- Abbreviations and Glossary
- 1. Introduction
- 2. Legislative and policy framwork for grants administration
- 3. Identifying the decision-making roles and responsibilities
- 4. How will potential funding recipients access the program?
- 5. Developing program guidelines and procedures
- 6. Implementing the selection process
- 7. Administering approved grants
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4. How will potential funding recipients access the program?
Effective grants administration will be supported by agencies choosing application and assessment methods that will promote open, transparent and equitable access to grants and the cost-effective delivery of a program focused on the achievement of the objectives and outcomes sought by government.
The core objective in implementing a grant program is to maximise the cost-effective achievement of the outcomes sought by government, while providing transparent and equitable access to grants. This will be supported by:
- at the outset of the planning process, clearly defining and documenting the strategic and operational objectives of the program and establishing a performance information framework that will support informed and accurate reporting on the extent to which the desired outcomes are actually achieved through the grants awarded;
- selecting a grant application process that is cost-effective, accessible and likely to maximise the attraction and selection of high quality applications, noting that the CGGs require that, unless specifically agreed otherwise, competitive, merit-based selection processes should be used, based upon clearly defined selection criteria; and
- designing an application and assessment process that, while cost-effective and proportional to the nature of the program, obtains sufficient information to reach an informed assessment of the merits of each application, including the extent to which it is likely to contribute to the achievement of program objectives and provide value for money.
Governments have the executive authority to establish and abolish programs, but require the Parliament to appropriate funds to enable expenditure to occur. Funding is appropriated to FMA Act agencies by the Parliament within the context of an outcomes and outputs framework. The key elements of the framework are:
- specification of the outcomes government is seeking to achieve, which are the intended results, impacts or consequences of actions by the government on the Australian community;
- specification of how the actual deliverables (outputs) will assist in achieving the outcomes;
- identification of expenses, revenues, assets or liabilities managed by agencies on behalf of the government (administered items);
- establishment of a performance management regime that includes indicators of effectiveness and efficiency; and
- annual performance reporting of agencies' contributions to the achievement of outcomes and the delivery of outputs.
Within that framework, as discussed in Chapter 3 of this Guide, it is usual for the funding used to make grant payments to be appropriated to the responsible agency as an administered expense; that is, as funding managed on behalf of government. Depending upon the nature of the grant program, this may occur through either:
- special appropriations, which are made in Acts that deal with particular purposes of spending. Special appropriations are allocated to the budgeted administered expenses for the relevant outcome of the responsible agency; or, more commonly
- annual appropriations, made through the Annual Appropriation Acts. Annual administered appropriations are made in relation to a specified agency outcome and may only be spent for the purposes of that outcome.
Outcome statements explain the purpose and therefore the legal basis on which funds are appropriated by the Parliament for use by agencies. They are also used as a basis for budgeting, measuring performance and reporting against the use of the appropriated funds. Agencies are responsible for measuring and reporting on their intended and actual performance in terms of outcomes, reflecting the outcome statement relating to the relevant appropriation.
4.1.1 Clearly defined operational objectives provide the linkage between grant program design and the outcomes and outputs framework
Reflecting this overarching framework, achieving an outcomes orientation has been established as one of the seven key principles to be applied in the implementation of grant programs. Accordingly, before the process that will be used to identify and select funding recipients under a particular grant program can be appropriately designed, it is important that the operational objectives of the program are clearly defined, documented and linked to the outcomes set by government. This will guide and inform the implementation of a program that supports:
- the transparent and accountable selection of grant recipients that will maximise cost-effective achievement of the desired outcomes; and
- the capacity of the relevant agency to provide the Parliament with comprehensive and accurate reporting on the extent to which the outcomes for which the funding was appropriated have been achieved.
Further guidance in relation to the establishment of a performance framework that links an agency's strategic directions and the grant's operational objectives to government outcomes is set out in Part II of the CGGs. Further general guidance on annual performance reporting is also set out in the Better Practice Guide, Performance Information in Portfolio Budget Statements, issued by the ANAO in 2002, and the Better Practice Guide, Better Practice in Annual Performance Reporting, jointly issued by the ANAO and the then Department of Finance and Administration in 2004.
An early and important consideration in the design of a grant program is establishing how to structure the process by which potential funding recipients will be able to access the program. Depending upon the policy objective that is to be addressed, there are a number of options available. These include:
- competitive funding rounds which open and close to applications on nominated dates, with eligible applications received by the closing date being assessed against the selection criteria set down for the program and then prioritised against competing, eligible applications for the available funding;
- targeted or restricted competitive funding rounds open to a small number of potential funding recipients based on the specialised requirements of the program or project under consideration;
- a non-competitive, open process under which applications may be submitted at any time over the life of the program and are assessed individually against the selection criteria set down for the program, with funding decisions in relation to each application being determined without reference to the comparative merits of other applications;
- a demand-driven process under which applications that satisfy stated eligibility criteria receive funding, up to the limit of available appropriations and subject to revision, suspension or abolition of the program; or
- one-off grants to be determined on an ad-hoc basis (usually by Ministerial decision, including by Cabinet).
4.2.1 Selecting the appropriate process
In selecting the process through which potential applicants will be given the opportunity to access a grant program, regard should be had to the seven key principles established in the CGGs for grants administration, including proportionality; collaboration and partnership; and achieving value with public money.
In that context, the factors that are relevant in selecting the appropriate application and assessment process for a given program include:
- the objective of the program;
- the likely number and type of applicants;
- the type of projects or activities for which funding may be sought;
- the value of grant that individual applicants will be able to apply for;
- the nature of inquiries that will be required in order to appropriately address the risk profile associated with potential applications, which may vary between different types of applicants and projects; and
- the need for timeliness and cost-effectiveness in the decision-making process, while maintaining rigor and equity.
It is also necessary to balance a desire to maximise access to a program with the need to maintain appropriate standards of public administration. For example, a demand-driven program may provide an efficient means of supporting or promoting activity in a particular sector. However, this will need to be supported by appropriate risk analysis and management practices in order to avoid unintended consequences and/or poor levels of achievement against the intended outcomes.
Similarly, a discretionary program that is open to applications at any time provides flexibility for potential applicants in relation to the timing of the development of their proposals to the point of being ready for submission. This is particularly the case where funding contributions for the project are also being sought from other sources, or where there is a need to satisfy planning or other regulatory requirements in order for a project to proceed. However, some possible drawbacks of this approach include that:
- it is likely to result in applications being assessed in relative isolation, making it more difficult to ensure there are consistent processes, standards and interpretations of the program guidelines applied in the decision-making process; and
- the absence of defined opening and closing dates for applications and the announcement of decisions can result in applicants experiencing differing timeframes between lodging an application and being advised of the outcome.
These factors can increase uncertainty (which may affect project viability); reduce transparency and perceived equity (which may affect public confidence in the program); and may disadvantage some potential funding recipients.
Conversely, a merit-based, competitive funding round approach offers advantages such as:
- greater certainty of timeframes for applicants (which is important for project planning and viability) and agencies (which is important for effective resource management); and
- a more transparent and reliable method of selecting successful applicants, having regard for the stated objectives of the program, in that the process of ranking competing eligible applications based on their relative performance against the published assessment criteria provides a further layer of assessment.
In this respect, the CGGs advise that:
unless specifically agreed otherwise, competitive, merit-based selection processes should be used, based upon clearly defined selection criteria.
In that context, in establishing the form of application and selection process to be applied to a particular grant program, it is advisable for agencies to document consideration of the risks, costs and benefits of the available options and, where it is proposed to use a method other than a competitive, merit-based selection process, to also document the formal approval of that approach.
Funding streams may assist in ensuring application processes are fit-for-purpose
The application process for some grant programs is relatively straight-forward. For example, demand-driven schemes are often premised on achieving a single objective through the payment of a set amount of funding to eligible applicants to be used for a specified purpose.
However, a grant program may be more complex in both its objectives and the types of applicants and/or projects it is seeking to support. In those circumstances, it may be appropriate to tailor the application and assessment process to accommodate various streams of potential applicants.
Funding streams might be based on considerations such as the size of grant being sought; the nature of the applicant; the nature and overall size of the project for which the funding is being sought; and/or the outcomes being sought from the granting activity through the achievement of separate, but related, operational objectives. The application and assessment process applied to each stream can be tailored to appropriately balance the cost effectiveness of the program for both potential applicants and the administering agency with the requirement for appropriate accountability for, and oversight of, the public money involved. For example:
- the application form used for each stream can be tailored to collect the information relevant to assessing particular types of applicants and projects, without requiring unnecessary or overly detailed information to be provided by other types of applicants and projects;
- the timeframes for the opening and closing of application rounds and the announcement of funding decisions can be tailored to take account of the characteristics of likely applicants to each stream and the nature of projects it is seeking to support, as well as the resource planning requirements of the administering agency; and
- the assessment procedures developed for each stream can be separately articulated, with officials being trained appropriately in the application of those procedures. Cost-effective administration may also be enhanced through the use of dedicated teams to undertake assessments in respect of each stream, within the context of a coordinated overall assessment process.
A streaming approach can also assist in managing the expectations of potential funding recipients. For example, clearly identifying the total funding available under a particular stream, and the maximum (and, if relevant, minimum) grant that will be awarded, can be helpful in minimising the extent to which proponents invest time and effort in submitting proposals seeking funding contributions that are unlikely to be provided within the parameters of the grant program (and which also absorb agency resources).
The appropriate definition of operational objectives for a granting activity can assist in identifying potential streaming options. Equally, the use of distinct streams within an overarching program can assist in ensuring that the operational objectives stated for the program do not become too broad to provide a meaningful basis for selecting grant recipients and reporting on program performance. For example, while an overarching objective might be expressed for an overall government initiative or program, the definition of concise, unambiguous, realistic, outcome-oriented statements of what the granting activity is intended to achieve may reveal natural streaming options, each directed at achieving a specific aspect of the outcomes expected by government. The merits of each application are then able to be considered in the context of other applications that are seeking access to the same pool of funds in order to achieve similar objectives.
Due diligence is a process undertaken to obtain sufficient information for informed decision-making and to verify the accuracy and completeness of information that has been provided. In that context, another important factor in determining the appropriate application process for a grant program is the information that will be required in order to properly assess applications and adequately inform funding decisions.
4.3.1 Proportionality within the context of the financial management framework
An overly complex application form with extensive information requirements may be difficult for some potential funding recipients to complete and can potentially disadvantage some applicants. However, this must be balanced against the obligation to perform appropriate due diligence in relation to grant applications. In this respect, a key aspect of the financial framework is the obligation placed on approvers to undertake reasonable inquiries in order to satisfy themselves that a proposed grant:
- will make efficient, effective and ethical use of the public money; and
- would not be inconsistent with the policies of the Commonwealth which, as noted in Chapter 2 of this Guide, include the CGGs and the specific guidelines established for the relevant program.
In the normal course, the assessment process undertaken by the relevant agency or advisory panel will be relied upon by the approver in fulfilling that obligation. A key element in relation to those 'reasonable inquiries' is providing potential funding recipients with appropriate opportunity to submit information in support of their application. In particular, the design of the application form should assist applicants to provide information in respect of all selection criteria identified in the program guidelines.
Information supplied by applicants can then be analysed, together with relevant information from other sources, in order to assess the merits of each application based on the criteria articulated for the program.
In this respect, there are efficiencies for both applicants and agencies from:
- clearly specifying in the program guidelines and application form the information required to support an application, including, as relevant:
- what information must accompany an application in order for it to be considered; and
- whether additional information may be sought or accepted from the applicant as part of the assessment process;
- only seeking information that is needed and relevant;
- clearly specifying in the program guidelines the extent to which additional supporting material that might be included with applications (such as letters of support) will be taken into account in the selection of successful applications. A further matter to consider in this respect is that, while the approach of providing grant applicants with the opportunity to demonstrate broader support for their project is relatively common, there is a risk that some projects may also have community opposition—something that the applicant is unlikely to draw attention to in its application for funding. Accordingly, it will be prudent for agencies to also consider, and document, the approach that will be taken should letters indicating community opposition be received in relation to funding applications during the assessment and decision-making process;
- determining in the program's planning stage whether the skills necessary to appropriately examine information to be provided by applicants are available within the agency and, where that is not the case, identifying (prior to the assessment commencing) the process by which the necessary expert advice will be obtained and acted upon; and
- identifying ways of facilitating the provision of information by applicants, such as through the use of dedicated web-based portals and electronic application forms. In this respect, it is important for agencies to consider the likelihood of applicants needing to lodge substantial supporting attachments with their application, which may cause difficulties when using email solutions.
Again, the key principle of proportionality is relevant in determining the information required of applicants. For example, the extent of financial and other information that may reasonably be required in order to assess applications for low-value grants by community organisations would be likely to be considerably less than that which would be expected to be obtained in relation to applications for funding submitted by commercial organisations or for use in complex or high-value projects.
A two-stage application approach may be appropriate in some circumstances
For some grant programs, the capacity to maximise the extent to which high quality applications are submitted for consideration, and the cost-effectiveness of the program for both the administering agency and prospective applicants, may be enhanced by adopting a two-stage application approach. Under such an approach, a form of pre-assessment can be used to assist prospective applicants in determining whether there is likely to be any merit in them investing in the preparation of a full application.
For example, as outlined in Figure 4 on page 17, the Regional Food Producers Innovation and Productivity Program administered by the Department of Agriculture, Fisheries and Forestry involves a pre-assessment filter. Prospective applicants are provided with the capacity to register their entity's details on the department's website, which are used to make an initial assessment of eligibility. The proponent is then asked to lodge a clear, concise and convincing expression of interest that provides just enough information to allow the department to determine whether the project is likely to be eligible. If, after assessment of the expression of interest, the program decision-maker determines that the applicant and project are likely to meet the program eligibility criteria and could be competitive, the proponent is invited to submit a full application by a nominated date, which is then assessed as part of a competitive, merit-based round based on the program criteria. While an approach of this nature may result in a longer overall process for some applicants, it may also be beneficial in terms of the capacity to effectively target grant funding and administrative effort.
An alternative approach to an expression of interest stage might involve either the administering agency or another entity (for example, consultative panels such as the Regional Development Australia committees) working with proponents to develop their proposals to the point at which they can be accepted as a full application to the program at the next available opportunity. Alternatively, the proponent may be assisted to identify that their proposal is unlikely to be successful under the program and thereby avoid unnecessary costs and delays. Where an approach of this type is adopted, it will important to establish mechanisms that will provide appropriate transparency in regard to the pre-application processes undertaken.
4.3.2 What does the information obtained from applicants need to provide?
Regardless of the scale and nature of a grant program, the key requirement is that the information obtained from applicants and other sources is sufficient to reach an informed assessment of the merits of each application under the relevant program's guidelines. In the normal course, the completeness of the information obtained in the application and/or assessment process will determine the extent to which the program decision-maker will be in a position to demonstrate that they have based their decisions upon the 'reasonable inquiries' that FMA Regulation 9 requires.
The matters that will need to be considered in that context will, to some degree, depend upon the nature of the program. Further, the key principles of proportionality and value for money (including in the administration of a program) outlined in the CGGs are relevant considerations in determining the level of inquiry that would be considered reasonable in the context of a given grant program. However, Figure 6 sets out a number of criteria that will be useful reference points for determining the information that will need to be obtained through the application process for a particular grant program.
Relevance to effective assessment of grant applications
The information obtained provides sufficient reliable evidence to determine whether the applicant satisfies threshold eligibility criteria set out in the program guidelines and/or, where relevant, the legislation establishing the program.
The reliability of the information provided to substantiate the eligibility of a grant application is important in demonstrating that government objectives are being met through the making of the grant and to the equitable conduct of the program in a manner that is compliant with the grants policy framework. For non-competitive or demand-driven grant programs, particular issues can arise in this regard as there may be no further assessment process once an application has passed through a gateway eligibility criterion. Objective evidence of the satisfaction of an eligibility criterion provides a sounder basis for assessing compliance than assertions made in the application (a factor that is a relevant consideration in framing the eligibility criteria).
The information obtained is sufficient to inform a reliable assessment of the financial viability of the project or activity for which the grant funding is being sought.
For many programs, the financial viability of the project for which funding is being sought, such that it is both likely to be completed within the proposed budget and remain sustainable beyond the funded project period, is important in assessing the merits of an application. The reliability of project cost and/or revenue estimates is of particular relevance for projects at higher risk of estimating error, inadvertent or deliberate misstatement and/or cost increases/revenue shortfalls (for example: construction projects; projects involving an exposure to foreign exchange movements; or projects that are reliant upon generating minimum revenue streams in order to achieve the projected outcomes). A relevant consideration in determining the application requirements is the extent to which it is appropriate that applicants be required to provide documentation supporting cost and/or revenue estimates set out in the application.
The information obtained is sufficient to accurately identify the potential funding recipient, including
Particular matters of relevance in this regard are determining the applicant's eligibility and capacity to enter into an enforceable funding agreement. Particularly for grant programs that allow applications from commercial organisations, it will be important for the applicant entity's position within a corporate structure to be identified in order to assess any resulting risks in relation to project viability, governance over the grant funding or the capacity for the corporation to fund the project without government assistance.
The information obtained identifies the party that will actually be undertaking the project to which the grant funding would contribute.
In some cases, the entity that submits an application to a grant program is not the entity that will actually undertake the relevant project. As well as determining the eligibility and value for money of the application (including the potential for cost shifting), appropriate consideration of this issue will include assessing whether the entity undertaking the project has the necessary skills to effectively do so; and that the project implementation arrangements will support appropriate oversight of the grant funding.
The information obtained provides a clear and comprehensive description of the project being proposed, and identifies the outcomes that will be achieved.
In order to undertake a robust assessment that appropriately informs decision-making, the information obtained must allow the assessor to fully understand the location, nature and scope of the project being proposed and how that relates to the outcomes claimed. For example, unless the full parameters of the proposed works are identified, it will not be possible to appropriately assess the adequacy of the proposed budget and, therefore, the likelihood of the project being completed.
The information obtained enables an informed assessment of the likelihood of the project being completed without the grant and/or the claimed outcomes being otherwise achieved.
Should either circumstance arise, the value for money to be achieved from approving the grant will be significantly diminished. For example, examination of the project timelines and other information set out in the application may indicate that the applicant was already committed to the project. It is advisable for agencies to maintain oversight of this issue throughout the assessment process, particularly where there is a considerable delay between application and decision-making. Equally, applications seeking only a small proportion of project costs may indicate that the project would proceed regardless of the outcome of the application.
The information obtained will enable a funding agreement, deed or other arrangement to be entered into with a successful applicant (where this is an element of the program's design).
It is reasonable to expect that the extent of information obtained from applicants will be such that, should funding be approved, a funding agreement will be able to be drafted without seeking further information, with the funding recipient then being asked to comment on the draft agreement. This is particularly the case where, as is commonly the case, a standard funding agreement is used. Particularly for project-based grants, completing the agreement following funding approval typically involves populating the relevant schedules with details of the project to be delivered (including scope, budget, funding contributions, timelines and milestone requirements, and required outputs and outcomes). If these matters are not able to be derived from the material on which the grant approval was based, the quality of the assessment in terms of appropriately informing decision-making under the program guidelines, the financial framework and the grants policy framework will fall into question.
Source: ANAO analysis.
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