The Australian Political Parties for Democracy Programme is administered by Finance. The programme aims to strengthen democracy internationally by providing support for the international activities of Australia's major political parties. Funding of up to $1 million is provided annually under the programme to each of the Australian Labor Party and to the Liberal Party of Australia. Guidelines for the programme provide for the parties to re-apply for funding each year and set out the criteria against which applications for funding are assessed. The proposed audit would examine the administration of the program by Finance, including the adequacy of assessment of acquittal documentation and requests to roll over funding.



The Australian Political Parties for Democracy Program (the Program) commenced in the latter half of 2005–06. The Program was announced as a new measure in the 2005–06 Mid-Year Economic and Fiscal Outlook (MYEFO). It is a grants program1 established by a decision of the former Government, which provides annual funding of up to $1 million to each of the Australian Labor Party (ALP) and the Liberal Party of Australia (Liberal Party—on behalf of the Coalition).

The objective of the Program is ‘to strengthen democracy internationally by providing support for the international activities of Australia's major political parties'. The funding provided under the Program may be used to assist activities consistent with this objective, including:

  • providing training, education and advice;
  • supporting democratic activities and programs in overseas countries;
  • providing assistance in the conduct of local, regional or national elections in overseas countries;
  • supporting the involvement of Australia's political parties in international activities that promote the objectives of the Program, such as liaison with international organisations for the specific purpose of achieving the Program's objectives; and
  • visits by Australian party officials (but not Australian Parliamentarians) to overseas countries or to support visits to Australia.2

Total funding made available to the parties under the Program3 since 2005–06 has been $5.75 million. As at October 2008, $4.7 million had been paid to the parties under the Program, with reported expenditure by the parties of $3.02 million. This funding is in addition to other public funding that is available to political parties.4

The Program is administered by the Department of Finance and Deregulation (Finance).5 Following the October 2005 decision to establish the Program, Finance developed an administrative framework for the Program. Key elements of this framework are: an application form (submitted by the parties following advice from Finance each year that funds will be made available); Program administrative guidelines and grant deeds (to govern the payment and use of grant funds); and acquittal documentation (to be submitted by the parties after the end of each financial year).

It was intended that the Program would be reviewed at the end of the 2006–07 financial year. However, Finance has advised ANAO that delays in receiving acquittal documentation for the 2006–07 funding from the parties meant that a meaningful review could not be undertaken until such time as that information was received, and that, in the intervening period, the Program was reviewed as part of the savings measures instigated across a range of areas of government spending following the 2007 federal election.6 The 2008–09 Budget included an announcement that arrangements for the Program after 2008–09 would be reviewed to determine whether the Program should be refocused.

Audit scope and objective

The objective of the audit was to assess the effectiveness of:

  • Finance's administration of the Program; and
  • program accountability arrangements, including any key performance indicators that have been developed for the Program as well as the reporting of performance information through the Portfolio Budget Statements and Annual Reports.

The audit commenced in August 2008 and was conducted under section 15 of the Auditor General Act 1997. The audit involved an examination of Finance's administration of grants made under the Program since its inception in 2005–06.

Audit conclusions

Governments have the executive authority to establish and abolish programs, but require the Parliament to appropriate funds to enable expenditure to occur. As providing policy advice to the Government is a core function of the Australian Public Service, programs are often established with the benefit of departmental advice, but this is not always the case. The decision to establish the Australian Political Parties for Democracy Program was made in October 2005, without being informed by departmental analysis of the need for the Program. It was also not evident why the Program was designed to be open only to the two major political parties, given the activities to be supported under the Program.

Following the former Government's decision to establish the Program, Finance developed the administrative framework. The framework was developed in consultation with relevant agencies, and through negotiation with the two parties. The result has been that, collectively, the Program guidelines, application forms and grant deeds provide a sound basis for a framework to support cost-effective administration.

Although the total quantum of Program funding is relatively small (up to $2 million per annum), the individual grants are relatively large compared to many grants programs. Recognising the nature of the Program and the experience with its administration to date, there are opportunities for Finance to strengthen the administrative arrangements by:

  • more closely linking the projects identified in the funding applications and those reflected in the grant deeds (so as to promote the use of Program funds consistent with Program objectives). At present, the grant deeds entered into between Finance and each of the political parties for each year do not require that the grant funds be used for the purposes outlined by the parties in their annual applications for grant funding under the Program. As a result, there is an insufficient accountability ‘loop' established to link the purposes for which funding has been applied with the purposes for which funding may be validly spent;
  • applying greater attention to requiring the parties to adhere to the established acquittal arrangements (bearing in mind that payments are made to the parties in advance of Program activities being undertaken); and
  • developing a performance measurement framework combined with public reporting of the extent to which the Program is meeting its objective of ‘strengthening democracy internationally'.

The ANAO has made four recommendations directed to this end.

Key findings by chapter

Administration of the Program (Chapter 2)

Funding purposes

In submitting their annual applications for grant funding under the Program, each party is required to provide details of the purposes for which the grant funding will be used in the year. The grant deeds entered into between Finance and each of the political parties for each year require that the grant funding be spent only in accordance with the grant deed and the Program guidelines. However, there is no requirement in the grant deed for the parties' expenditure to be used for the purposes outlined in their funding application.

This approach has the effect that the value of the information provided by the parties in their application forms is diminished, as there is an insufficient accountability ‘loop' established to link the purposes for which funding has been applied with the purposes for which funding may be validly spent. Further in this respect, in exercising an FMA Regulation 9 approval, the Finance official approving the grants relies on the information provided by the parties in their application forms.7

Instalment payments

Payment of the grant funding is generally made to the political parties in instalments, in advance of Program activities being undertaken. While it is relatively common in many Australian Government grant programs involving instalment payments to require grant recipients to demonstrate the extent to which previous instalment payments have been, or will shortly be, spent, there is no such requirement contained in the Program documentation. In this respect, payments are made to the political parties by Finance irrespective of whether previous instalments of grant funds have been spent. In addition, although the Program documentation provides for Finance to withhold further payments of grant funds until prior year grant funding has been fully acquitted by the parties, there were instances where payments were made to the parties without the acquittal documentation for prior year funding having been provided to Finance's satisfaction.

Carry over of funding

The Program guidelines provide that, at the end of the financial year, the parties may apply to Finance to seek written approval to carry over any portion of the grant funds unspent in that year into the following financial year. The proportion of grant funds that the parties have sought to roll over into subsequent financial years has been significant—up to as much as 60 per cent of the funding available to any one party in a year. In addition, there have been delays in the parties requesting approval for funding to be carried forward—in one instance grant funding was held by a party for nine months past the end of the relevant financial year before a request for carry over was made.

Banking requirements

The grant deeds require that the political parties maintain a separate bank account for the grant funding, which is to contain only the grant funds and any interest earned on those funds. Although the acquittal documentation provided by the parties has, in some instances, indicated that funds other than the grant funds and interest may be held in the parties' bank accounts, there has been no action taken by Finance to seek confirmation that the parties are complying with the terms of the grant deeds in this respect.


Grant acquittals provide a measure of assurance that public funds allocated to grant recipients have been spent for their intended purposes. The Program documentation requires each political party to provide an audited acquittal of the grant funding paid to it within three months of the end of the financial year, as well as a report that contains details of the purposes for which funds were spent and the outcomes achieved through Program activities. However, the grant acquittals submitted to Finance have been deficient in a number of respects, including that:

  • acquittal documentation has not been provided on time;
  • certificates stating that the grant funding has been spent in accordance with the grant deed have not been provided, or the certificates provided have not been signed by an auditor as the grant deed requires; and
  • an inadequate level of detail has in some cases been provided in respect of the activities undertaken and the funds spent on Program activities.

While Finance has, in most instances, sought clarification from the parties or required them to resubmit acquittal documentation where it was assessed as being inadequate or incomplete, the acquittal documentation finally accepted by Finance has still not always complied with the requirements of the Program documentation. In addition, there was no evidence that Finance has processes in place, as part of finalising the parties' acquittal documentation, to assess whether the financial information reported by the parties is within the bounds of the limits contained in the Program guidelines.

Program Accountability (Chapter 3)

Non-program expenses

The Program governance arrangements include provision for up to 15 per cent of the grant funding available to a party in a year (excluding interest earned, but including amounts carried forward from a prior year) to be used to fund ‘incremental administrative expenses' associated with the Program. The parties have reported administrative costs to Finance as a separate item to project costs in their acquittal documentation. While the 15 per cent limit has not been exceeded by either party in the period between 2005–06 and 2007–08, Finance has not had processes in place to ensure that the project costs reported by the parties do not incorporate activities that should instead have been included as part of the parties' administrative costs,8 or that the total administrative costs reported are within the bounds of the limit set by the Program documentation.

Program expenditure

The Program's primary objective is to ‘strengthen democracy internationally'. Of the $4.7 million paid under the Program from 2005–06 to 2007–08,9 the parties have reported to Finance expenditure of $3.02 million (64 per cent of the grant funding paid). Of this amount, reports provided to Finance by the parties have shown that, in aggregate, the grant funding has been spent as follows:

  • 44 per cent on providing direct assistance to countries identified as priority regions for development assistance through Australia's aid policy;10
  • 36 per cent on activities relating to other countries such as the United Kingdom and the United States of America, or on non-country specific activities; and
  • 20 per cent on administrative costs and subscriptions to international organisations.

It is accepted better practice for grant funding not to be approved retrospectively, or to duplicate existing funding sources. However, the acquittal documentation provided to Finance by the parties has shown that costs have been charged to the Program that were incurred outside of the grant period defined by the grant deeds signed each year. The Program documentation does not include an explicit requirement for the grant funding to be spent only within the defined grant period and, despite receiving legal advice that it would be appropriate to do so, no action has been taken by Finance to amend the Program documentation in this regard. In addition, the parties' acquittal documentation has reported that Program grant funds have been used in place of party funds to finance existing party activities or obligations (such as annual subscriptions to international organisations).11 The Program documentation does not address the extent to which parties are permitted to charge expenditure that may have been incurred regardless of whether the Program was established.

Program performance

In submitting applications for funding under the Program each year, the parties are required to include a statement about the activities that are proposed to be funded and how these activities will promote the objectives of the Program. Further, details of the activities that were undertaken using Program funds, including the outcomes achieved through those activities, are required to be reported by each party as part of their annual acquittal documentation. However, there was no evidence that Finance, in finalising the acquittal documentation received from the parties, assessed:

  • the purposes for which the grant funding was used;
  • the extent to which those purposes were consistent with the nature of the eligible activities under the Program; or
  • the extent to which the reported outcomes for the projects undertaken have contributed to the overall objective of the Program.

In addition, the Program guidelines set out in broad terms the types of activities that may be funded through the Program. This has the result that there is considerable flexibility in terms of the specific projects or activities that may fall within the broadly expressed categories in the Program guidelines. The establishment of the Program without the benefit of departmental advice may have impacted upon the administrative design of the Program, such that limits on the use of Program funds are only expressed in the Program guidelines in terms of administrative costs and travel arrangements.

Performance reporting

Performance information, presented initially in an agency's Portfolio Budget Statements (PBSs), with results being reported later in Annual Reports, is the foundation for agency accountability and transparency.12 In this respect, a performance measurement framework is essential for grant administrators to assess the effectiveness of the program.13

There has been no performance information for the Program reported by Finance in its PBSs or Annual Reports. In addition, while there is some key performance information relevant to the Program contained in Finance's Corporate Plan 2006–07 to 2009–10, there has been no internal reporting by Finance in terms of the achievement of the objective set out in the Corporate Plan. There has also been no separate reporting to the Parliament by Finance in relation to the Program.14

Summary of agency responses

A copy of the proposed report was provided to Finance and to AusAID (as there are a number of areas in the report that refer to AusAID and its administration of Australia's aid programs). AusAID did not provide any formal comments on the audit report.

Finance agreed to the four audit recommendations and other suggested improvements. In two instances, the department's agreement to the audit recommendations was qualified because it does not consider it is the best placed agency to develop performance indicators against the objective of the Program to strengthen democracy internationally, or to assess Program performance against this objective. Finance has commenced reviewing arrangements under the Program, including writing to the political parties seeking their voluntary compliance with various issues raised by the audit (recognising that amendments to the grant deeds and Program guidelines will require Government consideration). Finance also provided the following formal comments on the audit report:

The Department of Finance and Deregulation (Finance) welcomes the work undertaken by the ANAO in examining the Australian Political Parties for Democracy Program, and the thrust of its findings.

Finance notes that the ANAO acknowledges in its audit report that, as the Program is a non-discretionary grants program, Finance does not have a role in seeking and assessing applications for funding, except to the extent that it ensures that the parties comply with the requirements of the program documentation. Finance also notes that the ANAO has acknowledged in the audit report that Finance was only able to develop the administrative framework for the program following the then Government's October 2005 decision to establish the program and was therefore unable to undertake any planning and analysis of the need for the program prior to the decision being taken.


[1] The Program is a non-discretionary grants program. For a discretionary grants program, funding is awarded on a competitive basis, whereas for non-discretionary programs, the amount of funding and the funding recipients are predetermined.

[2] The Program guidelines note that Australian Parliamentarians have access to other forms of funding for travel purposes such as the overseas study entitlement and Parliamentary delegation travel. In 2001–02, the ANAO conducted a performance audit of Parliamentarians' entitlements (ANAO Audit Report No. 5 2001–02, Parliamentarians' Entitlements: 1999–2000, Canberra, 7 August 2001). The ANAO is currently conducting a second performance audit of Parliamentarians' entitlements.

[3] An amount of $724 575 was subsequently repaid to Finance by the Liberal Party in respect of its 2006–07 funding. This is discussed in Chapter 2.

[4] For example, as a result of the 2007 Federal Election, funding payments totalling $49 million were made to political parties and independent candidates, of which the ALP received $22 million, the Liberal Party $18.1 million and the National Party $3.2 million.

[5] Prior to the change of Government following the 2007 Federal Election and the issuing of a new Administrative Arrangements Order, the Department of Finance and Deregulation was known as the Department of Finance and Administration. The Department is referred to as Finance throughout this report.

[6] Total funding available under the Program for 2008–09 was reduced from $2 million to $750 000.

[7] Although undertaken in respect of a discretionary grants program, ANAO Audit Report No, 14 2007–08, Performance Audit of the Regional Partnerships Programme (specifically, Volume 2 pp. 343–354) outlines the importance of close links between applications for funding and the funding agreement.

[8] In this respect, the acquittal documentation submitted by the parties to Finance showed that there were instances where administrative costs were charged to the Program but were incorporated into the cost of particular Program activities rather than being separately identified as administrative costs.

[9] In December 2007, the Liberal Party repaid to Finance $724 575 of the $1 million paid to it in 2006–07. Taking this repayment into account, the $3.02 million spent by the parties represents 76 per cent of the grant funding paid under the Program.

[10] The primary objective of the Program is to ‘strengthen democracy internationally'. The Australian Government's foreign aid policy sets out the priority regions in which Official Development Assistance (including for strengthening governance) is to be provided. These areas include Papua New Guinea, the Solomon Islands, Indonesia, the Philippines, East Timor and Vanuatu.

[11] Finance advised ANAO in November 2008 that it considered that the costs reported by the parties relating to annual subscriptions to international organisations ‘represent a legitimate use of funding under the Program guidelines and do not represent cost shifting'.

[12] ANAO Better Practice Guide–Performance Information in Portfolio Budget Statements, Canberra, May 2002, p. 1.

[13] ANAO Better Practice Guide–Administration of Grants, Canberra, May 2002, p. 25.

[14] By way of comparison, the approach taken for some Parliamentarians' travel entitlements (also administered by Finance) includes public disclosure of the use of certain types of entitlements (including the tabling of separate reports in the Parliament).