and rebates provided by the Australian Government to individuals or organisations are generally intended to provide financial assistance, whether directly to a recipient or through a third party. Finance has advised agencies that a key consideration in deciding whether the CGGs will apply in such cases is whether the subsidy or rebate is an entitlement. In this respect, FMA Regulation 3A(2)(d) stipulates that a payment of benefit to a person, including a payment of an entitlement established by legislation or by a government program, is taken not to be a grant. Regulation 3A(2)(e) similarly provides that a tax concession or offset is taken not to be a grant.

[28] Finance Circular 2009/05, op. cit., p. 2.

[29] Commonwealth Grant Guidelines, op. cit., paragraph 3.23.

[30] That principle, established in Carltona Ltd v Commissioners of Works [19430 2 ALL ER 560], applies, in certain circumstances, to infer to a Minister a power to authorise officials to exercise, on the Minister's behalf, a power vested in the Minister, despite the absence of an express power to delegate or authorise. The Australian Government Solicitor has advised that, in Carltona, the court's reasoning indicates that there are two grounds which justify inferring such a power to a Minister, as follows:

• the Minister is ultimately responsible to the Parliament for the decision of an authorised official; and

• in modern government, Ministers have so many functions and powers, administrative necessity dictates that they act through duly authorised officials (Source: Legal Briefing Number 74, Delegations, authorisations and the Carltona principle, Australian Government Solicitor, 14 December 2004, p.7).

[31] Or statutory authorised officer.

[32] Legal Briefing Number 74, op. cit., pp. 2 and 6.

[33] FMA Regulation 26 provides that an agency Chief Executive may delegate to an official, by signed instrument, any of the Chief Executive's powers or functions under the Regulations. Finance Circular No. 2009/05 notes that: 'Most commonly, officials obtain the authority to approve spending proposals through a delegation from their Chief Executive.' (Finance Circular No. 2009/05, op. cit., p. 6).

[34] The exceptions are that: section 62 of the FMA Act provides that the Finance Minister may, by written instrument, delegate any of the Minister's powers or functions under the Act to an official (except for the power to make Orders); and section 62A of the FMA Act provides that the Treasurer may, by signed instrument, delegate to nominated officials of the Department of the Treasury any of the Treasurer's powers or functions under the Act.

[35] In some circumstances, it may be possible to imply an authorisation for an agency Chief Executive to approve grant proposals on behalf of
the Minister.

[36] In some cases, cross-agency committees can assist in the assessment of applications to programs relevant to the achievement of objectives in multiple portfolio areas. For example, this approach has been adopted in relation to various streams of the Jobs Fund.

[37] For example, under the former Regional Partnerships Program, non-profit Area Consultative Committees (ACCs) comprising business, community and local government representatives from a particular region performed a range of functions, including as a point of interface between the Commonwealth Government and regional communities, assisting proponents to develop grant applications and providing formal recommendations to the responsible Minister in relation to whether each application should be funded and its relative priority for the region. The ACCs have since been restructured and now comprise a network of committees that make up Regional Development Australia and are directed at building partnerships between governments, regional development organisations, local businesses, community groups and key regional stakeholders to provide strategic and targeted responses to economic, environmental and social issues affecting the regions of Australia.

[38] Commonwealth Grant Guidelines, op. cit., p. 28.

[39] In some circumstances, it may also be prudent for the administering agency to implement a register of private interests, and protocols for the register's operation.

[40] In this context, under FMA Regulation 4(d), persons employed under the Members of Parliament (Staff) Act 1984 on the staff of an office-holder or a Senator or Member are allocated to Finance, as the Department of State to which the money out of which the person's remuneration is paid is appropriated.

[41] Strategic Review of the Administration of Australian Grant Programs, op. cit., p. 63.

[42] Strategic Review of the Administration of Australian Government Grant Programs, op. cit., p. 55.

[43] Available at <http://www.finance.gov.au/publications/finance-circulars/index.html> [accessed 24 May 2010].

[44] Commonwealth Grant Guidelines, op. cit., p. 30.

[45] See, for example, section 11 of Appropriation Act (No. 1) 2009–10.

[46] However, the forward estimates are relevant to establishing the limit on the delegation from the Finance Minister to agency Chief Executives of the power to authorise the approval of spending proposals to which Regulation 10 applies. Further advice on determining when Regulation 10 authorisation is required and other aspects of the application of Regulation 10 are set out in Finance Circular No. 2007/01, FMA Regulation 10, 21 June 2007 [available at <http://www.finance.gov.au/publications/finance-circulars/index.html> [accessed 24 May 2010].

[47] The delegation current at the time this Guide was published was included in the Financial Management and Accountability (Finance Minister to Chief Executives) Delegation 2009 (compilation prepared on 17 February 2010) available at
<http://www.finance.gov.au/financial-framework/fma-legislation/fma-delegations.html> [accessed 21 April 2010].

[48] Section 53 of the FMA Act provides agency Chief Executives with an express power to delegate, by written instrument, any of the Chief Executive's powers or functions under the Act, including powers or functions delegated to the Chief Executive by the Finance Minister or Treasurer, to an official in any agency.

[49] The limits set out in the delegation do not represent an allowance by which existing appropriations can be exceeded in the approval of grants before a need for Regulation 10 authorisation will arise.

[50] See footnote 47.

[51] Pursuant to section 6 of the ADJR Act, the Federal Court has jurisdiction to review administrative decisions on the following grounds: (a) that a breach of the rules of natural justice occurred in connection with the making of the decision; (b) that procedures that were required by law to be observed in connection with the making of the decision were not observed; (c) that the person who purported to make the decision did not have jurisdiction to make the decision; (d) that the decision was not authorised by the enactment in pursuance of which it was purported to be made; (e) that the making of the decision was an improper exercise of the power conferred by the enactment in pursuance of which it was purported to be made; (f) that the decision involved an error of law, whether or not the error appears on the record of the decision; (g) that the decision was induced or affected by fraud; (h) that there was no evidence or other material to justify the making of the decision or (j) that the decision was otherwise contrary to law.

[52] See further in Report by the Commonwealth Ombudsman, Prof. John McMillan, under the Ombudsman Act 1976, Report No.12 2009, Executive Schemes, Canberra, August 2009, p. 4.

[53] ibid., p. 29.

[54] For example, the recommendation could be that the original funding decision should stand; that the agency should undertake a further detailed assessment of the application; or that the original decision should be reversed and funding awarded to the applicant.

[55] Section 83 of the Constitution provides that no money may be drawn from the Treasury of the Commonwealth without a legal appropriation authority. A valid appropriation at law provides the parliamentary authority to withdraw amounts from the Consolidated Revenue Fund. An appropriation must specify the purpose for which it is made and it must nominate an amount to be appropriated, or specify a formula or criteria by which the amount appropriated can be determined.

[56] Funding for the cost to the agency of administering the grant program will usually be provided to the relevant agency as part of its annual departmental expenses appropriation.

[57] Granting activity should be 'fit for purpose'. That is, key design features and related processes should be commensurate with the scale, nature, complexity and risks involved in the granting activity (Commonwealth Grant Guidelines, op. cit., p.19).

[58] Effective consultation, leading to a shared set of understandings and expectations, will help achieve more efficient and effective grants administration (Commonwealth Grant Guidelines, op. cit., p. 21).

[59] Achieving value with public money should be a prime consideration in all aspects of grants administration (Commonwealth Grant Guidelines, op. cit., p. 30).

[60] Commonwealth Grant Guidelines, op. cit., p. 29.

[61] For example, it is prudent for agencies administering grant programs to incorporate into their assessment of applications a process by which the potential for 'double dipping' to occur is independently assessed. 'Double dipping' occurs when an applicant is seeking funding for a project for which Australian Government funding has already been provided, or is available, either through the relevant agency or another Australian Government agency.

[62] Determining whether additional information will be sought or accepted from applicants to assist in the assessment process should be based upon appropriate consideration that weighs any risks to maintaining equity and probity against the need to ensure funding decisions are appropriately informed. Where it is determined that no additional information will be sought or accepted once applications have closed, it will be important that assessments and agency recommendations provided to the decision-maker are appropriately qualified to reflect any shortcomings in the information submitted with an application (for example, where the failure to provide required information has resulted in the agency being unable to form a view as to whether the application satisfies a criterion or in the assessed risk profile of a project being elevated). Equally, where it is determined that, as necessary, additional information will be sought from applicants in order to fully inform the assessment (with that component of the assessment methodology being clearly stated in the program guidelines), care should be taken to ensure that only information supporting the project that was set out in the application lodged by the closing date is considered and that applicants are not inadvertently provided with an opportunity to substantively revise or replace their application in order to address identified shortcomings. It is also important that there are clear probity procedures in place to ensure all applicants are provided with equivalent opportunities, if any, to address matters raised in agency assessments.

[63] Commonwealth Grant Guidelines, op. cit., p. 22.

[64] In this respect, Finance has advised agencies that: 'It is essential that agencies determine the character of the financial arrangement they employ, in order to comply with the relevant framework applying to the arrangement.' (See Finance Circular No. 2009/03, op. cit., p. 1.)

[65] Commonwealth Grant Guidelines, op. cit., paragraph 2.7.

[66] Strategic Review of the Administration of Australian Government Grant Programs, op. cit., p. 63.

[67] Recommendation 7(b), ibid., p. 66.

[68] This requirement was originally introduced through Finance Minister's Instructions issued in December 2007, which stipulated that Ministers should not make any decisions on discretionary grants without first receiving departmental advice on the merits of the grant application relative to the guidelines for that grants program.

[69] Commonwealth Grant Guidelines, op. cit., paragraph 3.19 (see Figure 3 of this Guide).

[70] Commonwealth Grant Guidelines, op. cit., paragraphs 3.16–3.17.

[71] For example, some grant programs involve each application being considered individually against specified criteria, without reference to the relative merits of other applications submitted to the program.

[72] Strategic Review of the Administration of Australian Government Grant Programs, op. cit., pp. 63–64.

[73] Commonwealth Grant Guidelines, op. cit., paragraphs 3.24 and 3.22 (see Figure 3 of this Guide).

[74] Australian Government Solicitor, Legal Briefing 83, op. cit., p. 2.

[75] Commonwealth Grant Guidelines, op. cit., paragraph 3.22.

[76] See discussion in Chapter 3.

[77] See discussion in Chapter 4.

[78] See discussion in Chapter 3.

[79] Commonwealth Grant Guidelines, op. cit., p. 30.

[80] Australian Government Solicitor, Legal Briefing 83, op. cit., p. 9.

[81] Commonwealth Grant Guidelines, op. cit., p. 30.

[82] For grant programs with a statutory basis, legislative amendment may be required.

[83] The CGGs further advise that these issues should be addressed in the context of the ERC consideration of guidelines for new grant programs (Commonwealth Grant Guidelines, op. cit., p. 29).

[84] ibid.

[85] ibid., p. 23. The requirement for the operational guidance prepared in relation to a grant program to be in accordance with the CGGs is a mandatory requirement (see paragraph 3.25 of the CGGs).

[86] See discussion in Chapter 3.

[87] Senate Finance and Public Administration References Committee, A Funding Matter Under the Dairy Regional Assistance Program, June 2003, p. 47.

[88] Commonwealth Grant Guidelines, op. cit., p. 28.

[89] Amongst other things, this approach helps decision-makers meet their obligations under Regulation 12 to record in writing the basis on which the approver is satisfied that approved grants comply with Regulation 9, as well as providing transparency of the reasons for not approving grants for other applications.

[90] Commonwealth Grant Guidelines, Foreword, op. cit., p. v.

[91] ibid., paragraph 3.19.

[92] Review of the Administration of Australian Government Grant Programs, op. cit., Recommendation 7(c) and (d), p. 66.

[93] As noted in Chapter 2, the requirement that Ministers obtain agency advice before approving a grant was first introduced in December 2007 as part of interim arrangements for grants administration established through Finance Minister's Instructions pending the outcome of the 2008 Strategic Review. In particular, the interim arrangements specified that: Ministers were not to make decisions on discretionary grants without first receiving departmental advice on the merits of the grant application; and if a Minister chose not to follow departmental advice, the decision to award or reject a grant would be referred for determination by a Ministerial Group. The interim arrangements were, accordingly, premised on the agency advice clearly indicating whether the agency considered that the grant should be approved. As also noted, the revised Finance Minister's Instructions issued in January 2009 and, from 1 July 2009, the CGGs have similarly required that Ministers obtain agency advice on the merits of a proposed grant before approving the grant, as well as imposing reporting obligations on Ministers where they decide to approve a grant which the relevant agency has recommended be rejected.

[94] As noted in Chapter 5 of this Guide, it would be advisable for program guidelines to stipulate whether incomplete applications will be considered for funding.

[95] Commonwealth Grant Guidelines, op. cit., p. 29.

[96] Australian Government, Standard of Ministerial Ethics, December 2007, p. 2 <accessed on 25 March 2010 from http://www.pmc.gov.au/guidelines/docs/ministerial_ethics.pdf>.

[97] Finance Circular 2009/05, op. cit., p. 9–10.

[98] In accordance with the CGGs, it is important that any additional processes applied accord with the program guidelines. As discussed in Chapter 3, a further consideration in this respect is that, depending upon the circumstances and the role played in the selection of successful applicants, staff within a Minister's Office who undertake assessment and selection processes in relation to a grant program may be considered 'officials' that are subject to the grants policy framework in undertaking that task.

[99] This is necessary for the approver to satisfy his or her obligations under FMA Regulation 12.

[100] Commonwealth Grant Guidelines, op. cit., paragraph 3.23.

[101] Available at <http://www.finance.gov.au/publications/finance-circulars/index.html> [accessed 16 December 2009].

[102] See Australian Government Solicitor, Legal Briefing 83, op. cit.

[103] For example, some programs are designed such that grant payments are made on a reimbursement basis—sometimes referred to as 'rebates'. In some circumstances, this approach is effective in mitigating risks to the program, but may not be appropriate in terms of maximising program outcomes in other circumstances.

[104] Commonwealth Grant Guidelines, op. cit., p. 24.

[105] ibid.

[106] This requirement is also highlighted by the CGGs, which stipulate that: 'A grant funding agreement must be consistent with the terms of the approval given under FMA Regulation 9, including any conditions on the approval.' (ibid., paragraph 3.11).

[107] In this respect, agencies should be alert to the potential for grant recipients to delay making any financial contribution to project expenditure until after the Australian Government grant, and other sources where relevant, have been exhausted. This strategy can be used to transfer financing costs from the funding recipient to the Australian Government. This is particularly relevant where the proponent had proposed funding its contribution to project costs through commercial borrowings.

[108] In order to minimise interest foregone by the Commonwealth through the payment of funds in advance of the needs of a funded project, the funding paid upon reaching a milestone should be determined, where possible, by reference to actual project expenditure incurred to date. In other words, it is not advisable for agencies to draft funding agreements such that a grant instalment will become payable in response to achievement of a stage in the project that does not give rise to significant costs to the proponent.

[109] Where the grant involved is of low value and is to be used for a straight-forward, nominated purpose, it may be appropriate to make a single payment. However, again, payment in advance of need should be avoided in order to reduce program risks and the overall cost of grant to the Australian Government.

[110] Commonwealth Grant Guidelines, op. cit., p. 20.

[111] For example, the Finance Minister's power to allow a debt to be paid in instalments (FMA Act s. 34(1)(c))or defer the time for payment (FMA Act s. 34(1)(d)) has been delegated to all FMA Act agency Chief Executives.

[112] ANAO Better Practice Guide, Performance Information in Portfolio Budget Statements, Canberra, May 2002, p. 25.

 

 

 

 

Previous: Index