- Probity in grants - Community Health and Hospitals Program
- Announced on 12 December 2018, the $1.25 billion Community Health and Hospitals Program (CHHP) was to reduce pressure on community and hospital services by funding projects in four areas:
- specialist hospital services
- drug and alcohol treatment
- preventive, primary and chronic disease management
- mental health.
- At November 2022, the Australian National Audit Office (ANAO) found there had been 171 CHHP and associated projects approved between 2018–19 and 2020–21, with the funding delivered through National Partnership Agreements (NPAs), and through grants to Primary Health Networks (PHNs) and non-government organisations (NGOs). The grants were for both service delivery and infrastructure projects. At September 2023, in 102 of the 171 projects, services were being delivered (39 projects) or the project had reached completion (63 projects).
- According to the Department of Health and Aged Care (Health), were 63 NPAs valued at $1.07 billion; 25 agreements with PHNs valued at $583 million; and 83 projects funded through national NGOs totalling $169.9 million. While there were expression of interest (EIO) processes for the NPAs (sent to states and territories on 24 December 2018) and PHNs (sent on 2 January 2019), there was no EOI process for NGOs.
- The projects funded through the CHHP were selected by the minister’s office, based on EOIs submitted to Health, and proposals received by the Minister for Health’s office. The grant proposals were not put forward as a new policy proposal and not formally considered by Cabinet. They were instead endorsed via correspondence from the Prime Minister to the Minister for Health and announced as part of the 2019–20 Budget. Health then developed grant guidelines and sought advice from the Australian Government Solicitor (AGS) on the constitutional and legislative risks associated with the grants.
- The ANAO undertook the audit to provide assurance to the Parliament on the effectiveness of CHHP administration, including compliance with the Commonwealth Grant Rules and Guidelines (CGRGs).
- The ANAO found Health’s administration of the CHHP was ineffective, and fell short of ethical requirements:
- there were deliberate breaches of the relevant legal requirements and the principles underpinning them
- the classification of the majority of CHHP grants was not appropriately justified
- no grant opportunity guidelines were developed for seven of 108 CHHP grants, and in at least three instances this represented a deliberate decision by senior management to not comply with finance law
- controls for, and reporting of, non-compliance with finance law were insufficient
- where grant opportunity guidelines were produced, they were not fully consistent with the principles of robust planning, transparency and probity in the CGRGs
- there was no appropriate assessment of risk
- multiple grants were recommended for funding prior to confirmation there was lawful authority, or despite knowing there was no legislative authority
- recommendations were made to government to fund grants based on assessment processes that were not fully consistent with the requirements under the grant opportunity guidelines and CGRGs
- application processes were not fully consistent with the principle of achieving value for money
- there was limited due diligence prior to recommending funding
- obligations to publish grant awards on GrantConnect were not met in a timely and accurate manner
- executive oversight, risk and fraud management were deficient
- monitoring and evaluation arrangements were only partly effective.
- This chapter discusses Health’s administration of the grants to PHNs and NGOs by examining some of the key ethical breaches the ANAO identified in its report with regard to: classification of grants; grant opportunity guidelines; the assessment and selection process; and legal authority. Throughout the chapter, key legislative and ethical requirements associated with grants administration, and Health’s responses to the issues raised, are discussed. The chapter is not an exhaustive examination of all the issues raised by the ANAO, but a selection of some of the key points relevant to considerations of probity and ethics.
Legal obligations
3.8The CGRGs are issued by the Finance minister under section 105C of the Public Governance, Performance and Accountability Act 2013 (PGPA Act) and are legally binding on officers. Under subsection 13(4) of the Public Service Act 1999 (PS Act), officers are required to comply with all applicable Australian laws. The PGPA Act states, ‘to avoid doubt, the finance law is an Australian law for the purposes of subsection 13(4) of the Public Service Act 1999 …’. Finance law is defined in the PGPA Act as: the PGPA Act, the rules, any instrument made under the PGPA Act, or an Appropriation Act. The CGRGs are an instrument made under the PGPA Act.
3.9As with procurement, the objective of grants administration is to promote proper (efficient, effective, economical and ethical) use and management of public resources.
3.10This objective is to be achieved through: compliance with the relevant legislation, policy and reporting frameworks for grant administration; whole-of-government and individual entity grants administration practices; and the application of seven key principles for better practice grants administration. The seven key principles are: robust planning and design; collaboration and partnership; proportionality; outcomes orientation; achieving value with relevant money; governance and accountability; probity and transparency. Entities must put in place practices and procedures to ensure grants administration is conducted in a manner consistent with the seven key principles.
3.11In grants administration, probity and transparency is achieved in part by ensuring decisions are impartial, appropriately documented and reported, publicly defensible, and lawful.
3.12Further obligations under the CGRGs and PGPA Act are discussed as relevant below.
Key findings of the audit
Classification of grants
Ethical considerations
3.13Under the CGRGs, officials should consider the options available for the selection of grant recipients, including: open competitive funding rounds; targeted or restricted competitive funding rounds; a non-competitive, open process; demand-driven or ‘first-in first-served’; a closed non-competitive process; or one-off grants determined on an ad hoc basis, usually by ministerial decision. Regardless of the classification, the CGRGs apply to all forms and types of grants.
3.14According to the CGRGs, a one-off/ad hoc grant is ‘designed to meet a specific need, often due to urgency or other circumstances’. In its report, the ANAO pointed out that while one-off grants are usually made by ministerial decision, the fact a grant is made as a result of a ministerial decision does not automatically classify it as an ad hoc grant.
3.15The CGRGs acknowledge in some circumstances it may be appropriate to use a non-competitive and/or a non-application based process. However, officials should document why this approach has been used. Acting with probity in grants administration also involves transparency, that is, providing reasons for decisions and the provision of two-way information to government, the Parliament, potential grantees, grantees, beneficiaries and the community. Transparency, according to the CGRGs, ‘provides assurance that grants administration is appropriate and that legislative obligations and policy commitments are being met’.
Audit findings
3.16Health classified the 108 grants to PHNs and NGOS as follows:
- one-off/ad-hoc – 69
- closed non-competitive – 5
- targeted non-competitive – 18 (which is not a category contained in the CGRGs)
- open competitive – 9
- not classified – 7.
- Contrary to CGRG requirements, Health did not document the rationale for using one-off/ad hoc grants and the ANAO was of the view ‘the classification generally did not align with guidance for ad hoc/one-off grants’.
- Health advised the ANAO it had classified the majority of grants as one-off/ad hoc because ‘CHHP and associated grants were government decisions’. As noted above, the fact a grant decision has been made by a minister is not sufficient to classify it as a one-off/ad hoc. Even so, the classification did not correspond with the guidance in the CGRGs for one-off/ad hoc grants, specifically: the CHHP ‘was not responding to an urgent or unforeseen circumstance and the program need was not specific’. The ANAO wrote that a characteristic of the December 2018 CHHP announcement was its ‘broad objectives for community health and hospitals projects’.
- In September 2019, Health did seek advice from the Department of Finance on whether draft CHHP mental health grant opportunity guidelines were consistent with the CGRGs. In that instance, Finance advised the proposed one-off/ad hoc classification would more appropriately be classified as a ‘closed non-competitive’ grant because the opportunity was only available to those listed in the guidelines. Though Health noted the advice, it did not alter its categorisation or explain its rationale for not doing so. The ANAO found internal Health correspondence relating to this advice, which referred to ‘similar feedback on “the remaining guidelines”’.
Grant opportunity guidelines
Ethical considerations
3.20Probity and transparency are key principles for grants administration and entities are required to behave consistently with these principles, which involves applying and complying with public sector values and duties such as honesty, integrity, impartiality and accountability. Entities are also required to demonstrate robust planning and design, which underpins efficient, effective, economical, and ethical grants administration.
3.21Decisions relating to grant opportunities are to be appropriately documented and reported, publicly defensible, and lawful.
3.22Under finance law, grant opportunity guidelines are required for all grants, including one-off or ad hoc grants, and they must be consistent with the CGRGs.Grant opportunity guidelines establish key requirements for grant opportunities including grant objectives, grant assessment and selection criteria, indicative reporting and acquittal requirements, and funding approval requirements. They are intended to provide sufficient information to inform those who are considering applying for a grant.
Audit finding—failure to have grant opportunity guidelines in place
3.23The audit report found Health did not develop grant opportunity guidelines for seven of 108 CHHP grants to PHNs and NGOs, and in at least three instances this represented a deliberate decision by senior management to not comply with finance law. Health acknowledged the Executive Board was aware of noncompliance at the time.
3.24In October 2019, officials proposed that four grants be made without grant opportunity guidelines in place (three were awarded). The decision not to comply with the CGRGs was made in the context of concerns raised by the responsible First Assistant Secretary with the responsible Deputy Secretary that ‘there was a risk that these grants [several mental health-related CHHP grants] would be delayed by the requirements of the CGRGs’.
3.25The audit found email correspondence that indicated the Deputy Secretary had discussed the concern about delays with the Secretary and other Deputy Secretaries during a regular Executive Board meeting (though the minutes did not record this discussion). The Deputy Secretary recorded their understanding of discussions at the Executive Board meeting in an email to the First Assistant Secretary, including that: previous approvals had been made by the Deputy Secretary for CHHP grants to ‘progress without full compliance’, and ‘drafting and approval of [grant opportunity guidelines] should not delay prompt execution’. The Deputy Secretary acknowledged this would constitute a breach of CGRG requirements, and requested each use of this approach be subject to their approval. The ANAO was unable to locate any report in Health’s internal breach recording system or to the Audit and Risk Committee of these three breaches.
3.26During the inquiry, Health told the committee:
The activities in question were related to suicide prevention and mental health—a high priority. They had been announced. They were recipients that were known. The concern was that to establish the guidelines and set up various necessary mechanisms would take a significant amount of time. The intent, as I understand from the officer, was to do some of these things in parallel in order to provide that greater assistance. The clear finding—and I think the finance law is very clear—was that the sequencing was wrong and a different solution should have been sought … it is very clear—and this is the point that the ANAO made—that that is the wrong way to actually do it.
3.27Noncompliance was not limited to CHHP. Across all departmental grants between 1July 2019 and 28 July 2022, Health internally reported breaching the CGRG obligation for grant opportunity guidelines to be in place before awarding grants 24 times; in 12 of the 24 breach reports, approval to breach the CGRG requirement was provided by a senior executive officer prior to the breach occurring. Health told the ANAO it considered the 24 occurrences of non-compliance to be ‘infrequent’ and not meeting the definition of ‘systemic’; non-compliance had been ‘in response to a decision of government’; it occurred in a context where complying with the CGRGs would result in ‘delays [that] would mean the project not commencing in the timeframe announced’.
3.28It was not until the final stages of the audit that Health identified the three instances of non-compliance with finance law in 2019-20 directly related to CHHP as ‘significant,’ and these were reported to the Minister for Health and the Minister for Finance on 9 February 2023.
3.29At the hearing on 8 September 2023, Health suggested the Executive Board had not been aware of the nonreporting of the deliberate noncompliance (discussed above in paragraphs 3.23–3.25). In one instance, Health explained its actions as such:
In the case of what was found during the audit process, which I think came as a surprise to us all, there were three grants being looked at where there was noncompliance and that had not been reported through the voluntary reporting system of noncompliance. When the ANAO brought that to our attention in October-November 2022, we looked at the guidance around 'significant', because there are various considerations. 'Significant' goes to materiality—the volume, the value of what's involved. We looked at it through that lens. In the context of that three-year period it was about 22,000 grants, but in the one year, if you just limit it to 2018-19, I think there were around 12,000 grants established … The value, back then, was about $7 billion. It came to $14 million; something like that. Compared to those criteria, we didn't think it represented 'significant'. But when you then turned to the other elements—the nature of the noncompliance, the fact that we weren't aware of it, and that there was this sense of intentionality and the reputational risk that would represent—we assessed it as being significant.
3.30Health confirmed to the ANAO it had taken a number of actions, including: directing senior management that non-compliance of the nature described was not appropriate; establishing a mandatory performance expectation in all senior executive agreements that officers familiarise themselves with their obligations under finance law, comply with it at all times, and work to build a strong culture of compliance with finance law; initiating a program of increased financial literacy training. Further responses from Health are discussed below.
Audit finding—consistency of grant opportunity guidelines with Commonwealth Grant Rules and Guidelines
3.31Where grant opportunity guidelines were produced, they were not always fully consistent with the CGRGs. The Department of Finance (Finance) advised Health in relation to mental health grants that although the grant opportunity guidelines contained the required elements, the substance of the guidelines was not fully consistent with the principles of the CGRGs, in particular robust planning and design, and probity and transparency. In relation to this advice, one officer in Health remarked the advice did not provide ‘much value add’. Health stated this remark was not reflective of Health’s culture.
3.32However, a level of disregard for advice from Finance was found in an email exchange between senior Health officials to unrelated June 2019 Finance feedback regarding Health’s general approach to grant opportunity guidelines and CGRG compliance. The email exchange described Finance’s advice as ‘a pretty outrageous set of accusations which points to a pretty deep-set culture of mistrust’. A Deputy Secretary stated ‘[It] would be nice if [Finance’s] concerns related to some sort of outcome measure. I can feel some congestion busting coming on’. ‘Congestion busting’ was the reason given for several internal performance awards to officials involved in the CHHP process.
3.33When this matter was raised during a public hearing, the Secretary of the Department of Health and Aged Care, MrBlair Comley, did acknowledge ‘the seniority of an officer does matter when it comes to the import of what is done and how it transmits through culture’. He went on to emphasise the impact behaviours have on culture:
A lot of our responses that we have put back to the committee about improving things are systems related responses to try and embed the right procedures and to require the right considerations to be in briefings of ministers. But I wouldn't underestimate the behaviours and the symbols that drive that culture through an organisation.
Assessment and selection of grants
Ethical consideration
3.34A mandatory requirement under the CGRGs, where an accountable authority or official approves the proposed commitment of relevant money in relation to a grant, is that person must record the basis for the approval relative to the grant opportunity guidelines and the key principle of achieving value with relevant money.
3.35Officials must provide written advice to ministers (in cases where a minister exercises the role of an approver) that at a minimum includes:
- that the spending is a grant
- information on finance law requirements (contained in the PGPA Act, Rule and CGRGs), including legal authority to make the grant
- outline the application and selection process followed, including the selection criteria, that were used to select potential grantees
- include the merits of the proposed grant or grants relative to the grant opportunity guidelines and the key principle of achieving value with relevant money.
- Under the CGRGs, the basis for recommending or rejecting each proposed grant should be set out in the assessment material and should reflect the particular merits of each grant activity in terms of the grant opportunity guidelines (including assessment against the selection criteria).
- While officials do not have to rank grants when briefing ministers, officials should at a minimum indicate which grant applications: fully meet the selection criteria; partially meet the selection criteria, and do not meet any of the selection criteria.
- Entities must have practices and procedures to ensure grants administration is conducted in a manner consistent with probity and transparency principles. Accountability and transparency, under the CGRGs, require officials to demonstrate and justify the use of public resources.
Audit finding—assessment of proposals
3.39To determine the extent to which Health complied with relevant requirements of the CGRGs, the ANAO reviewed a targeted sample of 16 of the 108 CHHP and associated projects. Amongst other things, the ANAO reviewed documents relevant to the assessment and selection of the grants. Fifteen grants in the sample were made to NGOs. These had been identified by government, and did not involve an application process.
3.40The ANAO stated it was unable to identify, and Health was unable to provide, records for several grants demonstrating CGRG compliance, including documented grant assessments, financial viability assessments, and the basis for assessments of value with relevant money.
3.41In response to a suggestion from Finance that a non-application-based process may not be appropriate in the particular circumstances, Health stated ‘Given decisions of Government about eligibility of particular organisations and projects for the CHHP, the Department is not able to elaborate further on these aspects’. Health stated that in the absence of a formal application, the key information used in the assessment would be the project proposal.
3.42Health did develop assessment plans establishing how Health would assess grant proposals against criteria in the relevant grant opportunity guidelines. The assessment plans included high-level instructions covering: assessing value with relevant money; assessment of financial viability, governance and risk; and the requirements for recommendations to government and decision making.
3.43According to the assessment plans, staff were to receive training and other materials and information (including on probity and CGRG requirements, as well as the policy intent of the program). This was not provided following a decision to ‘simplify’ the assessment process.
3.44The ANAO found of the 16 grants examined, there was documented assessment against the criteria for 11. Of the 11, one project was assessed as highly suitable and 10 projects were assessed as suitable. One suitable project (Lord Somers Camp) was later assessed as not suitable by a quality assurer. Advice supporting recommendations to government did not include the assessment ratings although it did indicate whether Health judged the grant to represent value for money.
3.45The information in project proposals, that was used by Health for assessment because there were no formal applications, was found by the ANAO to be ‘varied in terms of clarity, detail, completeness and suitability as the basis for a value for money assessment’. Assessments, where documented, contained information copied directly from applicants’ business cases and requests for funding. In some cases, the ANAO found proposals did not specify how much money was being sought and what would be delivered.
3.46In five of the 11 assessments the ANAO examined, Health stated there was insufficient information to support the assessment but assessed the proposal as suitable for funding. Health recommended additional information including detailed budgets, project plans and timelines should be requested as a grant agreement milestone.
3.47As part of its consideration of value with relevant money, the assessment plans and grant opportunity guidelines stated Health would undertake a financial viability assessment on organisations that had not previously received funding form the Commonwealth. Of the 12 organisations in the sample that had not previously received funding from the Commonwealth, Health undertook a financial viability assessment for seven—four were partly completed and three were complete.
3.48The ANAO found Health assessed as ‘suitable’ projects with proposed activities that were inconsistent with the requirements of the grant opportunity guidelines, including grants to the Esther Foundation and the Lord Somers Camp. The ANAO found the application processes were not fully consistent with the principle of achieving value for money and Health undertook limited due diligence before recommending funding.
3.49Notwithstanding these shortcomings, the ANAO found Health officials involved in the assessment and development of funding recommendations to government formally certified their agreement to be bound by the requirements of the assessment plan and CGRGs.
3.50The ANAO found Health’s subsequent submissions to the minister (provided in the form of funding recommendations and requests for funding approval) for tranche one, two and three projects claimed the approach taken was consistent with the PGPA Act and CGRGs, but this was not supported by evidence. It found Health’s advice to the minister on value with relevant money was not always supported by robust evidence.
Legal authority
Ethical consideration
3.51The PS Act states that the Australian Public Service is apolitical and provides the government with advice that is frank, honest, timely and based on the best available evidence. Under the CGRGs, officers are to apply and comply with public sector values and duties, including honesty, integrity, impartiality and accountability. It is an obligation under the CGRGs that ‘before entering into an arrangement for the proposed commitment of relevant money there must be legal authority to support the arrangement [emphasis in original].
3.52The PGPA Act and the CGRGs include requirements that apply to ministers. Officials must advise the relevant minister on these requirements. The CGRGs state that officials must provide written advice to ministers which, at a minimum, provides information on the applicable requirements of the PGPA Act and Rule and the CGRGs, including the legal authority for the grant.
3.53The PGPA Act requires that a minister must not approve proposed expenditure of relevant money unless satisfied, after reasonable inquiries, that the expenditure would be a ‘proper’ use of relevant money. The terms of the approval must be recorded in writing as soon as practicable after the approval is given. ‘Proper’ when used in relation to the use or management of public resources means efficient, effective, economical and ethical.
Audit finding—advice to minister
3.54On 11 June 2019, the minister accepted recommendations from Health to approve 44 tranche one grants, pending legal advice from the AGS. In its advice to the minister, Health anticipated ‘the majority of projects would receive a “low” or “medium” legal risk assessment from the AGS’.
3.55However, when received, the AGS advice found 11 of the projects were ‘likely to be without lawful authority’ and of these the AGS advised for six ‘there was no legislation that reasonably could be relied on to authorise expenditure on the program’. Included in these 11 were grants to the Esther foundation, and Lord Somers Camp, which are highlighted case studies in the audit report.
3.56Health then advised the minister on 25 June 2019 that ‘there were 11 projects where the AGS assessment identified there would ‘likely be no lawful authority for the expenditure’. According to the ANAO, the advice did not accurately reflect the nature of the risk, specifically the AGS opinion that for six of the grants there was no legislation that could reasonably be relied upon to authorise expenditure. Further, the ANAO found the advice to the minister lacked detail that had been provided by the AGS on the extent to which risk could be managed or mitigated.
3.57The ANAO described the following process:
On 30 June 2019 the Minister noted Health's advice that it execute the ‘high’ risk agreements despite the AGS risk assessments. Health advised the Minister it would execute the agreements on the grounds that they were one-off grants, legal challenge was unlikely, funding for each project had already been agreed by government, the projects had been announced, and stakeholders were committed. Health noted in its advice that this approach may attract adverse commentary from the ANAO and any parties opposed to the expenditure. Health stated in its advice that risks would be mitigated through obtaining more information in grant milestone reports, such as budgets and risk plans, and through strong grants management.
3.58The ANAO stated it was unclear ‘how additional information on project budgets, or strong grants management, could resolve the issue that the grant had no legislative authority’. The ANAO found ‘Health acted contrary to requirements of the CGRGs in recommending the Minister approve funding and that agreements be executed notwithstanding the absence of legislative authority’.
3.59The audit also found the 30 June 2019 advice to the minister stated Health had consulted with the Department of Prime Minister and Cabinet on grants assessed to likely be without lawful authority and ‘PM&C had advised that the Minister could decide on whether the government would proceed with the 11 projects’. As noted above, the CGRGs are part of finance law, and they specify there must be legal authority to support a grant.
3.60Health told the Committee:
The thinking at the time—reflecting that this is not due process—was that the correspondence from the Prime Minister was providing authority for the grant. The grant was able to proceed; that was the advice that was provided … and that’s not correct.
3.61During the inquiry, Health suggested at the time there was a view there was something of a ‘balance’ involved in decisions:
This was not the right way to go about it. I acknowledge that straight off. In what I saw, there was a balancing between an estimation of the likelihood of this risk materialising and then the benefits of providing funding to organisations.
3.62Health went on to state:
There's a certain element of risk that you have to balance. For sure, the appropriation was in that year; we had to do it by 30 June. I guess a decision needs to be made whether you pull back from that time frame notwithstanding that.
3.63Health suggested in its evidence that ‘decisions of government’ had a certain status:
… at that time, election, tight timeframes to implement decisions of government. I would say in terms of election commitments and prebudget announcements, all of them in the end rely on a decision of government. Effectively from a public servant's perspective they are all decisions of government and it's just then the processes we need to follow to implement them.
3.64In its audit, the ANAO highlighted a key message to all Australian Government entities:
Where decisions of government identify preferred recipients for grants funding, grants remain subject to the Commonwealth Grants Rules and Guidelines (CGRGs). It is the administering entity’s responsibility to inform the relevant minister of the necessary steps and timeframes required to comply with the CGRGs. This includes providing clear advice where government identified projects or recipients do not align with grants program objectives or value for money.
Response from Health
3.65Health agreed to the four recommendations made by the ANAO, which related to:
- improving the systems of control to identify, assess and report non-compliance with finance law
- ensuring grant assessments are consistent with the requirements of established grant opportunity guidelines and the requirements of the CRGs, are based on sufficient information and due diligence to support a value for money recommendation, and are appropriately documented
- ensuring advice to government on grant funding approval is consistent with the requirements of the CGRGs and the grant opportunity guidelines, and is comprehensive, evidence-based and accurate
- establishing a quality assurance process to confirm and where necessary correct the accuracy of reporting on Grant Connect.
- In evidence to the Committee, the Department stated it recognised it had a responsibility to perform its functions ethically and acknowledged the audit report had found ‘in this instance, the Department did not meet those standards to which we hold ourselves accountable. We have accepted this finding and recognise its serious nature’.
- Notwithstanding the findings of the audit, the Department was not of a view there was a cultural problem at the time, rather the failures, which included deliberate breaches of finance law and recommendations to the minister to approve grants where there was no legislative or constitutional authority, could be attributed to capability and attention to detail. The Committee was told:
I honestly don't think there was a culture that was systemically within the department at that time. I truly don't believe that was the case … It's capability and attention to detail. If you view that as having some ethical aspect to it—and you could argue that there is—then, yes.
3.68Since the audit, Health told the Committee it had strengthened its approach to grants administration, including by:
- revising the content of guidance and templates to support compliance with the PGPA Act, GGRGs, and required ethical standards
- updating Accountable Authority instruction and Finance Business Rules relating to financial obligations and accountability to clarify financial management responsibilities
- ensuring the Grants Assurance Program reviews grant administration against mandatory requirements and principles in the CGRGs with results reported to the Executive Committee.
- Health stated it had ‘continued to mature the way in which CHHP is managed and the way … [finance] law is enforced’. In particular:
Projects have been reallocated to closely align with policy expertise, and centralised governance arrangements have been established to oversee the remaining projects. This is underpinned by a new project management reporting system to promote better data hygiene and to simplify and standardise project reports and financial tracking. This enables us to capture lessons learned and support overall program evaluation.
Two centres of excellence have been established to provide advice on capital grants and national partnerships. Under its 2020–24 finance strategy, the department continues to operate a strong financial controls and assurance framework and a financial governance framework which promotes the efficient, effective, economical and ethical use of resources.
Malintent
3.70As was also the case with the Department of Infrastructure, Transport, Regional Development, Communication and the Arts (discussed in chapter 2), the Committee heard from Health the suggestion that an absence of malintent, perhaps mitigated to some extent, the breaching of finance law. Deputy Secretary in the Department of Health and Aged Care, Mr Charles Wann, stated there was a ‘very strong delivery focus’ to deliver on decisions of government and he ‘didn’t see any motivation of malintent, improper purpose or personal bias or any sense of trying to hide anything or lack of transparency and intent to hide’.
3.71The department repeated this in response to questions on notice and in so doing suggested failing to act with probity or to act ethically only applied when such behaviour was motivated by malintent, improper purpose or personal bias:
The Department of Health and Aged Care (the department) acknowledges failures of process with respect to the recording of Community Health and Hospitals Program (CHHP) grant assessments and funding recommendations. The department’s conduct at the time was not motivated by malintent, improper purpose or personal bias.
3.72The Secretary of Health, Mr Comley, however, told the Committee during a subsequent hearing, ‘A lack of malintent is not an acceptable justification for not adhering to finance law’.
Decisions of Government
3.73The ANAO had found in its report that Health had used the rationale ‘decisions of government’ to administer grants in a manner that did not meet the requirements of the CGRGs and as the basis for not responding to advice from the Department of Finance.
3.74As noted above, in its report, the ANAO emphasised ‘decisions of government’ remained subject to the CGRGs.
3.75Health suggested in a letter to the minister, in November 2022, the creation of an additional category of grant in the CGRGs to ‘support timely delivery of published and explicit decisions of Government,’ and the development of ‘program level grant guidelines that can be re-used over subsequent years and funding rounds’.
3.76The Auditor-General stated, ‘we found … [the proposal for an additional grant category] a strange suggestion really, because the framework [CGRGs] has been put in place for the purpose of getting transparency and accountability around government decision-making, and it has a fair amount of flexibility in it to facilitate things … I don't know what the objective was other than to make things work faster, I assume, without applying the rules to them’.
3.77When questioned by the Committee, Health responded it was of the view it was ‘possible both to strengthen and streamline the grant policy framework’ to reduce the administrative burden and improve safeguards at the government decision-making level.
3.78During the Committee’s public hearings, Health expressed its view the rules with regard to grants must be regularly reviewed, particularly because this improves compliance. The Committee was told:
… the ability to keep reviewing those [CGRGs] to make sure they represent the best articulation of process and delivery is important. There's nothing special in this, but I think the ability to keep reviewing, keep talking to Finance and to keep looking at those guidelines and rules is always important … maintaining a focus on those guidelines: Are they up to date? Are they best practice? Do they manage the issues that we're trying to deal with appropriately? This is always important.
3.79Prefacing his comments by specifying he did not ‘want to in any way dilute the opening statement about malintent not being the threshold’, the Secretary, MrComley stated:
… if we want compliance across a range of things, we actually need to have a system that is as lean as it possibly can be so … those individuals don't get frustrated on the way. You increase compliance if you have a better set of rules.
3.80The Secretary pointed out:
The way this process should work is that, if you find a rule that's inconvenient or difficult, you should look at the purpose of the rule and then engage with the person who's responsible for making that rule to see if there's a more flexible way of doing that. If that can't be done, we still need to emphasise to people: how do we build our systems and processes from the start to make them as smooth as possible? A lot of it is asking how we can stay outcome focused but potentially build in the time in the process to allow the rules to be followed but the outcomes always to be delivered.