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5. Developing program guidelines and procedures

5.1 The guidelines promulgated in relation to a grant program play an essential role in establishing and implementing an effective program that funds the most meritorious applications and promotes public confidence in the equity and probity of the grant-giving process. The development and implementation of documented internal procedures support both the application of consistent standards of administration in accordance with the published program guidelines, and the capacity to demonstrate that all applicants have received equitable opportunities to access funding.

Key Points

The guidelines that are established for a grant program play a central role in the conduct of effective, efficient and accountable grants administration. Important considerations in establishing program guidelines include that:

  • a key obligation under the new grants policy framework is for all grants programs to have guidelines in place, with the guidelines representing one of the policy requirements that grants must be consistent with in order to be approved under the program;
  • clear and comprehensive published guidelines promote effective grants administration by encapsulating in one document all relevant information concerning the program (including any relevant legislative provisions; program ‘entry’ criteria and assessment criteria; the process that will be applied in determining successful applicants; and the obligations that funding recipients will be required to satisfy). This facilitates potential funding recipients’ understanding of the program, thereby encouraging high quality applications to be submitted in accordance with program timetables and with the information required for the application to be fully assessed, whilst at the same time discouraging applications that are ineligible or of doubtful merit in relation to the grant program’s objectives; and
  • soundly based selection criteria will provide an effective link between the program’s objectives and the outcomes achieved through the grants awarded.

5.1 Guidelines are required for all grant programs

The specific guidelines that are established for a particular grant-giving activity provide a key starting point for parties considering whether to participate in the program. Accordingly, the guidelines are central to implementing an effective program that complies with the grants policy framework. In particular, program guidelines identify how:

  • potential funding recipients will be able to access the program;
  • successful applicants will be determined; and
  • approved grants will be administered in order to achieve the stated program objectives, including the obligations that funding recipients will be required to satisfy.

The importance of sound program guidelines has been emphasised in the CGGs, which stipulate that:

  • agencies must develop grant guidelines for new grant programs, and make them publicly available (including on agency websites) where eligible persons and/or entities are able to apply for a grant under a program (CGGs paragraph 3.24);
  • agencies must ensure that grant guidelines and related operational guidance are in accordance with the CGGs (CGGs paragraph 3.25); and
  • the ERC will consider guidelines for new grant programs. Where a change is proposed to the guidelines for an existing grant program, agencies should consult with Finance on whether the proposed change will give rise to the need for ERC consideration of the guidelines (CGGs paragraph 3.22).

There is a clear expectation under the CGGs that grant program guidelines will be made public and be freely accessible by stakeholders, with the CGGs also advising more broadly that care should be taken to ensure that the rules of a granting activity are simply expressed and clear in their intent, and are effectively communicated to stakeholders.[63]

5.1.1 Guidelines continue to be required even where the program has a legislative authority

The CGGs make no exception in regard to the requirement to develop guidelines for all new grant programs, irrespective of whether the program is an executive scheme or has a statutory basis (see Figure 4).

The extent to which separate guidelines will need to be developed for a program that has some form of statutory basis will depend upon the provisions of the relevant legislation. It is possible for the legislation or legislative instrument establishing a grant program to be drafted such that it sets out all of the criteria and decision-making processes that will apply. However, in the normal course, in order for the administration of the program to fully comply with the CGGs, the legislation establishing a grant program will need to be supplemented by published guidelines that fully document the grant-giving process. This will particularly be the case where the legislation establishes the framework for a scheme, but relies upon the exercise of executive discretion and decision in order to be implemented.

For example, legislation may provide the responsible Minister with discretion in respect to how proposals from potential funding recipients will be sought and/or in relation to the matters the Minister might take into account in determining whether a proposal should be approved. Program guidelines provide the means by which the specific application and selection processes to be applied in exercising that discretion will be articulated and advised to stakeholders, as required under the CGGs.

Further, even where the relevant legislation specifies all eligibility and assessment criteria that will be applied, the program guidelines provide the vehicle for informing potential funding recipients of the terms and conditions that will apply to any approved funding, and the obligations they will need to satisfy should they be successful.

5.1.2 Are guidelines required if the program is to be utilised to fund projects that were the subject of election commitments?

It is common during election campaigns for political parties, Ministers and other government and non-government candidates to make various announcements that represent undertakings to provide certain funding, services or facilities in the event the relevant party is elected or re-elected to government. The importance to governments of delivering upon their election commitments is recognised. Nevertheless, the use of public money to fulfil such commitments may only occur in accordance with the financial framework that governs the expenditure of funds from the Consolidated Revenue Fund, being:

  • the availability of a valid appropriation at law; and
  • satisfaction of the requirements of relevant legislation governing the expenditure of public money.
Application of the financial framework and CGGs to consideration of grant proposals relating to election commitments

Election commitments are frequently implemented by way of grant payments. Neither the FMA Regulations nor the CGGs make any differentiation between proposed grants that were the subject of an earlier election commitment and any other grant proposal. Rather, the Regulations provide a principles-based framework for determining the obligations that will apply in approving a grant. In particular, as discussed in Chapter 2 of this Guide:

  • Regulation 3 defines a 'spending proposal' for the purposes of determining the circumstances that attract the obligations relating to the approval of a proposal to spend public money set out in Part 4 of the Regulations, Commitments to spend public money; and
  • Regulation 3A defines a 'grant' for the purposes of determining the circumstances that attract the obligations set out in the Regulations that are specific to grants administration, and in the CGGs issued under authority of Regulation 7A. The definition of a grant set out in Regulation 3A relates to the character of the payment being proposed[64], with the CGGs further stating that, within that definition:

A granting activity can take a variety of forms, including a payment made on a one-off or ad hoc basis, payments made as a result of a competitive assessment, or provided specified criteria are satisfied.[65]

Wherever a proposed payment (including in relation to fulfilling an election commitment) satisfies the definitions of 'spending proposal' and 'grant' set out in the Regulations, the relevant obligations will need to be observed in relation to that proposal. The 2008 Strategic Review emphasised this point, as follows:

The statutory obligations applying to the approval of spending proposals deriving from election commitments are no different from those attaching to the approval of any other spending proposal; accordingly, departments should provide their Ministers with advice on options for the funding of election commitments, having regard both to a Minister's statutory obligations and the extent to which the spending proposals satisfy the eligibility or assessment criteria for grant programs which might be used to fund the commitments.

In preparing their advice to Ministers on the funding of election commitments, departments have a responsibility to ensure that Ministers are appropriately informed both as to the nature of the spending proposal and whether it is likely to make efficient and effective use of public money (consistent with the requirements of FMA Regulation 9). For this purpose, documentation will often need to be obtained from project proponents providing evidence of need and details of the proposed expenditure, sufficient to allow Ministers to make an informed judgement in carrying out their statutory responsibilities. It is also important that departments advise their Ministers on any measures necessary to manage risks to the Commonwealth associated with the approval and implementation of election commitments.[66]

In this light, the Government accepted the Strategic Review's recommendation[67] that the requirement on Ministers to receive and consider agency advice on the merits of proposed grants, as assessed against the relevant program guidelines, before taking any decisions on the award of individual grants[68] should apply to all grant spending proposals, including proposals designed to satisfy commitments made in the context of election campaigns. This policy requirement is now reflected in the CGGs.[69]

In this respect, as with all proposals to spend public money, the financial framework requires that any decision to approve expenditure to satisfy an election commitment be undertaken in a manner that, through a process of reasonable inquiry, considers whether the proposed expenditure represents proper use of the public money involved (FMA Regulation 9 refers). Similarly, and consistent with the recommendations of the Strategic Review, all other relevant requirements that arise under the Regulations and CGGs in relation to grants administration must also be observed in considering whether to approve a grant to satisfy an election commitment. These include that:

  • if the grant is approved, the approver is required to record in writing the basis on which he or she was satisfied that the grant complies with Regulation 9 (FMA Regulation 12); and
  • Ministers are to report any decision to approve a grant that the agency has recommended be rejected to the Finance Minister, together with a brief statement of the basis of the approval (CGGs paragraph 3.21). Ministers are also required to advise the Finance Minister of any grants approved in the Minister's own electorate.

Accordingly, the effective implementation of commitments made in the context of an election campaign is reliant on both:

  • the development of an administrative approach that ensures both decision-makers and potential funding recipients are made aware of the need for projects proposed for funding to satisfy minimum standards set out in relevant legislation, and for funding to be available from appropriations passed through the Parliament, before they can be considered for funding by the incoming or returned government; and
  • the consistent and comprehensive implementation by the responsible agency of a program of inquiry and assessment in relation to each project being considered for funding, in order to appropriately inform the decision-maker.
The application of grant program guidelines to the funding of election commitments

As part of the process for allocating election commitments to Ministerial portfolios for administration following an election, agencies are responsible for assessing, and providing early advice to government on, options for funding the commitments. Where election commitments are intended to be implemented through grants, it will be necessary to consider the most appropriate administrative arrangements for considering those proposals.

Funding election commitments through existing grant programs may be problematic

As discussed in Chapter 2 of this Guide, the Commonwealth policies with which a proposed grant must be not be inconsistent in order to be approved under Regulation 9 include the guidelines applying to the program from which the expenditure is proposed to be made.[70] In that context, in the normal course, it may be problematic to seek to fund election commitments through an existing grant program.

It would not generally be feasible for consideration of grant proposals to fulfil election commitments to occur within the context of a competitive, rounds-based grant program. Even where an existing program is not competitively-based[71], it would be expected that application requirements and threshold criteria will have been established in relation to that program which a proposed grant would need to satisfy in order to be funded through the program. However, the policy intent underpinning an election commitment may not be consistent with the eligibility or other criteria established for the existing program, such that the grant proposal is unlikely to satisfy those criteria. In this context, the Strategic Review drew attention to the challenges that may arise in situations where the assessment of an election commitment identifies shortcomings with the proposal in terms of the published eligibility or assessment criteria for an existing program. Specifically:

The situation may arise that a spending proposal deriving from an election commitment satisfies the requirements of the FMA Regulations but fails to meet the eligibility or assessment criteria for the relevant funding program. For example, where a grant program is structured on a contestable basis, the proposal covered by the election commitment may fail to satisfy one or more of the eligibility criteria specified in the grant program guidelines, or alternatively may fail to make the selection cut when it is assessed on its merits against other competing applications. In such circumstances, should the Minister wish to proceed with the funding of the election commitment, a suitable funding platform for that purpose would need to be found.[72]

The funding of election commitments through existing grant programs also needs to be carefully considered in terms of the potential for this to reduce funding that would be otherwise available under the program, thereby possibly leading to calls for the size of the program to be increased.

Funding election commitments through dedicated grant programs may be a more appropriate approach

In general, a more appropriate funding platform for the implementation of one or more election commitments relating to a particular portfolio of responsibility is likely to be the establishment of a separate grant program to be used for the exclusive purpose of administering the election commitments. Where this option is taken, the CGGs require that guidelines be developed (and considered by the ERC) for the new program[73] to guide the consideration of the proposed grants within the context of the financial management and grants policy frameworks.

In accordance with the guidance set out in the CGGs, relevant considerations in the development of the guidelines for such programs will include that they be fit for purpose (having regard for the policy objective of the program), while supporting the decision-maker's capacity to demonstrate that funding decisions have been taken in accordance with the relevant statutory and policy requirements.

In administering such a program, an important role for agencies in putting election commitment projects forward for funding approval is to ensure Ministers are appropriately informed as to the nature of the project and whether it is likely to make proper use of the public money. Given election commitments are typically announced in broad terms, this process will usually involve project proposals being sought from the relevant proponents. Those proposals are then to be assessed against the guidelines in order to determine their suitability for funding approval, including assessing relevant risks to the Commonwealth achieving value for money and the extent to which those risks might be able to be treated or mitigated.

The guidelines established for such programs provide the vehicle for advising proponents of election commitment projects:

  • that funding can only be approved where the Government is satisfied that the project would be an efficient and effective use of public money;
  • of the factors that will be considered in making that determination (including, as appropriate, the standards their project proposal will need to meet); and
  • of the obligations that proponents of approved projects will be expected to satisfy.

Figure 7 sets out an example of good practice in the establishment and implementation of a grant program for the implementation of election commitments, including through the establishment of appropriate program guidelines.

Figure 7
Case study - Establishing a grant program for implementing election commitments: Better Regions Program

During the 2007 Federal election campaign, the then Opposition announced commitments to fund a number of regional projects should it be elected to government. Funding of $176 million over four years was subsequently announced in the 2008–09 Budget to implement the Government's regional election commitments through the Better Regions Program. Program Guidelines were published in August 2008 after consideration by the Expenditure Review Committee, with the responsible Minister noting that the Guidelines reflected the fact that the projects to be considered had already been identified, but also addressed issues such as:

  • program criteria, including assessment criteria;
  • process issues, such as the application, assessment and decision-making processes, including the roles of Ministers and officials in decision making; and
  • administration issues, including payment and acquittals processes, timelines and milestones.

The Guidelines advised that proponents would need to provide information including details of:

  • the proponent's organisation and any related entities in the corporate group;
  • the project, including funding arrangements;
  • financial information including quotations, cost estimates and budgets;
  • project timeframes;
  • project delivery information including project and business plans; and
  • all statutory and other approvals required if relevant for the project.

Based on the information provided, the department would undertake a risk analysis which would analyse: anticipated project results (which needed to be consistent with those identified in the election commitment); proponent viability; and project viability. The Guidelines further advised that:

  • following an assessment by the department to ensure that the project was ready for funding, approval would be sought from the responsible Minister for the release of funds;
  • the Minister would consider whether the project will make efficient and effective use of public money as required by Commonwealth legislation and whether any risk management strategies would need to be imposed as a condition of funding; and
  • for approved projects, the proponent would need to enter into a Funding Agreement before any Better Regions funding could be paid.

In recognition of the need for grant proposals in relation to election commitments to be considered in accordance with the financial framework, the Guidelines further advised that:

Proponents should not make financial commitments based on receiving funding from the Australian Government until the Funding Agreement (contract) has been executed.

The program Guidelines also advised proponents that, for approved projects:

The Department will work with the proponent with the aim of finalising the Funding Agreement (contract) within 16 weeks of the project being approved by the [Minister]. The offer of funding may be withdrawn if the proponent cannot meet the timeframe, has not obtained agreement from the Department to obtain an extension to this timeframe, or if there are significant reasons as to why the project cannot commence.

Source: ANAO analysis.

5.1.3 What if there were program guidelines in place prior to the commencement of the CGGs?

Programs already in existence when the new grants policy framework was introduced on 1 July 2009 are not exempt from that framework, including the mandatory requirement that agencies must ensure that grant guidelines and related operational guidance are in accordance with the CGGs.

The regulations that amended the FMA Regulations to introduce the CGGs and associated grants-specific statutory obligations contain a broad transitional and savings provision to provide sufficient opportunity for agencies to adjust their internal procedures, CEIs, delegations and related materials for existing grant programs to ensure they are compliant with the CGGs.[74]

Where the guidelines for on-going grant programs that commenced prior to 1 July 2009 are not compliant with the CGGs (for example, they have not disclosed all of the decision-making criteria and processes applied under the program), the guidelines will need to be revised and re-issued in a compliant form.

5.1.4 ERC consideration of changes to program guidelines

As noted in Chapter 1 of this Guide, since December 2007 there has been a policy requirement that guidelines for new grant programs be considered by the ERC, with this requirement now being reflected in the CGGs. Once a program has been established (whether prior to or after commencement of the CGGs), the CGGs state that:

Where a change is proposed to the guidelines for an existing grant program, agencies should consult with [the Department of Finance and Deregulation] on whether the proposed change will give rise to the need for ERC consideration of the guidelines.[75]

While guidance will need to be sought from Finance in relation to specific programs, in general terms the matters that could be expected to represent a significant change to a program's guidelines that may require ERC approval would include any matters that have a substantive effect upon the opportunity for an entity to successfully access funding through the program. This could include:

  • changes to the stated objectives and focus of the program;
  • changes to eligibility criteria and other aspects of the guidelines that affect who may access funding under the program;
  • alterations to the assessment criteria that will be applied in selecting funding recipients or to the interpretation that is to be applied to a criterion, including the introduction of any new or additional capacity to waive or amend criteria in relation to particular applications;
  • changes to the application and assessment process, such as a change from an open process to a closed funding round approach or to the terms and conditions with which applications must comply in order to be accepted for consideration; or
  • any changes that will have retrospective effect in relation to the capacity to consider the approval of funding for applications already submitted, including through previous funding rounds.

Changes that may have a material effect upon the budgetary profile of the program, including in relation to the approach that will be taken to paying approved funding to successful applicants (such as the use or otherwise of advance payments), would also be likely to be considered a significant change that may require ERC approval.

In respect to on-going programs that were in existence as at 1 July 2009, agencies may need to seek advice from Finance as to whether the publication of revised guidelines that provide public disclosure of existing program parameters not previously included in the published guidelines for that program (as opposed to amending or changing those parameters) will require ERC consideration.

5.2 Determining the content of program guidelines

The appropriate level of content of grant guidelines will vary depending upon the size, scope and nature of the program, having regard for the need for all aspects of the program to conform to the key principles established for grants administration including proportionality; governance and accountability; and probity and transparency. In that context, the underlying principle is that program guidelines address the matters necessary to promote transparent and equitable access to grants (while minimising wasted effort being applied to the submission of proposals that are ineligible or unlikely to be funded), and fully inform the efficient, effective and accountable administration of the program. This would involve the guidelines articulating:

  • the program's purpose, scope, objectives and desired outcomes;
  • the total funding that is available and any limitations on the amount individual applicants will be able to apply for;
  • the types of projects that will (and will not) be funded;
  • the entities that are eligible to apply for or receive funding, and any that are not eligible;
  • the governance arrangements that will apply to the program's administration (including the respective roles and responsibilities of the Minister, agency officials and any advisory panel that may be involved)[76];
  • the process by which eligible entities will be able to apply to the program, including the information that is required to accompany any application and any deadline for submitting applications[77];
  • the process by which funding recipients will be selected, including specifying all criteria on which funding decisions will be based (including whether there is discretion for criteria to be waived or amended during the assessment and/or decision-making process and, if so, how that discretion will be exercised);
  • any review or appeal mechanism that will be available to unsuccessful applicants and the processes that will be applied[78]; and
  • the terms and conditions that will apply to the provision of a grant, including the reporting and other accountability requirements that funding recipients will be expected to comply with. It is advisable for a copy of the funding agreement for the program to accompany the published guidelines.

Part II of the CGGs sets out a range of guidance in relation to how the recommended content and presentation of grant program guidelines can contribute to achieving key principles in grants administration, extracts of which are set out in Figure 8.

Figure 8
Extracts of guidance set out in the CGGs on the content and purpose of grant program guideline

Key Principle: Collaboration and Partnership (CGGs p. 22):

Clear, consistent and well-documented grant guidelines are an important component of effective and accessible grants administration. A single reference source for policy guidance, administrative procedures, appraisal criteria, monitoring requirements, evaluation strategies and standard forms, helps to ensure consistent and efficient grants administration.

As well as being understandable, grant guidelines should clearly inform potential recipients if the Commonwealth has terms and conditions that recipients will need to meet during the life of the project (such as financial and performance reporting).

Key Principle: Governance and Accountability (CGGs p. 23):

Agencies should develop such policies, procedures and guidelines as are necessary for the sound administration of grants. In the case of grant programs, this should include grant guidelines and associated operational guidance for the administration of the program. When developing such guidance, agencies must act in accordance with the CGGs.

Grant program guidelines should be fit for purpose and should include information on the outcomes and objectives of the grant program, governance arrangements (including roles and responsibilities), funding and selection processes, performance monitoring and reporting, evaluation, operational issues and complaint handling mechanisms.

Key Principle: Probity and Transparency (CGGs p. 28–29):

Agencies should put in place appropriate mechanisms for identifying and managing potential conflicts of interest. Relevant measures may include (inter alia): ensuring that grant guidelines clearly outline what constitutes a conflict of interest. Clear procedures for declaring conflicts of interest and their management should be established.

In the interests of transparency, accountability and equity, grant guidelines should document the circumstances in which the eligibility and assessment criteria set out in grant guidelines may be waived or amended. Guidelines for new grant programs require ERC consideration and these issues should be addressed in that context.

Source: Commonwealth Grant Guidelines, Policies and Principles for Grants Administration, Financial Management Guidance No. 23, July 2009.

It is important that the guidelines established in relation to a grant program have been appropriately considered, including through internal review and quality assurance mechanisms, before being published. In this respect, the CGGs suggest that it may also be useful for agencies to consider testing the clarity of program information and grant guidelines with relevant client groups. This may assist in avoiding the need for subsequent significant and/or numerous amendments to the guidelines. Frequent changes in program guidelines can lead to confusion or uncertainty among potential applicants, as well as increasing the complexity of grants administration.

5.3 Determining the due date for submitting applications

Clearly specifying the date by which applications will be required to be submitted is an important aspect of program guidelines. This is particularly the case for rounds-based programs. However, it is also important information to make available to potential applicants to other grant processes, given most programs have a defined life-span based on budgetary arrangements.

An important consideration in establishing the due date for applications is whether the time allowed between the public calling of applications and the deadline for submission is adequate to provide potential applicants with a reasonable opportunity to develop proposals that are robust and comprehensively respond to the published guidelines. Issues that are relevant in this regard include:

  • the nature of projects for which funding is likely to be sought;
  • the budgetary cycle of expected sources of co-funding, particularly where this relates to other Australian Government bodies, State or Territory bodies, local government authorities or private trusts and foundations (which often announce funding in annual or periodic rounds); and
  • the extent to which factors such as strategic collaboration between entities is identified in the guidelines as improving an application's chances of success.

Agencies will also need to consider other factors that may impact upon the receipt of applications, such as:

  • whether the nominated closing date coincides with a public holiday in a particular State or Territory; or
  • the potential for applicants to become confused where there is daylight saving in operation in some States or Territories, but not others. Clarity in this respect can be achieved through the guidelines clearly advising applicants of the time zone that applies to the closing time for the submission of applications.

In the interests of clarity and probity, it is also advisable for program guidelines to:

  • clearly state that applications not received within the required timeframe or through the required application process will not be accepted; and
  • define what would constitute a complete application and stipulate whether incomplete applications will be considered.

5.4 Drafting selection criteria

The criteria that are to be applied in determining funding recipients under a grant program are the key link between the program's stated objectives and the outcomes that are subsequently achieved from the expenditure of public money. Accordingly, they play an important role in both:

  • attracting good potential funding recipients to apply to the program and encouraging entities that are unlikely to be successful not to invest unnecessary resources in preparing an application; and
  • providing the basis for a transparent, accountable and effective grant program.

5.4.1 Characteristics of sound selection criteria

As the CGGs advise, achieving value with public money should be a prime consideration in all aspects of grants administration.[79] Accordingly, value for money is expected to underpin the selection criteria established for grant programs.

The criteria that will be appropriate will depend upon the nature of the program. However, there are some common characteristics that will assist in ensuring selection criteria contribute to achieving an accountable and effective grant program that complies with the policy underpinnings of the CGGs—see Figure 9.

Figure 9
General characteristics of sound selection criteria for a grant program

Characteristic

Relevance to effective grants administration

Outcomes focused and aligned with the policy objective

The establishment of a clear read between the objectives articulated for the program and the selection criteria to be applied assists in ensuring that the selection process will be focussed on funding those applications that will contribute to the cost-effective achievement of desired outcomes.

Promote additionality

In order to promote the achievement of value for money from grant expenditure, it is important that the criteria developed for a grant program, and the assessment procedures applied, appropriately consider the extent to which the funding being sought by an applicant will result in an outcome that is additional to those that are likely to occur regardless of whether the application is successful.

Comprehensive

The program guidelines must articulate all criteria that will be applied in determining whether a particular application will be awarded funding. This should not be confused with a blanket requirement for heavily detailed criteria to be included in all program guidelines—such an approach would not be consistent with the requirement under the CGGs that all aspects of grants administration be fit-for-purpose. Instead, this characteristic is reflective of the fact that only those criteria set out in the program guidelines should be applied in the selection of funding recipients.

Unambiguous

Selection criteria that are expressed in ambiguous or non-exclusive terms can lead to confusion on the part of both potential funding recipients and program administrators as to what criteria may be used in the selection of funding recipients. It is also detrimental to the transparency and accountability of the selection process.

Objectively assessable

Criteria that are able to be objectively assessed on the basis of the information and supporting documentation provided by applicants and available from other sources (such as public records) maximise the potential for the relative merits of all applications to be consistently assessed, leading to informed decision-making. Criteria that are based on subjective assessments and/or statements by applicants are likely to diminish the robustness, consistency and defensibility of the selection process.

Easily understood, plain language, with translation services provided.

Grant program guidelines, including selection criteria, need to be expressed in easily understood, plain language and effectively communicated, including through the appropriate availability of alternative language forms. This maximises program accessibility.

Key terms are defined

In order to support the submission of high quality applications and the conduct of a transparent and consistent assessment process, it is important that all key terms that impact upon an application's chances of being successful are clearly defined in the published guidelines.

Internally consistent

It is advisable to check the selection criteria set out for a particular grant program for any internal inconsistencies so as to ensure there is clarity for both applicants and program administrators.

Source: ANAO analysis.

5.4.2 Types of criteria

It is important to appreciate the different types of criteria that may be established for a grant program and the role they play in the assessment process. Selection criteria fall into two main groups, as follows:

  • threshold criteria are the criteria that an application must satisfy in order to be considered for funding. These are also variously expressed as 'eligibility criteria', 'mandatory criteria', 'compliance criteria' or 'gateway criteria'; and
  • assessment criteria are the criteria against which all eligible, compliant applications will be assessed in order to determine their merits against the program objectives and, for competitive programs, other competing applications.
Threshold criteria

It is important that program guidelines clearly identify any threshold requirements that must be satisfied in order for an application to be considered for funding. Well-constructed eligibility criteria are straightforward, easily understood and effectively communicated to potential applicants, with the guidelines clearly stating that applications that do not satisfy all threshold criteria will not be considered. This helps to reduce frustration and unnecessary costs by assisting potential applicants to avoid developing and submitting applications that are ineligible or that have little chance of success, and will promote consistent assessment processes.

A common approach is for grant program guidelines to include a discrete section outlining the entities and projects that are eligible to apply for funding and those that are not. However, it is also common for additional statements to be included in other sections of program guidelines that also represent mandatory requirements that must be satisfied in order to receive funding. This often involves the use of expressions such as 'must', 'must not', 'will' or 'will not'.

In that respect, the clarity and transparency of the grant-giving process will be assisted by all threshold requirements being grouped and clearly identified as such in the program guidelines. This has benefits for both potential applicants and the administering agency, in that adopting this approach can provide a comprehensive checklist of minimum and mandatory requirements that:

  • potential applicants can easily use to inform a decision as to whether to invest resources in developing an application; and
  • officials or others undertaking the assessment can use to ensure any applications that fail to satisfy one or more of the threshold requirements set out in the guidelines are identified as being ineligible for funding consideration. This can then be appropriately reflected in advice provided to the decision-maker.

For some types of grant programs, satisfying nominated threshold criteria is all that is required in order for an applicant to receive funding. In such programs, the nominated criteria provide the means by which funding is directed toward the achievement of the relevant government objective. For other programs, the purpose of threshold criteria is also to be clear about the standard of application that will be considered for funding in the context of the relevant program's objectives. This assists in discouraging the submission of unsuitable applications and, if necessary, to eliminate such applications from the assessment process.

It is advisable to examine draft criteria for the potential to cause unintended consequences, as there is a risk that the inclusion of extensive mandatory requirements may unintentionally result in suitable applicants being excluded from the process.[80] Equally, however, the careful specification of minimum mandatory requirements can assist in focussing both grant funding and scarce agency resources on applications that are more likely to contribute to the program's objectives. In particular, all eligibility requirements agreed by government or the relevant Minister in establishing the program must be clearly set out in the guidelines.

Eligibility criteria in demand-driven programs

A demand-driven program can be an effective means of providing intended recipients with efficient access to funding in order to facilitate the achievement of the intended impact or objective. This approach may also be effective in minimising administrative costs.

However, the role of eligibility criteria applied in such programs is of particular importance. In order to be effective, they must both:

  • reflect the core objective of the program; and
  • be capable of appropriate scrutiny and objective validation.

Unless that is the case, it will be more difficult for the responsible agency to accurately measure and report on actual achievement against the outcome for which the program funding was appropriated, as opposed to the commonly adopted approach of simply reporting the number of grants given as a performance measure.

Another important consideration in establishing demand-driven programs is the potential for the program to become oversubscribed. This may result in the program needing to be closed to further applications earlier than originally planned, unless additional funding is made available. It is important that the potential for this situation to arise is assessed in the program's design phase, in order to appropriately inform:

  • the decision as to whether a demand-driven program is the most appropriate vehicle for achieving the relevant government objective;
  • the determination of the total funding that will be required to achieve nominated outcome levels; and
  • a decision as to the maximum grant that will be available to an individual applicant to the program.

Ongoing monitoring of current and expected demand levels in order to provide appropriate and early advice to government, together with early establishment of contingency plans to facilitate the orderly withdrawal of the program should the need arise, are also important aspects of the implementation of a demand-driven program. Further, it is desirable for the program guidelines to clearly alert stakeholders to the potential for the program to be closed earlier than the publicised date should the available funds be exhausted, and the arrangements that will apply to any pending applications should that situation arise.

Equally, where demand falls well below expectations, it is unlikely that the program will be achieving the intended outcomes. In that circumstance, it is important for administering agencies to update demand forecasts based on appropriate data and market research, in order to provide budgetary and policy advice to government in relation to options for the reduction, amendment or cessation of the program.

Assessment criteria

Assessment criteria provide the basis on which it will be determined whether a compliant grant proposal merits funding under the relevant program, having regard for the program's objectives and the selection process set out in the guidelines.

Consider whether the grant will achieve desired outcomes that would not otherwise be achieved

The CGGs highlight that the effective appraisal of grant proposals is an important element in achieving value with public money, noting that:

A fundamental appraisal criterion is that a grant should add value by achieving something worthwhile that would not occur without grant assistance.[81]

In that context, as a general principle, unless a project would either not proceed, or would not proceed in the desired manner
or time scale, without assistance, any grant paid simply releases the applicant's funds for other purposes that may not
contribute to the objectives of the grant program. Funds paid in such circumstances provide no added value and also represent an opportunity cost.

Accordingly, an issue to be considered in establishing program guidelines is the extent to which it will be appropriate to incorporate specific criteria that will help to guard against grant funding failing to generate a net increase in achieved outcomes. Depending upon the nature of the program, this can include criteria relating to factors such as:

  • retrospectivity—under which potential applicants are advised that funding will not be approved for expenditure already incurred or for projects or activities that have already commenced. In this context, unless allowed under the terms of the program, one of the clearest indicators that funding assistance is not essential is if the project starts, and/or the proponent enters into a legal or financial commitment in relation to the project, before the grant has been approved; or
  • cost shifting—under which potential applicants are advised that funding will not be approved for projects or activities that are the responsibility of another level of government and/or which result in the Australian Government funding enabling another level of government to reduce the level of its own source funding that is applied to the relevant activity (resulting in a substitution of effort, rather than a net increase in effort from the grant funding).
Assessing overall value for money

An issue for agencies to remain cognisant of in both framing assessment criteria and assessing applications against those
criteria is that, in some circumstances, applications may not represent value for money to the Australian Government despite appearing to satisfy certain criteria to a high level. Accordingly, it is important that the program guidelines and assessment procedures incorporate:

  • appropriate advice to potential applicants in relation to how varying levels of achievement against a particular criterion will
    be viewed in the assessment process; and
  • appropriate benchmarks and triggers to alert assessors to applications that would benefit from particular scrutiny from
    that perspective.

For example, a criterion commonly applied in grant programs is the extent of partnership funding contributions proposed in the application. Partnership (or 'cocktail') funding arrangements involve a project being financed from a range of different sources. It can also involve a project being divided into different components, so as to obtain funding from more than one source in order to deliver the overall project.

In administering partnership requirements, the focus is often on maximising the contributions from other partners in order to achieve a high degree of reported 'leverage' from the Australian Government funding, but with the outcomes from the project proposed by the applicant being assessed as arising from the grant being sought. The effectiveness of the assessment process will be enhanced by balancing this approach with a recognition that a high ratio of partnership contributions to Australian Government funding can be a strong indication that the project could well proceed without funding assistance. Accordingly, such grants may not represent value for money in that any grant funding is unlikely to result in outcomes that are in addition to those likely to be achieved through the funding already committed by the applicant and other parties.

Similarly, ANAO has observed instances in which projects have been assessed highly in relation to the outcomes claimed in the application, such as the number of jobs expected to be generated or the projected level of increase in community services, but where further examination of the information provided by the applicant, and otherwise available through public records, would have highlighted that the applicant was committed to the project regardless of whether the grant application was successful.

Even in circumstances where grant conditions require a project to have reached a certain stage before a grant will be given, the relationship between the objectives of the project and those of the grant program need to be clearly understood if funding assistance is not to be awarded unnecessarily. For example, awarding a grant primarily in order to secure favourable exposure by being associated with an important or high profile project that will proceed regardless of the Australian Government funding would be unlikely to represent a sound use of public money.

Weighting of criteria may be appropriate

Particularly where competitive funding rounds are utilised, the purpose of the assessment criteria (as set out in the program guidelines) is to provide an efficient and effective means of differentiating between eligible, compliant applications that are seeking access to the available funding.

A relevant consideration in this respect is whether it would be appropriate to assign relative weightings to individual assessment criteria, in order to target available funding at projects that exhibit particular characteristics. When determining whether weightings will be applied, it is important to consider the contribution each criterion makes to assessing the relative merits of an application against the objectives of the program. This will assist in ensuring that maximum value for money is achieved through the grants that are awarded. If a criterion is considered to be of marginal or relatively low consequence in that regard, it may be appropriate to consider eliminating it from the guidelines in the interests of streamlining the process for both applicants and the responsible agency.

The transparency, consistency and defensibility of the assessment process will be supported by:

  • grant program guidelines making clear the extent, if any, to which nominated assessment criteria will be more heavily weighted (or favoured) in determining an application's overall assessment and, where relevant, relative ranking in comparison to competing applications; and
  • the assessment process subsequently applied being transparently based upon the advice set out in the guidelines.

5.5 Capacity to waive or amend criteria during the assessment process

It is open to governments to amend the parameters of grant programs in response to changes in circumstances or program objectives. This will typically be given effect to by the issuing of revised guidelines for the conduct of subsequent rounds of a given grant program, or to set the parameters against which any further applications to an existing program will be considered for funding.[82]

However, departing from the selection criteria advised to potential applicants during the assessment of applications submitted in response to those criteria is more problematic as it may be detrimental to the conduct of a transparent and equitable grant program. Where such amendments are considered necessary, robust grants administration will be supported by:

  • the amendments to the program's published selection criteria being advised to stakeholders in a timely manner through the publication of revised guidelines; and
  • the revised guidelines clearly identifying the extent, if any, to which the amended criteria will be applied to extant applications and/or whether potential funding recipients will have any opportunity to re-submit an application based upon the revised criteria. In this respect, it is advisable to avoid retrospective application of amended criteria to applications already lodged unless there is a clear public policy benefit from doing so, particularly where doing so would act to the disadvantage of the applicant.

In this respect, the CGGs indicate that there may be instances (such as emergencies, urgent or unforeseen circumstances) where it is considered necessary to waive or amend the eligibility or assessment criteria established for a granting activity, without such changes being reflected in a revision to the published program guidelines. However, the CGGs also advise that, in the interests of transparency, accountability and equity, the grant guidelines should document the circumstances in which this might occur.[83]

The disclosure to all potential applicants of the circumstances in which amendment or waiving of published selection criteria might occur during the assessment of applications enhances transparency. However, as the CGGs further advise:

  • agencies should seek appropriate authority before invoking provisions for waiving or amending eligibility and assessment criteria; and
  • careful consideration should be given to seeking Ministerial authority in these circumstances, and appropriate records should be kept.[84]

As the CGGs indicate, the circumstances in which it might be appropriate to consider invoking provisions for waiving or amending criteria during the application assessment process would be expected to be confined to emergencies, urgent or unforeseen circumstances. In this respect, as discussed above, in the normal course probity and transparency are likely to be best supported by a change in relevant circumstances being dealt with through formal amendment of the published program guidelines (or, alternatively, through the abolition of the existing program and the establishment of a new program).

5.6 Documenting internal procedures

The parameters set down in the guidelines promulgated in relation to a grant program must be implemented by the responsible agency in a manner that supports both procedural consistency and cost-effective administration. In this respect, the CGGs advise that:

Agencies should develop such policies, procedures and guidelines as are necessary for the sound administration of grants. In the case of grant programs, this should include grant guidelines and associated operational guidance for the administration of the program. When developing such guidance, agencies must act in accordance with the CGGs.[85]

Sound administration of a grant program is supported through the establishment of documented internal procedures to guide each aspect of the administration process, including the procedures and protocols that are to be applied in:

  • seeking and receiving applications or grant proposals, including communication with proponents (both prior to proposals being submitted and during the assessment process);
  • the assessment of applications or grant proposals, consistent with the program guidelines;
  • submitting agency advice and funding recommendations in relation to assessed applications to the decision-maker for consideration, and recording the decisions made;
  • advising successful and unsuccessful applicants of the outcome of their grant application;
  • administering approved grants;
  • evaluating project and program outcomes; and
  • managing potential conflicts of interest, fraud or unethical behaviour through the application of internal controls.

It is important to document such procedures prior to the commencement of the application process and for there to be appropriate review and maintenance of the documented procedures over the life of the grant program (including through appropriate version control and change logs, so as to enable identification of the approved procedures that applied at various stages of program implementation). In particular, any changes to the approved program guidelines or administrative arrangements will need to be reflected in the documented procedures in a timely manner in order to ensure program administration remains consistent with the approved program parameters.

 

 

 

 

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