The audit objective was to assess the effectiveness of the Department of Industry's administration of the Commercialisation Australia Program.

Summary

Introduction

1. In the context of an increasingly competitive global economy, successive Australian Governments have sought to strengthen the nation’s competitive advantage and improve living standards by adopting policies directed at supporting and strengthening Australia’s capacity to innovate. Key focus areas have included funding for science and research, the provision of incentives for business research and development, and the provision of financial assistance1 and other types of support for high risk enterprises.

2. The Commercialisation Australia (CA) Program was established in 2009 to support companies and innovators during the commercialisation phase of developing their products and ideas.2 During this phase many companies find it difficult to attract the necessary private sector finance and support to prove their ventures, so as to transition from experimentation and development to commercial production.3 In 2013, a report by the Australian Bureau of Statistics indicated that consistent with previous results, 45 per cent of Australian businesses reported at least one barrier to innovation. One in five businesses reported lack of access to additional funds, making this the most frequently reported barrier.4

The Commercialisation Australia Program

3. The CA Program’s objective is to build the capacity of, and opportunities for, Australia’s researchers, entrepreneurs and innovative firms to convert ideas into successful commercial ventures, enhancing Australia’s participation and competitiveness in the global economy and generating commercial returns from Australia’s significant investment in public sector research.5

4. The 2009–10 Budget included funding of $196.1 million over four years for the CA Program, with ongoing funding of $82 million per annum beyond the forward estimates. The program is administered by the Department of Industry.6

5. The CA Program opened for applications on 4 January 2010. The original program design included four grant components spanning the commercialisation life-cycle, providing both financial and non-financial support. Two components provide applicants with access to skills, knowledge and expertise in order to build their capacity—extending the focus of the program to the participant as well as the project being commercialised. A third component provides funds to establish the commercial viability of the applicant’s venture as part of the proof-of-concept stage, while the fourth component provides funds for the steps necessary to bring the venture to market, as part of early stage commercialisation activities. In addition, applicants have: access to Case Managers7 (CMs) to support them for the duration of their involvement with the program; and advice from members of the program’s Expert Network.8

6. The CA Program was intended to operate flexibly and this is reflected in aspects of its design. Applications for funding may be made at any time, in recognition that applicants are likely to seek financial assistance at different stages of commercialising their product or service and may not be in a position to wait for grant funding rounds to open and close.9 Applicants can also enter and exit the program at various stages on the commercialisation pathway and, in some circumstances, can access different grant components concurrently.

7. In 2009, the then Government decided that in addition to the grant components, the CA Program would also include: a program of research and analysis to support future commercialisation policy and program development; and ongoing collection and analysis of data to measure the short and long term impacts of the CA Program10. These activities were intended to support an active process of review and adjustment to the program’s design, to maintain its relevance and effectiveness.

8. In March 2011, the department sought the Minister’s approval to establish a fifth program component, the CA Pilot Program (Pilot Program), to provide financial assistance for assessments of the practicality and effectiveness of new, alternative methods of support for commercialisation.11 The fifth component was also established as a grant program, with separate program guidelines. Funding of up to $2 million per annum (on all projects combined) was available for the Pilot Program, with $500 000 in financial assistance awarded by the department to itself in January 2013. The department suspended the Pilot Program in August 2013 following its consideration of issues raised by the ANAO during this audit.

9. The department’s Business Competitiveness and Trade Division (specifically, the Commercialisation Australia (CA) Branch) has policy responsibility for the CA Program and directly administered the Pilot Program until its suspension. The department’s specialist program delivery division, AusIndustry12, is responsible for delivery of the four original grant components.

10. The CA Program’s governance arrangements include the CA Board, which was established to provide expert advice and merit rank applications for grant funding. Board members are appointed for their experience in commercialisation.13

11. Between January 2010 and 31 December 2013, the CA Program received 6 084 applications, of which 992 progressed to be considered by the CA Board. Of these, 616 applications have been approved for funding by the Program Delegate to a value of $207 million. A total of $224.7 million was expended as at 31 December 2013.14

12. The department advised that the CA Program was suspended on 21 March 2014 pending the outcome of the 2014–15 Commonwealth Budget process. Subsequently, as part of the 2014–15 Budget, the Government announced cessation of the CA Program from 1 January 2015.15

Audit objectives, criteria and scope

13. The audit objective was to assess the effectiveness of the department’s administration of the CA Program.

14. To form a conclusion against the audit objective, the ANAO adopted the following high-level criteria:

  • program planning, risk assessment and governance arrangements support effective grants administration;
  • selection and approval processes for awarding grant funding are well-designed, appropriately implemented and consistent with the Commonwealth Grant Guidelines; and
  • management of program reporting and performance is sound.

15. The audit examined the department’s delivery and administration of all components of the CA Program, including the CA Pilot Program.

Overall conclusion

16. The Commercialisation Australia Program (CA Program), a 2009–10 Budget measure16, has operated since January 2010 to help strengthen Australia’s competitive advantage by promoting innovation and the commercialisation of Australian products and ideas. Administered by the Department of Industry, the program provides grant funding and other support to the stage where recipients are able to attract private capital and carry forward their venture to full commercialisation. The CA Program comprises four original grant components and a fifth component introduced in 2011, the Pilot Program, which was suspended in the course of the audit.17

17. Overall, the effectiveness of the department’s administration of the CA Program has been mixed. While the department’s administration of the four original grant components has been generally effective, its decision to apply for grant funding under the Pilot Program led to non-compliance with financial framework requirements and a conflict of roles18 for departmental staff involved in the program’s administration.

18. The department’s delivery of the original four grant components has been generally in accordance with the CA Program Guidelines and the Commonwealth Grant Guidelines. Between January 2010 and 31 December 2013, the CA Program received 6 084 applications. Of these applications, 992 were considered and merit ranked by the CA Board and 616 were approved for funding by the departmental program delegate to a value of $207 million. Of this funding, $185 million was directed to proof-of-concept and early stage commercialisation projects; with private investors contributing an equal level of funding to these projects. Program participants indicated satisfaction with the wider program, including unsuccessful applicants who considered that their company was better positioned for commercialisation following the application process, due to the quality of support and feedback provided by departmental case managers as part of the application assessment phase.

19. However, the Pilot Program’s design, which made provision for the department to apply for a Commonwealth grant, and the department’s decision to apply for grant funding, demonstrated a lack of understanding of the Australian Government’s financial management framework, resulting in the department granting financial assistance of $500 000 to itself.19 Under the financial framework, a ‘grant’ is defined as an arrangement for the provision of financial assistance to a recipient ‘other than the Commonwealth’20 and there is no provision for a department to receive or retain21 a Commonwealth grant. The department’s decision to award itself a grant and to retain the funding resulted in breaches of framework requirements.22 Further, the department applied for and received the grant under the Pilot Program notwithstanding a requirement in the program guidelines that applicants be incorporated under the Corporations Act 2001. As a department of state with the legal personality of the Commonwealth, the department did not satisfy this threshold criterion. The Pilot Program’s design, and the department’s decision to apply for a grant while also administering and advising on the program, created a situation where departmental officials had a conflict of roles; with potential implications for the equitable treatment of external applicants.

20. The department’s experience with the Pilot Program highlights the risks which can arise when agencies seek to access administered23 program funds for an internal project, an uncommon occurrence requiring careful assessment by agency management.

21. More broadly, there remains scope for improvement by the department in aspects of program governance, relating to: risk management; performance reporting and evaluation. While the CA Program provides financial and other assistance for commercialisation activities which are inherently risky, and which may therefore show little or no return on the Australian Government ‘investment’, the program is not supported by a program-level risk management framework to identify program risks and inform the department’s treatment of those risks.24 Other risk mitigation strategies documented in the Ministerial Directions25, such as a program of research and ongoing data analysis to measure the short and long term impacts of the program26, have not been progressed. The department and CA Board also agreed, early in the life of the CA Program, to a set of key performance measures to track and report on program performance against objectives.27 After three years, only one report on program performance was prepared for the CA Board’s consideration, in 2013, and the quality of data collected has generally been poor and would require a significant investment of time and skills to reliably inform research and analysis on program performance. Further, while two internal evaluations of the CA Program have been undertaken to date28, they have had limited input from sources external to government.29

22. The ANAO has not made recommendations in this audit, as key issues relating to the CA Pilot Program were addressed by the department in the course of the audit, and the CA Program will cease from 1 January 2015. However, this audit has highlighted that there remained scope for the department to improve its administration of aspects of the CA Program relating to risk management, performance reporting and evaluation. Further, the department will need to take steps towards the program’s orderly closure, and to draw on lessons learned, particularly from the CA Pilot Program experience, to inform its administration and the development of future grants programs.

Key findings by chapter

CA Program Grants Process (Chapter 2)

23. The Commercialisation Australia (CA) Branch30 has overall policy responsibility for the CA Program and manages the CM network. As the department’s specialist program delivery division, AusIndustry is responsible for delivery of the four original grant components31 and provides secretariat support to the CA Board.

24. AusIndustry’s delivery of the original four grant components has been generally in line with the CA Program Guidelines and in accordance with the Commonwealth Grant Guidelines (CGGs). AusIndustry’s network of state and territory locations combined with phone services and websites supported promotion efforts and gave applicants access to relevant information and assistance. AusIndustry also maintained good documentation in the form of procedures manuals, customer information guides and operational guidelines. This information was regularly updated and was readily available to staff and where applicable, potential applicants.

25. The department employed a two-stage application process as a means of promoting high quality applications and reducing the impost on applicants until it was confirmed that preparation of a full application was warranted. Once eligibility was established and a full application received, the CM applied a due diligence process to examine the competitiveness of the application against the selection criteria. This process informed the CA Board’s merit assessment and ranking of applications. The establishment of the CA Board, with expert members drawn from outside the department, was a further strategy to mitigate the risks associated with commercialisation projects, which can include the risk of project failure.

26. To offer potential applicants flexibility, the CA Program assessed applications on an ongoing basis; with the CA Board meeting approximately every six weeks. This approach to grants administration presents challenges in maintaining consistency of assessments and an even distribution of available funding over the financial year. The department sought to address these risks through continuity of CA Board membership, the due diligence process applied to applications, and the use of funding ‘brackets’32 to help provide for an even spread of funding across all grant types.

27. The ANAO’s examination of the CA Board’s assessment process indicated that it was actively supported by AusIndustry; the Board’s documentation was sound; conflict of interest procedures existed and were applied; assessment decisions were based on the program guidelines; and board assessments were recorded.

28. The ANAO’s analysis of a sample of successful applications also indicated that the process followed by the department’s Program Delegate when considering and approving funding recommendations had appropriate regard to the requirements of the financial management framework and the CGGs. The department’s procedures for negotiating funding agreements with successful applicants and monitoring their progress were also implemented in a manner consistent with the CA Program Guidelines, broader departmental requirements and the CGGs.

29. However, there was variation across the AusIndustry network in the approach adopted to obtaining and recording Declarations of Interest (DOI) from CMs, prior to referring an application for due diligence assessment.

30. As part of the 2014–15 Budget, the Government announced cessation of the CA Program from 1 January 2015. In light of the Government’s decision the department will need to take steps towards the program’s orderly closure.

CA Pilot Program (Chapter 3)

31. In the course of this performance audit, a number of issues were identified by the ANAO relating to the design and administration of the fifth component of the CA Program; the Pilot Program, which was introduced in 2011.

32. The Pilot Program’s design and administration demonstrated a lack of understanding of the Australian Government’s financial management framework, resulting in the department granting financial assistance of $500 000 to itself, for a project to be delivered by external service providers.33

33. The definition of a ‘grant’, for the purposes of the Commonwealth Grant Guidelines (CGGs), as an arrangement for the provision of financial assistance by the Commonwealth to a recipient ‘other than the Commonwealth’34 precluded the department from providing such a grant of public money for its own projects.

34. Further, the financial management framework provides that if monies are received by an agency, only receipts prescribed by the financial regulations may be retained by the agency.35 In this context, the regulations make no provision for an FMA Act agency to receive or retain a Commonwealth grant.36

35. The department’s decisions to ‘grant’ itself public money as a form of financial assistance for an internal project, and to retain that public money, were not soundly based and gave rise to breaches of the financial framework.37

36. Further, the department applied for and received financial assistance under the Pilot Program notwithstanding a requirement in the program guidelines that applicants be incorporated under the Corporations Act 2001. As a department of state with the legal personality of the Commonwealth, the department did not satisfy this threshold criterion but nonetheless advised the CA Board38 on an alternative interpretation of the guidelines39, which the Board accepted notwithstanding its reservations documented in the course of considering the department’s funding application.

37. The department’s decision to apply for a grant while also administering and advising on the program, created a situation where departmental officials had a conflict of roles; with potential implications for the equitable treatment of external applicants.40 While the Pilot Program Guidelines referred to the existence of formal procedures for managing potential conflicts, the potential for conflicts of interest were embedded in the Pilot Program component as a consequence of its design, making it difficult to manage such conflicts.

38. Further weaknesses related to departmental advice in a minute to the Minister that observed the CA Board had endorsed the draft Pilot Program Guidelines, after the Board had advised the department that the guidelines required ‘further development’. The department also misunderstood advice received from a central agency41 relating to the draft Pilot Program Guidelines, which had included observations on the potential for conflicts of interest to arise due to the program’s design.

39. Examination of these issues with the department led the ANAO to conclude that elements of the Pilot Program were not consistent with the requirements of the CGGs and aspects of the department’s administration were not compliant with the Australian Government’s financial management framework.42 The ANAO discussed potential audit findings with senior departmental representatives during August 2013. The department subsequently sought advice from the Department of Finance regarding resolution and management of these issues and, as a result, took action to suspend the Pilot Program in August 2013.

40. The department subsequently reported two breaches of the financial management framework, arising from its receipt of a grant under the Pilot Program, in its 2012–13 Certificate of Compliance to the responsible Minister.4344

Risk Management and Governance (Chapter 4)

41. Sound risk management practices can support effective program administration by identifying risks and appropriate treatments. While the department has an established enterprise-level risk management framework, the CA Program is not supported by a program-specific risk management framework to inform the department’s treatment of program-level risks. Had the CA Program continued beyond 1 January 2015, there would have been benefit in the department developing and maintaining a targeted risk management plan for the program. The design of the Pilot Program also introduced a number of risks, including the potential for conflicts of interest and role, and inconsistency with financial framework requirements. The involvement of the CA Board in the development of the Pilot Program, a new strategic direction for the CA Program as a whole, may have provided the department with additional insight on the risks associated with the Pilot Program’s design.

42. As part of the original CA Program design, the then Minister decided that the department undertake a program of research and analysis, regular data collection and monitoring and reporting, to allow for timely adjustments (if needed) to the program’s operation. However, the program of research and analysis has not commenced after three years and the department advised there are no immediate plans to initiate this work.

43. The then Government also established governance arrangements intended to mitigate CA Program risks, in particular the CA Board, which was intended to support the program at both a technical and strategic level through the knowledge and expertise of CA Board members. However, the Board’s contribution to the CA Program has largely focused on the technical assessment of applications, and in practice responsibility for setting strategic directions for the CA Program has been a departmental rather than a shared responsibility.

Program Performance and Evaluation (Chapter 5)

44. The Ministerial Directions and CA Program Guidelines state that achievement of program objectives would be supported through the regular collection and analysis of data to: measure the short and long term impact of the program; and inform development of future innovation and commercialisation initiatives. The CA Program Guidelines also require the department to monitor projects funded by the program, by: collecting baseline data as participants enter the program; and monitoring participants’ commercialisation achievements for at least five years following their departure from the program.

45. In consultation with the CA Board, the department agreed to a number of performance measures (referred to as KPIs) as a basis for measuring change during and immediately after the provision of support through the CA Program. The department also established a Program and Performance Data Collection (PPDC) in 2010 to collect and store participant data.45 While data has been regularly collected from participants, at a cost to participants and the department, its quality is poor and would require significant attention before it can be used with any confidence to report on program performance against its intermediate and long term objectives, or to reliably inform research and analysis.

46. The department has not used the KPIs agreed with the CA Board in 2010 to report on the CA Program’s progress and achievements. The failure to report against the KPIs largely stems from the department’s approach that commercialisation outcomes are only measurable over the long term. This perspective focuses on measuring CA Program performance in terms of the final commercialisation of an idea or product, and does not make provision for the use of proxy measures46 or intermediate outcomes at different stages of the commercialisation process, to improve stakeholders’ capacity to assess performance.

47. In establishing the CA Program, the then Government requested that regular and independent evaluations be conducted; and the department proposed rigorous and broad ranging parameters for such evaluations, including the examination of long and short term impacts. Two internal evaluations have been conducted: an ‘interim’ evaluation by the CA Branch in 2010 and a ‘final’ evaluation by the department’s internal evaluation unit in 2012–13. Both evaluations, oversighted largely by departmental officers, reported positively on the program’s achievements, notwithstanding the range of issues subsequently observed in this audit report. Further, the evaluations had limited input from sources external to the government, including the CA Board, notwithstanding the Board’s mandated role in monitoring and reviewing the CA Program, and advising on its strategic direction.

Summary of agency response

48. The Department of Industry’s summary response to the proposed report is provided below, with the full response at Appendix 1. Extracts of the proposed report were also provided to the Chair of the Commercialisation Australia Board, who did not provide a written response.

It is pleasing to note the Department’s, through AusIndustry, strong performance record in service delivery. The Australian National Audit Office (ANAO) report highlights that AusIndustry delivered the four original grant components in accordance with the Commonwealth Grant Guidelines and in line with the Commercialisation Australia Program Guidelines. AusIndustry also received positive feedback in providing applicants access to relevant information and assistance, and maintained comprehensive documentation in the form of procedures manuals, customer information guides and operational guidelines.

The program received over 6000 expressions of interest to 31 December 2013. As acknowledged by the ANAO, 992 applications were considered and merit ranked by the Commercialisation Australia Board. Of these, funding totalling $207 million has been provided for 616 separate components. The funding resulted in the creation of new high-tech, high-growth businesses in key sectors such as innovative manufacturing, agribusiness, mining technology, medical technology, ICT and advanced services.

The department acknowledges the contribution the audit made to enhance the program administration of the Commercialisation Australia Program. During the course of the audit, issues relating to some aspects of the design and administration of the Pilot Program were addressed by the department.

As part of the 2014–15 Budget, the Government announced the closure of the Commercialisation Australia Program from 1 January 2015. The Department will implement an appropriate closure strategy for the program.

Footnotes

[1] A form of ‘venture capital’.

[2] Since the 1990s the Australian Government had established a wide range of innovation support, including grants, tax concessions and venture capital programs. At the time the CA Program was announced these programs included: the Commercial Ready and Commercial Ready Plus Program; Intermediary Access Program; Industry Collaboration Innovation Program (ICIP) and the Commercialising Emerging Technologies (COMET) Program.

[3] This phase of business development has been described as: ‘So treacherous that high-tech start-ups call it the valley of death. The global financial crisis has made this valley considerably wider.’ See Australian Government, Powering Ideas: An Innovation Agenda for the 21st Century, Commonwealth of Australia, Canberra, 2009, p.15.

[4] Australian Bureau of Statistics, Selected Characteristics of Australian Businesses, 2011–12, cat.no. 8167.0 [Internet], ABS, Canberra, 2013, available from <http://www.abs.gov.au/ausstats/abs@.nsf/ Latestproducts/8167.0Main%20Features9201112?opendocument&tabname=Summary&prodno=8167.0&issue=2011-12&num=&view> [accessed 27 March 2014].

[5] Australian Government, Commercialisation Australia Program, Ministerial Program Direction No.1 of 2011, Canberra, December 2011, p. 2, clause 6.

[6] Since the commencement of the CA Program, the title of the administering department has changed several times. Unless there is a need to specify the full name or the acronym, this audit report uses ‘the Department of Industry’ to refer to: the Department of Innovation, Industry, Science and Research (from December 2007 to December 2011, abbreviated as DIISR); the Department of Industry, Innovation, Science, Research and Tertiary Education (from December 2011 to March 2013, abbreviated as DIISRTE); the Department of Industry, Innovation, Climate Change, Science, Research and Tertiary Education (from March 2013 to September 2013, abbreviated as DIICCSRTE); and the Department of Industry (from 18 September 2013).

[7] Case Managers are expected to possess extensive knowledge and experience in commercialisation, or a relevant area of expertise. They are contracted by the department following a tender process. The program currently contracts approximately 30 Case Managers.

[8] The Expert Network became operational in November 2010. Network members are volunteers who attend networking opportunities facilitated by the department. In addition to providing advice to applicants, Network members are provided with visibility of, and the opportunity to invest in, early stage high growth companies.

[9] This approach contrasts with that adopted in many grant programs, which involve: periodic application rounds with defined opening and closing dates; and the competitive assessment of applications from each round. Under the CA Program batches of applications are generally assessed every six weeks.

[10] The decision as later documented in a formal Ministerial Direction. See Australian Government, Commercialisation Australia Program, Direction No.1 of 2011, Canberra, 2011, p. 3, clause 6(i).

[11] Australian Government, Commercialisation Australia Pilot Program Guidelines, DIISR, Canberra, December 2011, p. 2.

[12] AusIndustry delivers programs for the department and a number of other government agencies.

[13] The CA Board is a committee of the Innovation Australia Board, established under the Industry, Research and Development Act 1986.

[14] This figure includes: grant funding provided to participants, the department’s program administration costs and other program costs such as Case Manager services.

[15] The department further advised that while the CA Program is now closed to new applications, applications received prior to the program’s suspension in March 2014 are being considered in accordance with the existing CA Program Guidelines and within available (albeit reduced) funding to 2016–17.The announced changes do not affect existing projects.

[16] The 2009–10 Budget included program funding of $196.1 million over four years, with ongoing funding of $82 million per annum beyond the forward estimates.

[17] As noted in paragraph 12, the CA Program as a whole was suspended on 21 March 2014, and the Government announced its cessation from 1 January 2015 in the context of the 2014–15 Budget.

[18] A conflict of roles, or a conflict of interest, may arise: where agency decision makers or staff involved in grants administration have a direct or indirect interest, which may influence the selection of a particular project or activity; and where a grant recipient has a direct or indirect interest, which may influence the selection of their particular project or activity during the application process. Conflicts may also arise when undertaking the grant project. See Department of Finance and Deregulation, Commonwealth Grant Guidelines, 2nd Edition, DOFD, Canberra, June 2013, p. 58, clause 13.6.

[19] The branch responsible for the administration of the Pilot Program proposed and received financial assistance through the Pilot Program to procure services from external providers to develop an Ecosystem Mapping Strategy (EMS) to collate and analyse data about innovation across specific business sectors. The EMS project involved a trial to assess the effectiveness of the mapping strategy as a policy development tool and to determine its potential scalability to other sectors. The project was assessed by the CA Board as consistent with the objectives of the Pilot Program.

[20] Financial Management and Accountability Regulations 1997 (FMA Regulations), regulation 3A(1).

[21] FMA Regulations 15(1) and 15(2) prescribe the types of receipts which an FMA Act agency, such as a department, may retain. Grants are not a type of prescribed receipt.

[22] The financial framework breaches were subsequently reported in the department’s 2012–13 Certificate of Compliance; an annual process which requires all FMA Act agencies to report on non-compliance with the financial management framework to the responsible Minister, copied to the Finance Minister.

[23] ‘Administered’ funding is provided to agencies to deliver program outcomes, such as grants of financial assistance. ‘Departmental’ funding is provided for the operating costs of agencies, such as salaries.

[24] The department advised that it has an established enterprise-level framework for risk management and planning, to which the CA Program area contributes high level inputs.

[25] Australian Government, Commercialisation Australia Program, Direction No.1 of 2011, Canberra, 2011, p. 3, clause 6(i). This legal Direction was made by the then Minister for Innovation, Industry, Science and Research.

[26] To allow for adjustments to the program design if needed.

[27] At the same time, the department established a database for information collected: at the commencement of each project; during each project; and for five years after project completion.

[28] An ‘interim’ evaluation was conducted by the CA Branch in 2010 and the ‘full’ evaluation was conducted in 2012–13 by the department’s internal evaluation unit.

[29] Notably, the CA Board was not represented on the relevant governance groups, notwithstanding its mandated role in monitoring and reviewing the CA Program.

[30] A part of the Business Competitiveness and Trade Division.

[31] AusIndustry’s responsibilities entail: general awareness raising; receipt and processing of applications in preparation for their assessment by the CA Board; negotiating Funding Agreements; and monitoring participants’ progress. The Program Delegate position also resides in AusIndustry.

[32] Once the CA Board rated individual applications, they were ranked within a funding bracket (from small to large funding brackets). The recommended applications were then determined based on the highest ranked applications within each bracket. This approach was adopted to provide for successful applications across the full range of grant types and grant value.

[33] The project is discussed in footnote 19.

[34] Financial Management and Accountability Regulations 1997 (FMA Regulations), regulation 3A(1).

[35]Financial Management and Accountability Act 1997 (FMA Act), section 31.

[36] FMA Regulations, regulations 15(1) and 15(2).

[37] See paragraph 40.

[38] The CA Board was established to provide expert external advice and to merit rank applications for grant funding under the CA Program.

[39] Contrary to the program guidelines approved by the Minister, the department advised that this threshold criterion only applied to external applicants.

[40] Both the CGGs and internal departmental guidance emphasised the need to avoid situations where the interests of staff might compromise their independence; including the real or perceived independence of their administration, advice or decision-making.

[41] The then Department of Finance and Deregulation, which administered and advised agencies on the application of the CGGs.

[42] The financial management framework is applicable to the Department of Industry as a prescribed agency subject to the Financial Management and Accountability Act 1997 (the FMA Act) and the Financial Management and Accountability Regulations 1997 (FMA Regulations).

[43] The breaches related to section 44 of the FMA Act and FMA Regulation 7A.

[44] The chief executives of all agencies subject to the FMA Act are required to provide a completed Certificate of Compliance to their portfolio minister each year. The purpose of the Certificate is to improve compliance with the Australian Government’s financial management framework, and to ensure that Ministers are kept informed of compliance issues within their portfolios.

[45] Participant data is collected at the commencement of projects, during projects and for five years following completion of a project.

[46] Proxy measures are output-level performance indicators and may be useful to indirectly measure effectiveness in certain situations. See Department of Finance and Deregulation, Performance Information and Indicators (October 2010), Finance, Canberra, 2010, p. 3; and ANAO Audit Report No.21 2013–14, Pilot Project to Audit Key Performance Indicators, p. 74.