- 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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6. Implementing the selection process
The selection of funding recipients must be undertaken in a manner that demonstrates that the program parameters, as established by the Government and advised to the public, were being met; all relevant statutory and policy obligations were satisfied; and all applicants were treated equitably and fairly.
A key consideration in the case of grant programs is whether decision-makers have equitably and transparently selected for funding the applications that represent best value for public money in the context of the objectives and outcomes of the granting activity, as set out in program guidelines. Achieving this objective is best supported by:
- establishing a robust process for the submission and receipt of applications;
- documenting and implementing an assessment process that is fully consistent with the parameters set out in the program guidelines; undertaken by appropriately skilled assessors; and which affords all applicants the same opportunities. The transparency and accountability of the assessment process will be promoted by any departures from the documented application and assessment processes being clearly reflected in the assessment material provided to the decision-maker, together with advice in relation to any resulting risks to probity and/or value for money. This will assist the decision-maker in demonstrating that they have satisfied their obligations under the financial framework and the CGGs (which highlight that the policies a grant proposal must not be inconsistent with in order to be approved include the relevant program guidelines);
- providing decision-makers with advice that effectively and consistently differentiates between projects of varying merit in terms of the selection criteria and the objectives of the program including, for competitive programs, a priority ranking of eligible applications based on their relative merits. In practice, this advice will include a clear funding recommendation in respect to each application, which will enhance the capacity to demonstrate that the policy intent underpinning the grants policy framework has been achieved, as well as assisting Ministers in meeting their reporting obligations in relation to the approval of grants; and
- the decisions taken in relation to grant applications being documented in a manner that promotes transparency and accountability and demonstrates compliance with all relevant statutory and policy requirements, including by recording the information on which the decision was based and the substantive reasons for the decision.
For all grant programs, it is important to establish a system by which applications are registered as they are received, including recording the date and time of receipt, the party from whom the application was received and the manner of submission (for example, applications might be received via a web-based portal, email or hard-copy).
Appropriately recording the receipt of applications is an important aspect of grant program administration, regardless of the type of application process being used. For example, for programs not involving defined funding rounds, it provides a means of accurately tracking the level of actual program up-take over time. This can be assessed against the expected demand levels on which total program funding was based in the budgetary process, and advice provided to government as appropriate.
For rounds-based programs, this information is required in order to be able to identify whether each application was received by the published closing time on the nominated date. In the normal course, late applications would be considered ineligible under the terms of the program guidelines.
Where electronic application processes are used, agencies will need to consider the potential for technology difficulties to cause some applications to be submitted either late or incomplete. In other cases, unforseen circumstances such as natural disasters may impact upon the timely receipt of applications from some applicants. The probity and integrity of program administration will be best supported by the protocols to be applied in situations of this nature being documented prior to the application process commencing.
Having an up-to-date register of existing applications may also be important in circumstances where there is a change made to the program's design or selection criteria and, therefore, a need to be able to differentiate applications received under the previous guidelines from those received under the revised guidelines. Tracking the receipt of applications is also an important input into resource management for the administering agency.
An important aspect of achieving value for money in a grant program is establishing an assessment process that is efficient and effective in that it supports both:
- timely completion of the decision-making process; and
- robust assessment of grant proposals based on appropriate analysis and due diligence, having regard for the nature of the program and the program guidelines.
Applying insufficient or inadequately skilled resources to the management of a grant program increases the risk that the program's objectives may not be achieved in an efficient, effective and timely manner. Accordingly, it is important that officials involved in the assessment of applications have skills that are appropriate in the context of the relevant program.
On the other hand, the application of too much administrative effort is not an efficient use of funds and could divert expenditure away from the effective achievement of the objectives of the program. An important consideration in this respect is the extent to which efficiencies can be incorporated into the grants administration process. For example, as discussed in Chapter 4 of this Guide, the efficiency and consistency of assessing applications to a program that involves funding directed at applicants and/or projects of varying types could be enhanced through the use of dedicated teams that specialise in a particular stream.
As discussed in Chapter 5 of this Guide, departing from the selection criteria advised to potential applicants is detrimental to the conduct of a transparent and equitable grant program, and may also be detrimental to the achievement of the program objectives from which the published criteria had been derived.
Departures from the published selection criteria can occur through a variety of means, including:
- the application of a different interpretation to a criterion than had been reflected in the guidelines available to applicants;
- the criteria that had been set out in the published guidelines being replaced by different criteria, either in whole or in part;
- the application of additional unpublished criteria to either exclude certain applications from further consideration, or to improve the opportunity for certain applications to be approved for funding; and/or
- the failure to apply certain criteria that had been set out in the published guidelines.
Given the criteria set out in the program guidelines are expected to have been soundly-derived from the program's stated objectives, the amendment or waiving of selection criteria during the assessment of applications is likely to increase the risk of projects that will not maximise value for money and program outcomes being nevertheless approved for funding. It can also give rise to perceptions that projects have been approved based on considerations other than merit, particularly where such departures occur in respect to some applications, but not others.
Reflecting this principle, the grants administration framework that has applied since 1 July 2009 requires decision-makers to make grant decisions in a manner that is consistent with the relevant program guidelines, including the selection processes and criteria set out in the guidelines. Accordingly, in the normal course, each of the criteria set out in the guidelines are to be applied in assessing applications, with no additional criteria able to be introduced.
In order to maintain the integrity of a grant program, it is important that any proposed amendments to either the terms of the published selection criteria and/or the manner in which the criteria will be applied are documented, appropriately considered and, where approved, formally incorporated into both the advice provided to potential funding recipients and the agency's internal assessment procedures.
6.3.1 Applying threshold criteria
Eligibility and other mandatory criteria advised to potential funding recipients must be transparently and consistently applied in the assessment process. It is advisable to confirm the compliance of each application with those criteria as the first stage of the assessment process. This aids the efficiency of program administration because, in the interests of probity and fairness, non-compliant applications would be expected to be clearly identified as ineligible and excluded from further consideration.
It is not appropriate for the failure of a proposal to satisfy a criterion expressed in the program guidelines as representing a threshold requirement to be presented as only reducing the overall quality of the proposal or as presenting a risk that would need to be managed should the proposal be selected for funding. Nor is it advisable for applications that have not satisfied mandatory requirements to be assessed and recommended for funding on the condition the proponents subsequently satisfy that requirement. Over time, such practices have been found to cause reputational damage to grant programs which, in turn, can adversely affect whether the desired program outcomes are able to be achieved.
An approach of that nature would diminish the capacity to demonstrate that all applicants have been consistently and equitably treated in the assessment process. It would also not accord fairness to other potential funding recipients, including those who may have chosen not be apply to the program on the basis of the information set out in the published guidelines.
It is important for any proposal to amend, reduce or remove threshold requirements from program guidelines to be based on sound analysis of the reasons for initially stipulating the requirement, and of the risks and benefits to achieving the program's objectives that may arise from amending that requirement, including the potential for unintended consequences to arise as a consequence of the amendment. As with other amendments to program guidelines, as discussed in Chapter 5 of this Guide, it is advisable that:
- any such changes be implemented through formal amendment of the published guidelines and applied consistently; and
- protocols in relation to whether the revised guidelines will apply to applications already on hand also be documented and approved.
Decision-making in relation to ineligible applications
Where the administrative arrangements agreed for a grant program provide for the Minister or a nominated official to be the sole decision-maker under the program, it will be necessary to submit applications assessed as ineligible to the decision-maker for final determination. In the interests of probity and transparency, any agency advice provided to the decision-maker in relation to such applications would be expected to clearly:
- identify the basis on which it is ineligible under the guidelines;
- advise that, as approval of the application would be contrary to the terms of the published guidelines, it would be unlikely to satisfy the decision-maker's obligations under the FMA Regulations and CGGs; and
- recommend that it not be approved for funding.
Where the decision-maker has agreed to administrative arrangements under which other officials are empowered to deem applications to be ineligible and exclude them from further consideration, that process may be finalised as part of the documented assessment, with the advice provided to the decision-maker at the conclusion of the assessment process either:
- excluding non-compliant applications (with the decision-maker being advised that this action had been taken in accordance with the agreed administrative arrangements); or
- for the decision-maker's information, clearly identifying those applications that had been deemed ineligible and, in accordance with the agreed administrative arrangements, reaffirming that this resulted in the merits of those applications not being further assessed against the program's guidelines.
6.3.2 Applying published assessment criteria and processes
Where relevant to the program design, applications identified as being compliant with all threshold requirements should progress to a full assessment in accordance with the guidelines approved and published for the program.
The assessment processes undertaken in relation to each application must be adequate and appropriate such that they represent inquiries that would be considered reasonable in the relevant circumstances in order to support a defensible decision to award or not award the grant. This is necessary in order to support the ability of the decision-maker to demonstrate that he or she has satisfied the statutory obligations that arise when deciding whether to approve a spending proposal (discussed further below).
Robustness and adequacy of assessments
The extent of inquiry that will be reasonably required will vary depending upon the nature of the program, the projects for which funding is being sought and the type of criterion being assessed. However, an important consideration will be the extent to which it will be appropriate for claims made in proposals submitted to the program to be subject to independent verification, having regard for the relative importance of a criterion to the achievement of the program's objectives.
For example, the matters that would reasonably be considered in an assessment of a partner funding criterion would include the extent to which the applicant has provided documentation confirming that partnership funding proposed in the application will be forthcoming. In relation to an applicant's own proposed funding contribution, it may be prudent for the assessment to also consider the confirmed availability of the proposed funding (including through examination of relevant documentation), particularly where the applicant is proposing to finance its contribution through commercial borrowings or from working capital, or where the contribution is subject to formal approval processes. It may also be appropriate for assessors to seek to independently confirm claimed third-party contributions by contacting nominated project partners and/or examining public records (for example, Council meeting minutes where a contribution from local government is proposed).
In this respect, while the existence of multiple sources of funding is often viewed favourably as representing wide support for a project, it will represent an increased risk to project viability should the proposed contributions not be forthcoming, or where actual contributions are at a level lower than that proposed by the application. This risk is heightened for applicants that have few financial resources of their own to contribute to the project. The reliability of assessments of partner contributions proposed by applicants will be enhanced by benchmarks for the achievement of nominated ratings being articulated in the program guidelines and internal procedures, and those benchmarks being consistently applied in the assessment process. For example, the guidelines could identify the various ratings that will be assigned to an application based on the proportion of project costs represented by partner contributions.
Similarly, effectively assessing and managing viability risks to both applicants and projects will be a critical factor affecting the success of many grant programs in producing sustainable, desirable outcomes. A fundamental underpinning for the effective identification and assessment of viability risks is for sufficient and appropriate information to be obtained for analysis.
This does not mean that higher risk projects that have been assessed as satisfying any threshold criteria and meeting other assessment criteria to a high standard should not necessarily be funded. It simply means that sufficient information is required to fully appreciate the risks so that an informed decision can be made as to whether they can be either accepted or cost-effectively mitigated, should the grant be approved, or that the risks are such that the grant should not be approved.
The obligation on agencies to undertake appropriate due diligence in the conduct of grant programs has been well recognised, including by Parliamentary Committees. For example, in the report of its inquiry into the funding of a Dairy Regional Assistance Program application, the then Senate Finance and Public Administration References Committee commented that:
In a government grants program…the administering department has a responsibility to conduct thorough checks on applicants to ensure that any funding decision takes account of all relevant information.
In this respect, it is important for agencies to:
- carefully consider the form and content of the information that will be sought through the application process;
- ensure that all required information has been provided by the applicant or otherwise obtained; and
- subject the information obtained to robust analysis. This may require utilising external experts to supplement the skills available within the agency. Where relevant, the efficiency, effectiveness and consistency of the assessment process will be enhanced by the assessment procedures established for the program setting out parameters to guide decisions on when external advice is to be sought in relation to an application, including through consideration of the size and complexity of the overall project, as well as the quantum of funding being sought.
The CGGs advise that:
The design of a granting activity should ensure that decisions in relation to the approval or refusal of applications for grants are transparent, well documented and consistent with the legislative and policy requirements set out in Chapter 3 of these CGGs.
In that context, the assessment and decision-making processes implemented in relation to a grant program need to accord with the processes set out in the promulgated guidelines. As also noted, the CGGs advise that unless specifically agreed otherwise, competitive, merit-based selection processes should be used, based upon clearly defined selection criteria.
An appropriately conducted competitive, merit-based grant selection process involves all eligible, compliant applications being assessed in the same manner against the same criteria, and then being ranked in priority order for receipt of the available funding based upon the outcome of those assessments. This advice is then provided to the decision-maker for his or her consideration.
6.4.1 Method and scale applied in rating and ranking applications
It is important for careful consideration to be given to the method and scale that will be applied in rating and (where relevant) ranking individual applications. The process should provide for the consistent application of the selection process outlined in the published guidelines (including any relative weighting between criteria identified in the guidelines—as discussed in Chapter 5 of this Guide), and (for competitive selection processes) be able to effectively and consistently differentiate between projects of varying merit in terms of the selection criteria.
Numerical rating scales have the advantage of being able to differentiate quite effectively between individual projects and classes of project. Scoring applications against criterion using qualitative ordinal scales (such as: High/Medium/Low or Highly meets/Generally meets/Barely meets/Does not Meet) makes it inherently more difficult to arrive at an overall rating for each application. Further considerations are that:
- the use of ordinal scales usually results in fewer rating points, with a greater number of applications in each rating point than with numerical scales;
- there are not fixed differences between the respective ratings when an ordinal scale is used; and
- there is not a clear basis for consistently combining qualitative ratings against each criterion into an overall qualitative rating of individual applications, or for forming conclusions in respect to the relative merits of applications assigned the same overall rating.
These factors are likely to make it more difficult for decision-makers to differentiate the relative merits of projects within the same rating point on the ordinal scale, as well as diminishing the demonstrable equity and robustness of the assessment process. This is illustrated in Figure 10.
Numerical Rating Scale
Ordinal Rating Scale
# Most important criterion that is weighted as being twice as important as any other criterion.
Note 1: Under the numerical scale, the aggregated score for Application X would be 49 out of 60 (i.e. ((2x10)+5+6+7+9+2).
Note 2: Under the ordinal scale, it is not clear as to what combination of ordinal rating would equate to an overall score of Low, Low/Medium, Medium, Medium/High or High.
Source: ANAO analysis.
Equally, however, care should be taken with the range of numerical ratings for each criterion and the weighting of the criterion relative to others to avoid potential misinterpretation or unintended consequences. Numerical rating scales will only produce useful results if they are based on a sound underlying methodology. The assumption underlying the production of an aggregate score from a numeric scale is that, using the example in Figure 10, a rating of ten indicates ten times more satisfaction of the criteria than a rating of one and so forth for the other ratings. If this is not the case, it is only an ordinal scale that uses numbers to identify the categories, rather than qualitative descriptors.
6.4.2 Documenting the assessment process
In the interests of transparent and accountable grants administration, it is necessary for the assessment of applications to be adequately documented. This involves those responsible for undertaking the assessment documenting, for each application, the information that was considered, and the conclusions reached, in respect to:
- each of the threshold criteria; and
- for compliant applications, each of the assessment criteria.
Typically, the results of the assessment process in relation to each application are then documented in a project brief provided to the decision-maker that provides a summary of the assessment against each criterion, as well as an overall conclusion/rating concerning the application. The appropriate level of detail included in the assessment brief for each application will depend upon the nature of the program. These individual assessments can then be used as the basis for determining an overall ranking of competing applications (in a competitive merit-based process) or to identify those applications that may be funded (in non-competitive program). The approach of preparing individual assessments of each application received has considerable merit, and should be adopted wherever practical.
6.4.3 Agency funding recommendations
As noted, the Minister for Finance and Deregulation has stated that the CGGs are intended to improve the transparency and accountability of grants administration, with the Government having mandated transparent and accountable decision-making processes for grants and timely public reporting through agency websites.
The CGGs stipulate that Ministers will not approve a grant without first receiving agency advice on its merits. In practice, advice on the merits of a grant application includes a clear agency recommendation to the Minister concerning whether or not funding should be approved for that application under the program guidelines. Finance has confirmed that this reflects the policy intent underpinning the requirement that Ministers obtain prior agency advice. In particular, as part of its response to the Strategic Review, in December 2008 the Government agreed to a recommendation that the advice and related briefing material provided to Ministers on grant program approvals should explicitly address the requirements of the FMA Regulations and make a clear recommendation. That approach is also supported by the context in which the policy requirement was developed, and other related mandatory requirements also set out in the CGGs. In particular, Ministers are required to report annually to the Finance Minister on all instances where they have decided to approve a grant which the relevant agency had recommended be rejected.
In that context, the absence of a clear recommendation from agencies as to whether a proposed grant should be approved or not will significantly diminish both the extent to which the intent of the policy requirements set out in the CGGs is demonstrably achieved, as well as the capacity for Ministers to ensure they consistently and demonstrably comply with their obligations.
For example, an approach under which the agency assesses an application as having little merit against the program guidelines, but makes no formal recommendation that it not be funded, may result in the Minister not reporting approval of that grant to the Finance Minister on the basis that the agency had not formally recommended that it be rejected. As well as diminishing the transparency of the decision-making process, this scenario also raises the potential for inconsistent practices to develop across grant programs, which is contrary to the purpose of promulgating a standard grants policy framework.
In addition, the new requirement under FMA Regulation 12 for approvers of grants to record the basis for their decisions is particularly relevant in circumstances where the decision-maker reaches a decision that is not consistent with the agency assessment of the application against the program guidelines. Inclusion of formal funding recommendations in the advice provided to decision-makers by agencies will assist in highlighting to approvers those instances in which it will be necessary for them to document the basis for any decision to approve the grant.
Practices that would not sit comfortably with the new policy framework for grants decision-making include:
- the decision-maker being provided with a list of projects variously rated against qualitative ratings (for example, High, Medium, Low) but with no recommendation or advice as to:
- which individual projects were ranked highest and should be preferred for approval within the available funding, having regard for their capacity to contribute to the achievement of program objectives both in relation to their assessment against the criteria and in comparison to other eligible applications, or
- which projects the agency recommends should not be funded, having regard for their capacity to contribute to the achievement of program objectives both in relation to their assessment against the criteria and in comparison to other eligible applications; or
- a minimum threshold approach under which the decision-maker is provided with a short list of all applications that, based on a risk assessment (rather than the application of objective, comparative assessment criteria), the agency considers could be funded subject to available funding but without any recommendation as to which individual applications were ranked highest and should be preferred within the available funding having regard for their capacity to contribute to the achievement of program objectives both in relation to their assessment against the criteria and in comparison to other applications.
6.4.4 Clearly identify in agency advice to the decision-maker any limitations on the assessment processes undertaken
The transparency and accountability of the assessment process will be promoted by any departures from the requirements set out in the program guidelines and application form being clearly advised in the assessment material provided to the decision-maker. For example, this would involve the assessment clearly identifying to the decision-maker any instances in which required information had not been provided; appropriately qualifying the assessment of the application against the relevant criteria; and informing the decision-maker of the extent of any heightened risks that result.
As noted, the CGGs indicate that there may be instances, such as emergencies, urgent, unforeseen or exceptional circumstances, where it is considered necessary to waive or amend the criteria established for a granting activity, but that, in the interests of transparency, accountability and equity, program guidelines should document the circumstances in which such this may occur. Where the inclusion in such provisions in program guidelines has been agreed, the CGGs further advise that:
- agencies should seek appropriate authority before invoking such provisions; and
- careful consideration should be given to seeking Ministerial authority in these circumstances and appropriate records should be kept.
In that context, it is important that applications that are 'fast-tracked' for funding consideration, including through the application of amended criteria or the waiving of criteria, in response to the sort of urgent or unforeseen circumstances described in the CGGs are still subjected to appropriate levels of due diligence and scrutiny. Similar considerations apply when assessments are truncated in response to requests from a Minister or his or her Office that the agency bring forward advice on a proposed grant within a short timeframe.
Where ever the extent of scrutiny and assessment undertaken in relation to a proposed grant has been restricted or truncated, it is important that agencies appropriately qualify the advice and funding recommendation subsequently provided in relation to the proposal. This is necessary to appropriately inform the decision-maker in relation to his or her obligation to be satisfied, based on reasonable inquiries, that the grant would make proper use of the public money before giving approval.
As relevant, this will include advice of any limitations or gaps in the information that was available to the assessment; any matters that had not been examined or on which the agency had been unable to form a view; and the risks to value for money that these limitations give rise to. The funding recommendation provided should be based upon the extent to which the agency has been able to establish the proposed grant's merits under the program guidelines. A proposal that does not demonstrably satisfy the selection criteria set out in the guidelines would generally result in a recommendation that it not be approved, having regard for the requirements of the CGGs and Regulation 9.
6.4.5 Engagement with applicants or their representatives during the decision-making process
In the interests of probity, all eligible applicants to a grant program should have equitable opportunities to access funding. This includes in relation to the extent, if any, to which applicants or representatives of applicants will be given an opportunity to engage with, or make additional representations to, either:
- agency officials and/or advisory panel members undertaking the assessment process; or
- Ministerial or other decision-makers prior to the grant outcome being formally determined and announced.
In the normal course, unless the program guidelines specifically provide applicants with the capacity to make representations in support of their application, it is advisable for contact with applicants to be limited to that necessary to keep them appropriately informed and for such contact to be conducted through formal, documented processes. For example, it may be appropriate to provide applicants with written acknowledgement of receipt of their application and/or to provide a help line over which applicants will be able to seek general advice on the progress of the decision-making process for the program.
The extent to which it will be necessary or appropriate for assessors to engage more directly with applicants during the assessment process will vary depending upon the nature of the grant program. In some cases it will be appropriate and reasonable to base the assessment process entirely on the information submitted with the application. For example, this would generally be the case for programs involving a large volume of applications seeking relatively small amounts of funding for straightforward purposes.
Particularly for programs involving proposals seeking funding for more complex and/or high value projects, appropriately conducted correspondence (including via email) between assessors and applicants during the assessment process may be important to ensuring assessments and funding recommendations are well informed and soundly based. This may involve assessors seeking clarification of information submitted with the application and/or requesting additional information identified as necessary to fully assess an application against the guidelines. Again, it is prudent for such inquiries to be recorded and conducted through procedures that are clearly documented in the material made available to applicants (such as the program guidelines) and the internal procedures established for the program.
Equally, while Ministers may find access to additional information that applicants may offer or be able to provide useful to inform their decisions, it is important that there be a clear understanding on the arrangements that will apply in circumstances where the assessment process is still active. This will assist in avoiding perceptions that some applicants have been provided with an opportunity to engage in that process in a manner that is not generally available or made known to potential applicants. Accordingly, it would be prudent for agencies to, in consultation with Ministers, also develop protocols that provide for contact between applicants and the Minister or his or her Office during the decision-making process to be documented and incorporated into the record of the program's administration, particularly where they are significant to Ministerial consideration of individual grant applications.
The situation is more complicated when it comes to applicants or potential applicants approaching their local Federal Member of Parliament for assistance with securing grant funding. It is important for grants administrators and decision-makers to recognise that:
- Australia's parliamentary system is based on the principles of representative and responsible government; and
- Members of Parliament are elected by the people to govern Australia in the public interest and individuals are able to approach a Member of Parliament, including Ministers, for assistance.
Against this background, instances of Parliamentarians seeking to make representations to Ministers or agency officials in respect to applications for grant funding need to be handled sensitively and in a way that does not compromise the integrity of any selection processes. There is a role for program guidelines in explicitly addressing how such representations are to be handled and taken into account in the assessment and decision-making process. For example, if such representations are to be viewed favourably, it would be inequitable for the guidelines not to advise all potential applicants of this. Otherwise, there is the potential for the program to fund the applications that are best represented rather than those that are most meritorious.
Addressing the handling of representations from Parliamentarians in the program guidelines would also assist Ministers, given they are expected to discharge their responsibilities in accordance with wide considerations of public interest. Where arrangements are put in place to provide assistance through grant programs, this public interest includes equitable treatment of participants. Consistent with this principle, the December 2007 Standards of Ministerial Ethics outline a Minister's obligations in respect to integrity, fairness, accountability, responsibility and to act in the public interest.
As discussed, FMA Regulation 9 sets out specific legislative requirements that must be satisfied in order for an approver to properly approve a grant. In addition, the CGGs set out a number of grants-specific decision-making and reporting requirements that apply where Ministers are the approver. Accordingly, it is important that the decision-maker's consideration of, and decisions in relation to, agency assessments and funding recommendations are recorded in a manner that promotes transparency and accountability and which is capable of demonstrating compliance with relevant statutory and policy obligations.
6.5.1 Demonstrating compliance with FMA Regulation 9
Regulation 9 establishes a single test—comprising a number of elements—which must be applied by an approver in considering a spending proposal. An important change in the financial management framework introduced in concert with the implementation of the grants policy framework was the amendment of Regulation 12 to include an additional requirement for grants under which the approver of a grant must record in writing the basis on which he or she is satisfied that the grant complies with Regulation 9.
The essential limbs of Regulation 9 that an approver must comply with in exercising his or her judgement as to whether to approve a proposed grant are:
- to undertake, or cause to be undertaken, such inquiries in relation to the proposed grant as are reasonable in the context of the grant program; and
- on the basis of those inquiries, determine whether he or she is satisfied that the proposed grant would make proper use of Commonwealth resources. In order to satisfy this test, the approver is required to be satisfied that the grant:
- will make efficient, effective and ethical use of the Commonwealth resources involved; and
- is not inconsistent with the policies of the Commonwealth.
Documenting the inquiries that were undertaken
It is important to remember that, regardless of the funding recommendation submitted by the agency, the outcome of the process prescribed by Regulation 9 may result in the program decision-maker deciding not to approve a particular grant proposal. Indeed, Regulation 9 prohibits an approver from approving a grant where he or she is not satisfied as to the matters specified. Alternatively, the decision-maker may decide that, following completion of that process and consideration of the resulting information, he or she is in a position to properly approve the grant. In either scenario, the decision-maker is required to base their decision upon the outcome of reasonable inquiries.
Approvers need to exercise their judgement in determining what are 'reasonable inquiries', taking into consideration the significance and value of the proposed grant and any associated risks or sensitivities, with an important consideration being whether the approver has marshalled sufficient information to make a defensible decision. In the context of a grant program, the inquiries undertaken need to be sufficient to assess the merits of a grant in relation to the criteria set out in the guidelines promulgated for the program. In the normal course, those inquiries will be undertaken through the assessment process undertaken by the relevant agency and/or advisory panel.
Where Ministers or other decision-makers agree with the agency funding recommendation, they are able to point to the agency assessment and advice as representing the reasonable inquiries they have made as required by Regulation 9, so long as they are satisfied that the assessment was conducted with rigour and in accordance with the guidelines. In this latter respect, as noted, it would be expected that the advice provided would highlight any aspect of the assessment that may have been truncated or not completed.
Different conclusions can often legitimately be drawn from the same set of information. Where decision-makers form a contrary view to the agency recommendation based entirely on the inquiries and information contained in the agency assessment, it will be necessary for the decision-maker to identify the basis for their alternative conclusion (this issue is discussed further below in relation to documenting the basis for approvals).
However, Ministers may also elect to make further inquiries or undertake additional assessment processes (either personally or through their advisers), with agency officials being unaware of the nature or extent of those inquiries or assessment processes. Where decision-makers either fully or partly base a decision to approve a grant on information or advice that is additional to that considered in the assessment process, they will need to document, for retention within the records of the administration of the grant program, the nature of that information (and, where relevant the inquiries that may have been undertaken to obtain it) and the manner in which it was taken into account in the decision-making process. Applying the same approach in relation to grants that are not approved on the basis of additional inquiries undertaken by the decision-maker and/or information that is additional to that considered by the agency will aid program transparency and accountability.
Demonstrating the basis on which the approver determined whether a grant would make proper use of Commonwealth resources
Under Regulation 9, an approver must not approve a grant unless he or she is satisfied that the expenditure will make efficient, effective and ethical use of the public money 'that is not inconsistent' with the policies of the Commonwealth. In practical terms, that latter requirement means that the expenditure must be consistent with all relevant policies. The CGGs stipulate that the policy requirements relating to grants administration include:
- the CGGs—accordingly, approval of a grant through a process that is inconsistent with the CGGs will not satisfy the requirements of Regulation 9; and
- the guidelines applying to a particular grant program—as a result, approval of a grant that is not compliant with the guidelines, including selection criteria, established for the relevant program or through a process that is inconsistent with that set out in the guidelines will also not satisfy the requirements of Regulation 9.
Accordingly, decision-makers will necessarily be required to base the rationale for a funding decision on the merits of the relevant application when considered against the program guidelines. Where the guidelines have stated that funding recipients will be determined based on a competitive, merit-based selection process, this will need to include consideration of the relative merits of competing eligible applications.
As discussed above, where decision-makers agree with the agency funding recommendation in respect to a grant application (irrespective of whether the recommendation was that it be approved or not approved), they are able to point to the agency assessment against the program guidelines as documenting the basis on which they have concluded whether the grant would make proper use of the Commonwealth resources for the purposes of Regulations 9 and 12 (as long as they are satisfied that the assessment was conducted with rigour).
Where decision-makers decide to approve a grant that the agency had, based on its assessment, recommended be rejected, the decision-maker will be required to separately document the substantive reasons for the approval, either at the time of giving the approval or as soon as practicable thereafter. In such circumstances, as noted, the CGGs further require that Ministers report annually to the Finance Minister on all instances where they have decided to approve a grant that the agency recommended be rejected, including a brief statement of the basis for the approval.
In that respect, it is also important to recognise that, in the context of a grant program, transparency of the reasons for not approving funding for individual applications is as important to accountability as it is in relation to decisions to approve other applications. Accordingly, it would be good practice for agencies to invite Ministers and other decision-makers to also record the basis for any decision not to approve an application that the agency assessment had indicated merited funding.
Documenting the basis for funding decisions is of particular importance where the program guidelines had stated that successful applicants would be selected through a competitive, merit-based process. In those circumstances, transparent and accountable grants administration will be promoted by the decision-maker documenting not only the basis on which he or she concluded whether an individual application had merit in its own right, but also the reasons for either elevating or demoting an application as compared to the ranked order of priority indicated by the assessment process.
The documented assessment and decision-making process must be maintained consistently as part of the official record, in accordance with National Archives of Australia standards and guidelines, and be accessible under Freedom of Information provisions as applicable.
The total funding that will be available under a grant program is identified at the time of announcing the program and, for programs that are to be delivered through funding rounds, the total amount that will available through a particular round is commonly announced as the round is opened to applications. The identified funding envelope is made available through the budgetary process, either as a specific Budget measure appropriated to the relevant agency or through the appropriation allocation process reflected in the Portfolio Budget Statements.
In that context, it is common for grant programs to be oversubscribed, with the funding sought by applicants exceeding the available funding. In that circumstance, the application of appropriately robust, transparent and accountable assessment and selection processes will be important in determining which applicants will be successful within the available funding.
However, in that process, it is important for agencies and decision-makers to remain cognisant of the fact that only compliant, eligible applications that will demonstrably provide value for the public money involved should be selected for funding, given the requirements set out in Regulation 9 and the CGGs. As discussed, applications that do not satisfy the assessment criteria set out in the program guidelines are unlikely to meet those requirements.
Accordingly, under the financial management and grants policy frameworks, it is not acceptable for applications to be approved in order to exhaust the available appropriation despite insufficient applications of adequate quality being on hand. In some circumstances, it would be prudent for agencies to include advice to this effect in the advice provided to decision-makers (noting that 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 financial approver in grants administration).
6.6.1 Consider retaining contingency funding
Even in circumstances where sufficient high quality applications are received to fully allocate the funding available under a grant program, it is advisable for agencies to consider the merits of retaining a proportion of funding as a contingency element.
For example, the importance of decisions to fund infrastructure projects being based on robust cost estimates is well recognised. Nevertheless, it is not possible for the application of cost estimating standards to eliminate cost overruns. Accordingly, the management of cost overruns, as well as any savings for individual projects, is an important aspect of the overall management of infrastructure funding programs.
While Australian Government grants are usually expressed to be financially capped to the approved amount, in some circumstances unanticipated cost increases are unable to be met by the funding recipient and other partner funding may not be forthcoming. This can result in a reduction in the scope of works undertaken for the project (with a commensurate decrease in the benefits achieved from the grant) or, in some cases, the viability of the project may be compromised.
Particularly for grant programs that are funding activities with an identifiable history of cost increases, it would be prudent for agencies to document consideration of this issue in the design and implementation of the program.
6.6.2 Additional funding for oversubscribed grant programs
In some cases, government may decide to make additional funding available for a grant program in order to promote the achievement of program objectives and/or to satisfy previously unmet demand. In that circumstance, the principles of value for money, probity and accountability will be promoted by:
- in circumstances where it is proposed to re-consider funding for applications that were submitted under a previous funding round, providing applicants with the opportunity to advise whether they wish to continue with the application and, if so, update any details (such as projected timeframes, estimated costs and the amount of any partner funding); and
- where new applications are to be considered, providing potential applicants with equitable access to this opportunity.
The announcement of grants can be a very sensitive issue at any time but especially in the lead up to an election, be it for Commonwealth, State, Territory or local governments. It is accepted that governments may choose the timing of announcements to suit their purposes having regard to other priorities. Nevertheless, from a program administration perspective and as a matter of good practice, it is preferable for all decisions on approved or unsuccessful projects to be announced together as soon as practicable after the decisions have been made, or within a relatively short period of time.
This approach enables proponents to know the outcome of their proposals as soon as possible so they can begin implementing their projects or pursue alternative sources of funding. It also has the added advantage of avoiding any perception that the timing of announcements is being used for party-political purposes. Avoiding such perceptions will be further aided where, irrespective of their political affiliation, all relevant Federal Members are provided with similar opportunities to be involved in the announcement of funding and promotion of the achievement of project milestones.
A further consideration in this respect is the announcement of grants that have been approved subject to conditions which, if not satisfied, will result in the withdrawal of the grant. The public announcement of grant approvals, particularly when done through media releases involving the local Member or candidate of the party then in government, necessarily involves an element of promotion to the broader community. In that context, it would be appropriate for the intended audience of the announcement to be provided with all relevant information in relation to the grant, including appropriate reference to the existence of any funding conditions that will need to be satisfied before the grant will proceed.
6.7.1 Publication of approved grants on agency websites
The CGGs stipulate that an agency must publish, on its website, information on its individual grants no later than seven working days after the funding agreement for the grant takes effect.
Instructions for publishing grant information on agency websites is set out Attachment A to Finance Circular No. 2009/04, Grants—Reporting Requirements.
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