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3. Identifying decision-making roles and responsibilities

An important element in designing a robust governance framework for a grant program is obtaining clarity as to who will be undertaking the role of decision-maker in relation to the awarding of grants. In order to clearly define program roles and responsibilities, and avoid unnecessary processes, the question of who will be the decision-maker, and how compliance with the associated statutory and policy obligations will be achieved in a cost-effective manner, is best considered (and documented) prior to commencement of the program.

Key Points

A central objective underpinning the new grants policy framework is to improve the transparency and accountability of grants administration. Accordingly, understanding all relevant requirements and how they might be complied with in a cost-effective manner is an essential element in the implementation of a grant program. Key considerations include that:

  • establishing a robust governance framework which clearly defines the roles and responsibilities of the various participants in the administration of a grant program facilitates accountability;
  • only persons that have been provided with the appropriate authority may legitimately perform the role of approver. In this respect, in the normal course, the responsible Minister is the approver unless otherwise agreed;
  • the statutory requirements that apply are the same regardless of whether the decision-maker is the responsible Minister or an official. However, the grants policy framework stipulates additional mandatory requirements where a Minister undertakes that role;
  • in determining who is performing the role of approver, and therefore is subject to the associated obligations, it is necessary to look to the substance of the administrative arrangements. The key test is that, to be the approver, a person must have the genuine authority and discretion to make the decision as to whether or not a potential recipient will receive a grant;
  • having regard for the advice set out in the CGGs that the grants administration function itself should provide value, there will be merit in agencies appropriately advising Ministers of opportunities to enhance the cost-effectiveness of program administration, including through the assignment of specified decision-making authority to officials;
  • the limits FMA Regulation 10 places on the authority of an approver (whether a Minister or official) to approve a grant for which there is insufficient available appropriation must be appropriately observed in the grant approval process; and
  • in establishing the decision-making arrangements for a grant program, it advisable for consideration to be given as to whether unsuccessful applicants will be provided with any opportunity to seek a review of funding decisions and, if so, for the program guidelines to document the processes and criteria that will apply to any such request.

3.1 Identifying the decision-maker informs program design

Clarity about roles and responsibilities aids the efficiency of grants administration by avoiding unnecessary procedures and practices. In this context, Ministers perform a pre-eminent role in the administration of government programs which needs to be recognised and respected in the design of individual programs. In particular, Ministers may bring knowledge, insights and perspectives to bear in the decision-making process that may not be available to officials.

A robust governance framework which clearly defines the roles and responsibilities of the various participants in the administration of a grant program facilitates accountability. It enhances the capacity to design and implement administrative arrangements that will satisfy the program's policy objectives, while ensuring efficient and effective compliance with all applicable obligations. This has been reflected in Governance and Accountability being established as one of the seven key principles for grants administration, with the CGGs stating that:

Granting activity should be underpinned by solid governance structures and clear lines of accountability. (CGGs p. 23)

The FMA Regulations regulate decisions to approve grants through application of the defined concepts of:

  • 'approver' (discussed further below);
  • 'spending proposal', whereby Regulation 3 defines proposals that will attract the operation of Part 4 of the Regulations, Commitments to spend public money' (see Chapter 2); and
  • 'grant', whereby Regulations 3A(1) and 3A(2) define those arrangements that will result in a spending proposal being taken to relate to a grant (and, therefore, be subject to the grants framework), and those arrangements that are taken not be grants (see Chapter 2).

In concert, the financial and grants policy frameworks place a number of specific obligations on a person when acting as the decision-maker in relation to the awarding of grants. The statutory requirements that apply to the approval of grant proposals are the same regardless of whether the decision-maker is the responsible Minister or an agency official. However, the grants policy framework stipulates additional mandatory obligations where a Minister undertakes that role (see Figure 3).

Understanding each of these statutory and policy requirements, and their application in the context of a grant program, is important for ensuring compliance with them in implementing the program. In this respect, Finance advises agencies that:

The FMA Regulations establish important statutory obligations for approvers (including Ministers, Chief Executives and officials). There should therefore be clarity as to who is exercising approval powers and their authority to do so. In particular, as part of planning complex procurements or establishing or reviewing grant programs, FMA Act agencies should undertake an analysis of their proposed processes in the context of the FMA Act and the FMA Regulations and any other specific relevant legislation. This will help identify the most appropriate timing for FMA Regulation 9 and FMA Regulation 10 decisions and should clearly establish who will make, and therefore be accountable for, those decisions.[28]

Agencies are responsible for advising Ministers on the requirements of the CGGs, and must take appropriate and timely steps to do so where a Minister exercises the role of a financial approver in grants administration.[29] In fulfilling that obligation, it would ordinarily be prudent for agencies to provide this advice to the Ministerial decision-maker each time a grant proposal is put forward for his or her consideration, given there are steps for the Minister to follow should he or she choose not to follow departmental advice in relation to the funding of a grant application. Provision of advice relating to the decision-maker's obligations can be incorporated into the standard briefing template used in relation to the relevant program.

However, it is also important to recognise that whether the responsible Minister is exercising the role of approver will be determined by the administrative arrangements established for the program. Therefore, in practice, advising Ministers of the statutory and policy requirements that apply in grants administration needs to initially occur as part of planning the program, including in relation to:

  • the requirements that would arise under the FMA Regulations and the CGGs should the Minister choose to exercise the role of approver, and how cost-effective compliance with those obligations might be achieved; and
  • advice on alternative arrangements that could be adopted should the Minister so choose.

This will inform Ministerial and/or government decisions in relation to whether the Minister or officials will act as the approver.

3.2 Authority to act as an approver

Only persons authorised to do so may legitimately perform the role of approver in relation to a spending proposal, including for the purpose of making a grant.

In this respect, the financial framework governing the entering into of commitments to spend public money reflects sound principles that have evolved over time. One of the areas of key change in that process has related to the application of the financial framework to spending decisions taken by Ministers. Specifically, compared to the predecessor Audit Act 1901 framework, the FMA Act framework that has applied since January 1998 was drafted so that it clearly applies to Ministers, or groups of Ministers, when they are making decisions about whether to approve the spending of public money.

3.2.1 The Minister is the approver unless others have been given the authority to perform that role for the relevant program

In concert, FMA Regulations 3 and 11 define who may act as approver of a spending proposal and in what circumstances. Specifically, Regulation 3 defines an 'approver' as:

  1. a Minister; or
  2. a Chief Executive; or
  3. a person authorised by or under an Act to exercise a function of approving proposals to spend public money.

Consequently, reflecting their executive power under the Constitution, Ministers are specifically recognised in the Regulations as having the authority to act as an approver and are subject to the requirements of the Regulations where they choose to do so. Alternatively, Ministers can elect to agree to administrative arrangements under which officials will undertake that role in respect to a given program.

Reflecting their inherent powers under the FMA Act, agency Chief Executives are also specifically recognised in the Regulations as having the authority to approve spending proposals relating to their agency. In practice, however, this would normally be subject to any decision by the relevant Minister to retain that role in relation to a given program to him or herself.

Authority for other agency officials to approve spending proposals

Regulation 11 stipulates that:

An official must not approve a spending proposal unless authorised by a Minister or Chief Executive, or by or under an Act, to approve the proposal.

Consequently, (unless specifically authorised by an Act to do so), agency officials are unable to undertake the role of approver in respect of a given program unless they have been provided with the authority to do so, either by the relevant Minister or Chief Executive. The three main ways in which this devolution of authority can be achieved are through:

  • an express power to delegate: Legislation may expressly provide a statutory procedure for the devolution of a power. This most commonly takes the form of an express power to delegate the power to another person in writing;
  • an express power to appoint an authorised officer: Some legislation expressly provides for the appointment of 'authorised officers', or the authorisation of persons, to exercise specified statutory powers; and
  • an implied power to authorise: Where legislation does not expressly provide a person in whom a statutory power is vested with the power to delegate or to authorise others to exercise the statutory power for, and on behalf of, that person, they may, in some circumstances, be able to rely on an implied power to authorise. Such a power is commonly referred to as the 'Carltona' principle.[30]

Delegations and authorisations play a key role in the Westminster system of public administration. They are the mechanism by which, in certain circumstances, officials may be provided with the authority to exercise a statutory power that the Parliament has vested in another individual or office-holder. However, the manner in which a delegate[31] exercises the power in question is fundamentally different from that of someone who is authorised by an office-holder to exercise a power for and behalf of the office-holder.

A delegate exercises a delegated power by applying their own discretion and acts in their own capacity, not that of the person who delegated the power to them. In contrast, the act of an authorised person is, at law, an act of the person in whom the power is vested. A person exercising a power for, and on behalf of, another does so as the 'alter ego' of the person in whom the power is vested.[32]

Delegation of authority to approve grant proposals by the agency Chief Executive

Where a Minister agrees to the awarding of grants under a particular program being decided at the agency level, relevant officials will, in the normal course, obtain authority to act as the approver through a delegation made by their Chief Executive under FMA Regulation 26.[33] In this respect, it is usual for agency CEIs to stipulate that only officials who have been delegated in writing by the Chief Executive may approve proposals to spend public money.

Delegated officials who approve grants must comply with any limits specified in the Chief Executive's delegation and any CEIs that relate to their function as a delegated approver. However, as a delegate, an official will be required to exercise the discretion of an approver in his or her own right, consistent with the obligations imposed by the FMA Regulations and the CGGs.

Authorisation by the Minister to approve grant proposals

There is no general express power under the FMA Act or Regulations for Ministers to delegate their power to approve spending proposals to officials.[34] However, it may be possible, in reliance on the Carltona principle, for a Minister to elect to authorise an agency official to undertake the role of approver on the Minister's behalf. As noted, the actions of an authorised official in undertaking the role of approver will be the act of the Minister.

Where a Chief Executive is authorised by a Minister to approve grants on the Minister's behalf (rather than exercising the Chief Executive's own authority to act as an approver in his or her own right), it would be prudent for that authority to be expressly given[35] and for it to occur in writing. This will provide clarity as to the capacity in which the Chief Executive is acting when approving the grant. Seeking the Minister's express authorisation also provides the Minister with the opportunity to consider whether he or she wishes to place any limitations or restrictions on the exercise of the power by the Chief Executive.

Other agency officials require an express authorisation from the relevant Minister in order to be empowered to perform the role of approver on the Minister's behalf. Again, it is prudent for such an express authorisation to be given in writing. Where an authorisation is given orally, normal recordkeeping and accountability obligations would require that the relevant officials make and retain a written record of having received such authorisation, the date on which it was received, and any related terms or conditions.

3.2.2 Use of an advisory panel in the selection of grant recipients

Whilst a common approach is for agency officials to undertake the assessment of applications to a grant program[36], it is also relatively common for expert or advisory panels comprising representatives from a relevant industry or community service sector, other levels of government and/or the broader community to be used to provide advice and/or recommendations to the program decision-maker in respect to which applications should be funded.

For example, this approach can be of value where a program relates to grants for specialised activities (such as research and development in a particular field; the provision of specialised health or community services; environmental projects; or providing funding to support emerging or innovative businesses); or for programs directed at achieving broad economic outcomes, such as industry restructuring assistance or stimulus programs. It has also been a long-standing practice under various governments to form advisory committees to provide advice on aspects of regional development, including in relation to grant programs directed at regional and rural Australia.[37]

Where such panels are used, it is important that the standing of the panel's advice and/or recommendations is established and documented prior to the application process commencing, and that applications are submitted to the advisory panel for consideration in accordance with the documented program procedures. Deviations from the approved processes may adversely affect the quality of the advice which, in turn, will have implications for the defensibility of the decision-making process, such as where:

  • the advisory panel is provided with a significantly truncated timeframe in which to provide its advice;
  • the panel is provided with insufficient information to enable it to provide informed advice or recommendations in relation to an application;
  • funding decisions are taken prior to receiving the panel's advice; and/or
  • the panel is not asked to provide advice in respect of particular applications.

Managing potential conflicts of interest

Another issue to be considered in the establishment of advisory panels is the potential for actual or perceived conflicts of interest to arise, which can be damaging to government, the agency and the granting activity. A conflict of interest could arise where a panel member has, or could be perceived as having, a direct or indirect interest that might prejudice, or be seen to prejudice, their partiality in the selection of projects or activities for funding.

The potential for actual or perceived conflicts of interest to arise is also a relevant consideration to be appropriately managed in relation to decision-makers and officials involved in grants administration. However, this issue may require a particular focus where persons with expertise in a relevant field are involved in the grant selection process. This is due to the inherent likelihood that panel members will have existing relationships within the sector from which grant applications are being sought. This risk may be heightened where the panel is drawn from a specialist area in which there is a relatively small pool of appropriately qualified candidates, particularly where those candidates may themselves qualify for grants under the program.

In this respect, the CGGs advise that agencies should put in place appropriate mechanisms for identifying and managing potential conflicts of interest.[38] Depending upon the nature of the program, relevant measures may include:

  • ensuring that grant program guidelines clearly outline what constitute potential conflicts of interest (and the circumstances in which they are relevant) in relation to the respective roles undertaken by decision-makers, officials and others involved in grant administration (including advisory panel members); and
  • establishing clear procedures for:
    • the declaration of actual, perceived or potential conflicts of interest; and
    • managing such conflicts, including clearly identifying who will be responsible for ensuring they are dealt with appropriately.[39]

It would also be advisable for agencies to develop a risk-based strategy for the systematic monitoring and review of compliance with the conflict of interest management procedures, as well as monitoring the selection process for any unusual trends or outcomes.

Advisory panels may be subject to the CGGs

Where the use of an advisory panel is being contemplated, it is important to recognise that, depending upon the nature of the role to be undertaken by the panel, its members may be required to comply with the grants policy framework in the same manner as applies to agency officials. Specifically, in some circumstances, the members of the panel may be deemed to be 'officials' of the agency. This arises because 'Agency' as defined by the financial framework legislation includes:

  • persons who are allocated to a Department of State for the purposes of the FMA Act by the FMA Regulations (s.5 FMA Act), with Regulation 4(a) stipulating that a person who performs a financial task for a Department of State is allocated to that department; and
  • a prescribed agency (s.5 FMA Act). Prescribed agencies are listed in Schedule 1 to the FMA Regulations, with Regulation 5 stipulating that the prescribed agency includes the body, organisation or group mentioned in Schedule 1 and any other persons who perform financial tasks in relation to a function of that body, organisation or group.

FMA Regulation 3 defines a 'financial task' for the purposes of determining persons who are allocated to a Department of State or who are part of a prescribed agency as:

a task or procedure relating to the commitment, spending, management or control of public money.

The assessment of applications and formulation of recommendations for the approval of grants of public money will, in some circumstances, be considered to be a task or procedure relating to the commitment, spending or management of public money. Accordingly, in designing the grant program and associated accountability structures, it will be important for agencies to consider whether the role an advisory panel is intended to perform will constitute a 'financial task' as defined in Regulation 3. Where it is determined that this is the case, the members of the panel will need to be advised of their obligations under the CGGs as 'officials' of the agency. For example, the funding recommendations of the advisory panel will need to be formulated in a manner that is consistent with the program guidelines.

Ministerial staff undertaking assessment and selection processes may also be subject to the CGGs

ANAO has observed instances in which Ministerial staff have undertaken assessment of grant applications. Sometimes this has been additional assessment undertaken subsequent to the output from the agency assessment process being submitted to the Minister for decision. In other cases, the only consideration of the merits of funding a particular grant proposal has occurred in the Minister's Office.

As with advisory panel members, 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 also be considered 'officials' that are subject to the grant policy framework in undertaking that task.[40]

Wherever either advisory panels or Ministerial staff are considered to be 'officials' due to the nature of the task undertaken, it will important for the administering agency to take positive steps to support those individuals in observing relevant obligations, including in relation to the annual Certificate of Compliance process.

Can an advisory panel member act as the approver?

From time to time there have been suggestions that, in some circumstances, consideration might be given to an advisory panel or an eminent external individual (perhaps the chair of the panel) making the final determination as to which applications will be funded under a program.

However, given the definition of 'approver' set out in the FMA Regulations, this will only be possible where both of the following conditions are satisfied:

  • the relevant individual is confirmed to be an official of the agency for the purposes of the FMA Act by virtue of undertaking a financial task for the agency. In that context, approving a spending proposal would be likely to be considered a 'financial task' within the definition set out in Regulation 3; and
  • the relevant individual has been given specific authority by the Minister or, with the Minister's agreement, by the agency Chief Executive to act as an approver for the purposes of FMA Regulation 9.

If both of those conditions are not satisfied, the final approval of a grant for the purposes of the financial framework will need to be referred to the Minister or an agency official, who will be required to undertake that role in accordance with the FMA Regulations.

3.2.3 Maintaining separation between the approver and the assessment process

Whether the approver is a Minister or an official, it is prudent for the approver (and their office, where relevant) to remain at arms length from the assessment process in order to avoid the potential for perceptions to arise that the approver has influenced the funding recommendations subsequently put forward for the approver's consideration. This matter was highlighted in the report of the Strategic Review, which advised that:

Should there be a reason, in exceptional circumstances, for the department to discuss the merits of a proposal with a Minister or Minister's office before the completion of its appraisal process, it would be prudent for this to occur only with the agreement of a senior member of the department's executive. To protect the probity of the selection process, any such discussions should be appropriately documented.[41]

Similar considerations apply in relation to involvement in the assessment process of an official that is the decision-maker for a grant program.

In this respect, in some cases consideration has been given to an official from the agency responsible for administering a grant program being included on an advisory panel formed to undertake or contribute to the assessment process, with that official also being delegated as the approver for the grant program. Care needs to be taken in adopting such an approach to ensure there
is no actual or perceived conflict between the official's role as the Regulation 9 approver and his or her participation in the
panel's deliberations.

3.3 The substance of the administrative arrangements determines where the obligations reside

Obtaining clarity, prior to a grant program opening to applications, in relation to the assignment of the statutory role of approver is necessary in order to ensure the administrative arrangements support the appropriate observance of the associated legislative and policy obligations. Accordingly, in agreeing the administrative arrangements for a grant program, it is better practice for Ministers to explicitly address the question of whether officials will be able to make funding decisions in relation to applications and, if so, whether any conditions (in addition to the legislative and policy parameters for the program) will apply.

In order to determine the party that has been assigned the role of approver for a particular program, it is necessary to look to the substance of the agreed administrative arrangements. The key test is that, to be the approver, a person must have the genuine authority and discretion to make the decision as to whether or not a potential funding recipient will receive a grant.

If the Minister has determined that agency officials are not able to make decisions on whether to fund or not fund individual applications without reference to the Minister, the officials are not capable of fulfilling the role of approver (or the associated obligations). In this respect, ANAO has observed instances in which, after being advised of a Ministerial decision to award a grant, officials have completed a template form in which the official purports to be giving the approval for the purposes of the FMA Regulations. This has usually involved the official stating that he or she had undertaken reasonable inquiries and was satisfied as to the matters required by Regulation 9. While this approach can give the impression of the official being the approver for the purposes of the Regulations (and now the CGGs), this 'form' is unlikely to have any legal effect and does not alter the substance of the administrative arrangements. In addition, the Strategic Review observed that such approaches can contribute to confusion about decision-making roles, and the fulfilment of the attendant obligations.[42]

Therefore, it is important that program documentation is designed to properly reflect the point at which there is substantive approval of grants and, consequently, a need to comply with the legislative and policy requirements that regulate such decisions.

3.3.1 Conditional approvals are still an approval

The test as to whether an approval of a grant must conform to the requirements of Regulation 9 and the CGGs is whether the person who has authority under the program to approve a grant has, in fact, given the approval required for the grant proposal to proceed—even if the approval is conditional on some actions being subsequently undertaken by other parties in order to give effect to the approved grant.

For example, a Minister might approve the substantive elements of a grant (such as the funding amount, funding recipient and approved purpose), but, in order to ensure the grant will make proper use of the public money involved, decide to attach certain conditions such as that:

  • the funding recipient must satisfy certain requirements (such as confirming the availability of partner funding or meeting certain timing requirements for commencement or completion of the project); or
  • agency officials are to finalise a funding agreement with the funding recipient which contains details such as milestones for the payment of grant funds.

Where any subsequent decision to withdraw or amend the grant offer can only be taken by the Ministerial decision-maker, the Minister will have retained the role of approver, rather than transferring that role to the officials charged with implementing the conditional approval. For example, this will be the case where officials are not empowered to:

  • decide, without further reference to the Minister, that a grant conditionally approved by the Minister will be withdrawn or not proceed based on a determination by the official that one or more of the conditions imposed by the Minister has not been satisfied; or
  • vary the substantive terms of the Minister's approval, or add or remove conditions attached to the Minister's approval, without seeking the Minister's concurrence with the proposed action.

3.3.2 Identifying the date of approval

The CGGs require that agencies publish information on individual grants on their websites no later than seven working days after the funding agreement for the grant takes effect.

The instructions for publishing grant information on agency websites set out in Attachment A to Finance Circular No. 2009/04, Grants—Reporting Requirements[43] include a requirement to include a field titled 'approval date'. The Finance Circular advises that, for the purposes of the reporting obligation, 'approval date' is the date the funding agreement takes effect.

This should not be confused with the date on which the grant was approved for the purposes of the FMA Regulations (and associated policy obligations under the CGGs), which is the date on which the approver gave the substantive approval for the grant to proceed. As noted, that approval may be given subject to the subsequent execution of a funding agreement with the funding recipient before payment will be made. In many cases, considerable time may elapse between the approval of the grant and the execution of the funding agreement.

3.4 The decision-making arrangements can have implications for cost-effective program administration

The CGGs highlight that the grants administration function itself should provide value, as should the selection of grant recipients to deliver grant outcomes.[44] In that context, there are options for assigning various levels of decision-making authority to officials that can be canvassed with Ministers, as appropriate, as a means of improving the efficiency and cost-effectiveness of program administration.

3.4.1 Options for assigning decision-making authority to officials

Particularly for programs involving a large number of low-value grants, assigning the decision-making role to officials can offer substantial opportunity to improve the responsiveness and timeliness of the assessment process with relatively low risk. Even for programs involving higher value grants, officials performing the role of approver can help to reduce the potential for an interpretation that funding decisions were taken for political reasons and not on the merits of applications.

Where Ministers exercise a preference to retain the role of substantive decision-maker for a grant program, there may still be merit in agencies seeking Ministerial consideration of measures that may assist in improving the cost-effectiveness of program administration. Depending upon the nature of the grant program, options that could be canvassed with the Minister include:

  • limited decision-making authority being provided to officials, based on a risk-assessment of the nature of applications expected to be received. For example:
    • where a program is expected to involve applications seeking funding across a wide range of values, officials could be given authority to make decisions on applications seeking grants up to a nominated value, with decisions on higher value grants being made by the Minister; and/or
    • where a program allows applicants to propose projects of varied nature, decision-making authority could be provided to officials in relation to projects considered to involve low risk activities, with the Minister retaining the role of decision-maker for projects that involve more sensitive, complex and/or higher risk activities; or
  • measures that will reduce the need to apply significant resources to the assessment of ineligible or poor quality applications, while allowing the Minister to retain the capacity to determine which compliant applications will be awarded funding, the amount of funding awarded and any conditions that are to be attached. For example, this could involve:
    • agency officials being given authority to exclude demonstrably ineligible applications from further consideration, without the need to refer each such application to the Minister for a final decision;
    • agency officials being given authority to deem as unsuccessful any applications that are assessed as clearly not satisfying one or more of the published selection criteria, without the need for reference to the Minister for a final decision; and/or
    • the Minister instructing the agency that only those eligible applications that are assessed as meeting the assessment criteria to a high standard overall are submitted for the Minister's consideration, with the remaining applicants being advised by the agency that they were unsuccessful.
Authority of agency officials to vary a Ministerial approval

A further matter to be determined in implementing a grant program is the extent, if any, to which officials will be given authority to make decisions that:

  1. alter the terms of a grant as originally approved by the Minister (for example, changes to the grant value or project scope); or
  2. alter or remove a condition the Minister had placed upon a grant.

This is an important consideration because, under the FMA Regulations, the funding agreement executed for a grant must be in accordance with the terms of the relevant approval made under Regulation 9. Accordingly, where officials do not have authority to make grant decisions under the program, any proposal to vary the terms of the original approval is itself a new spending proposal that will need to be referred to the Minister for decision. This can have implications for the cost-effectiveness and efficiency of program administration.

Again, depending upon the nature of the program, options that could be canvassed with the Minister in this respect include the Minister agreeing to officials being given authority to approve, within an agreed framework, minor variations to the project parameters included in funding agreements for approved grants. For example, the Minister may choose to place restrictions on the extent to which any variations approved by officials result in circumstances such as:

  • the Australian Government funding for a project exceeding the amount approved by the Minister;
  • any of the conditions imposed on the grant funding determined by the Minister in giving the original approval being revised or removed; or
  • the variation resulting in significant changes in the proportion of total project costs that are to be met by the Australian Government, as opposed to contributions from other sources.

Clearly documenting the advice provided to Ministers in relation to the determination of these administrative arrangements, and any Ministerial decisions or instructions made, will provide clarity and transparency in relation to the authority and role of officials in administering funding agreements with successful applicants. It is also advisable for such matters to be settled prior to applications being called.

3.5 Authority to approve a grant for which there is insufficient available appropriation

Under existing arrangements, the other key aspect of authority that must be established before a grant can be lawfully approved relates to the requirements of FMA Regulation 10, which stipulates that:

If any of the expenditure under a spending proposal is expenditure for which an appropriation of money is not authorised by the provisions of an existing laws or a proposed law that is before the Parliament, an approver must not approve the proposal unless the Finance Minister has given written authorisation for the approval.

Within the context of a grant program, Regulation 10 means that an approver, whether a Minister or official, has no general authority to approve a grant unless there is sufficient uncommitted appropriation available to cover the maximum amount that could become payable. Authority to consider approving grants that involve expenditure for which there is not sufficient available appropriation must be given in writing by the Finance Minister, or a delegate of the Finance Minister.

An authority to approve a grant given for the purposes of Regulation 10 does not create an appropriation. No expenditure can be actually incurred in relation to the grant unless there is an appropriation available. Authorisation under Regulation 10 also does not represent approval of the proposed grant. Whether or not to approve the grant must be subsequently considered by the authorised approver in accordance with Regulation 9 and the CGGs.

Regulation 10 plays an important role in the financial framework. Its purpose is to help manage the extent to which commitments to spend public money are entered into where funds have not yet been appropriated. This manages the “lock-in“ of future Budgets by the government of the day. Consequently, its requirements must be given early consideration in the implementation of a grant program in order to ensure that the administrative arrangements established for the program will support both compliance with the financial framework and efficient program administration.

3.5.1 FMA Regulation 10 has particular relevance for grant programs funded through administered annual appropriations

The need for Regulation 10 authorisation is most likely to arise (but not exclusively) in relation to multi-year spending proposals where the relevant appropriation is an annual appropriation. In that context, Regulation 10 will be an important consideration for the administration of many grant programs because the relevant appropriation is usually provided through annual administered appropriations, which are not available after the end of the relevant financial year and cannot be used to meet future commitments. This is the result of a process set out in the Annual Appropriation Acts which effectively reduces the amount of an annual administered appropriation item to the actual expenditure under that item in the relevant financial year, as reported in the financial statements included in the agency's Annual Report.[45]

The forward estimates set out in the budget papers are not appropriations and, therefore, do not play a role in determining whether Regulation 10 authorisation is required.[46] However, appropriations included in a Bill (such as the annual Budget Bills) that is before the Parliament at the time the spending proposal is being considered can be included in determining whether there is sufficient appropriation available to cover the proposal.

Regulation 10 authority must be obtained prior to the approver considering the spending proposal

An area of confusion that can arise within agencies relates to determining when in the grant administration process Regulation 10 authority is required. This arises in part due to the inclusion of a reference to Regulation 10 within Regulation 13, but not within Regulation 9. Regulation 13 specifies that:

A person must not enter into a contract, agreement or arrangement under which public money is, or may become, payable unless a spending proposal has been approved under regulation 9 and, if necessary, in accordance with regulation 10. [Emphasis added]

Some agencies have interpreted Regulation 13 as meaning that Regulation 10 is only triggered at the point of entering into the funding agreement with an approved grant recipient. However, that interpretation incorrectly applies the financial framework designed to regulate decisions to approve the spending of public money, as set out at the time of publication of this Guide.

Regulation 10 relates to the authority to consider approving spending proposals. In the context of a grant program, it is relevant at the point at which the assessment and/or recommendation in relation to grant applications is being prepared for submission to the approver for his or her consideration. Accordingly, in establishing the administrative arrangements for a grant program, it will be important for agencies to appreciate the respective roles played by FMA Regulations 10, 9 and 13, as follows:

  • Regulation 10 regulates the authority of a Minister, Chief Executive or official who otherwise has authority to act as an approver to consider approving a grant that involves expenditure for which an existing appropriation is not available;
  • Regulation 9 regulates the basis on which the authorised approver may then give such approval; and
  • Regulation 13 requires that there be an appropriately approved spending proposal before any person may enter into any arrangement under which public money may become payable in relation to the grant, including that the approver was duly authorised in accordance with Regulation 10 where that was required.

Therefore, if a proposed grant involves expenditure for which an appropriation is not currently available, written authority to approve the grant must be obtained under Regulation 10 before the approver considers the spending proposal. Once appropriately authorised, the approver must then determine whether to approve the grant or not, in accordance with the requirements of Regulation 9 and the CGGs. If the approver decides the grant will not be approved, the question of a funding agreement will not even arise.

Delegation of the power to authorise approval of a spending proposal

The power to authorise the approval of spending proposals under Regulation 10 has been delegated, with limits, from the Finance Minister to all FMA Act agency Chief Executives.[47] In same cases, the Finance Minister may make agency-specific determinations that alter the limits of the delegation to particular Chief Executives. In general, Chief Executives have, in turn, sub-delegated the power to provide authorisations for the purposes of Regulation 10 to nominated agency officials, within the terms of the relevant delegation.[48] There is no provision for the Finance Minister to delegate the Regulation 10 function to another Minister.

Accordingly, where Ministers perform the role of approver for a grant program, it will be necessary for the Minister to obtain prior written authority to approve proposed grants to which Regulation 10 applies from either:

  • the Finance Minister; or
  • the agency Chief Executive or a delegated official.

The purpose of the Finance Minister's delegation is to enable officials to undertake the authorisation function up to a specified level of forward commitment.[49] If the expenditure under a proposed grant, or collection of grants (for example, the total amount expected to be awarded under a competitive grant round), for which there is not sufficient uncommitted appropriation would exceed the limits of the Regulation 10 delegation or agency-specific determination, the relevant Minister will need to write to the Finance Minister seeking the Finance Minister's written authorisation to approve the relevant grants.

In some cases, there may be advantages in terms of the efficiency and effectiveness of program implementation from the responsible Minister seeking an overarching Regulation 10 authorisation in relation to the program from the Finance Minister, rather than relying upon the power delegated to officials being exercised in relation to individual grant proposals. It will be appropriate for agencies to consult with the Department of Finance and Deregulation where such an approach is proposed.

Don't confuse the giving of a delegation with the exercise of the delegation

The delegation to Chief Executives and officials of the Finance Minister's authorising power under Regulation 10 should not be confused with the actual giving of an authorisation to consider approving a spending proposal. The delegation must be exercised in writing before a Minister or official is able to lawfully approve the proposal. The Finance Minister's delegation instrument[50] sets out a number of requirements that must be observed by delegated officials including:

  • a delegate is prohibited from authorising the approval of a spending proposal unless it identifies a number of specified matters (subdivision 1.09 of the delegation instrument);
  • matters specified in the delegation must be considered by a delegate in authorising approval of a spending proposal (subdivision 1.10 of the delegation instrument); and
  • a delegate must ensure that a written record is kept of the matters mentioned in subdivisions 1.09 and 1.10 of the delegation instrument and any other relevant factors considered, and of the authorisation.

3.6 Capacity for funding decisions to be reviewed

Once the decision-maker for a grant program has taken a formal decision to approve or not approve funding for a particular application, it is important that any re-consideration or revision of that decision be undertaken in a transparent manner, in accordance with the documented decision-making process.

In that context, a further matter to consider in establishing the decision-making arrangements for a grant program is whether unsuccessful applicants will be provided with any opportunity to seek a review of funding decisions and, if so, the processes and criteria that will apply to any such request.

3.6.1 Review of decisions made under legislation

Decisions of an administrative character, such as in relation to the awarding of a grant, that are made under legislation may be subject to judicial review by the Federal Court of Australia under the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act). Such reviews are not a review of the merits of the decision as such, but a review of the processes undertaken to reach that decision so as to ensure that they were fair. [51]

The Administrative Appeals Tribunal does not have a general power to review decisions made under Commonwealth legislation. The Tribunal can only review a decision if an Act, regulation or other legislative instrument states that the decision is subject to review by the Tribunal.

3.6.2 Review of decisions made under an executive scheme

A feature of grant programs established by executive decision is that they are not subject to review under the ADJR Act, which covers only decisions made under an enactment, or by generalist or specialist administrative tribunals, such as the Administrative Appeals Tribunal. The Commonwealth Ombudsman is the only administrative law agency that can review decisions made under executive schemes. The Ombudsman may make recommendations to the relevant agency or Minister, but cannot overturn decisions.[52]

Nevertheless, it is appropriate for agencies to consider and, as relevant, advise Ministers on the merits of including in the decision-making framework established for a grant program some form of mechanism by which applicants that are not awarded funding, or are awarded less funding than they had applied for, can seek a re-consideration of that decision. The Commonwealth Ombudsman recommends that such mechanisms be established for executive schemes.[53]

Such mechanisms contribute to ensuring funding decisions have been taken in a manner that is consistent with the procedures outlined in the guidelines provided to applicants. They also assist in identifying instances in which the assessment on which the funding decision was based may have been premised on a misunderstanding of the information provided by the applicant or was otherwise flawed.

However, it is important that the approach taken to implementing such review mechanisms does not result in inequities such as some applicants being given an opportunity to revise, supplement or amend their application or otherwise engage in negotiation or debate with the agency or Minister as to the merits of their application where that opportunity is not available or known to other applicants.

It is equally important that, where it is determined that it is appropriate to include a review or appeal mechanism in the design of a grant program, the processes that will apply to such reviews are fully set out in the published program guidelines and are consistently complied with in program administration. In particular, it is advisable for the guidelines to document:

  • who will have standing to seek re-consideration of a funding decision, including clearly identifying whether any parties other than the unsuccessful applicant (such as the relevant Federal Member of Parliament) are able to seek such re-consideration;
  • the grounds on which a review may be sought and the procedural requirements for seeking such a review;
  • the basis on which it will be determined whether an application will be accepted for review; and
  • the process by which any application accepted for review will be re-considered. In this respect, in the interests of probity, it is advisable that any review be undertaken by officials not involved in the original assessment of the application, with a recommendation being provided to the decision-maker.[54] Where officials, rather than the Minister, are the decision-makers in relation to the program, it may also be advisable for the review decision-maker to be independent of the original decision-maker.

A necessary corollary to the effective implementation of a review mechanism is that all unsuccessful applicants are provided with the full and actual reasons for the rejection of their application, or with reasonable opportunity to seek advice from the agency on the reasons for their application being unsuccessful.

Complaint and queries mechanisms

Regardless of whether a formal review or appeal mechanism is to be included within the guidelines for a grant program, it would be prudent for agencies to consider the need to identify, in consultation with the Minister as necessary, the process by which complaints and other queries that may be received in relation to the program will be handled. Such complaints may relate to unsuccessful applications, but may also relate to other aspects of program administration.

To be effective, it will be necessary for information on such mechanisms to be made available to applicants through the program guidelines, other program documentation (such as a 'frequently asked questions' fact sheet) and other means, such as the agency's website. The establishment of a documented process for the consistent and timely handling of complaints and queries will promote sound public administration and assist in maintaining public confidence the integrity of the program.

 

 

 

 

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