Committee conclusions and recommendations
2.1
Grant programmes are a well-established mechanism that are commonly designed and implemented to support governments to achieve their stated policy objectives. Commonwealth departments are responsible for developing their own grants administration practices in accordance with the Commonwealth Grants Rules and Guidelines (CGRGs). This must include, where applicable, attention to identification and communication of risks associated with programme design, including any short timelines for programme delivery. Given the common application of grant programmes to deliver government funding, it is of ongoing concern to the Committee that the Auditor-General found that departments: did not clearly set-out the eligibility requirements in the programme guidelines; treated applicants inconsistently in relation to the stated eligibility requirements; and did not conduct eligibility assessments in a transparent or timely manner. There were also instances where ineligible applications proceeded through to merit assessment, and in some cases, ultimately funded.
2.2
The Committee views the matter of ineligible applications being recommended for further assessment (which may also result in funding), as an important public administration issue. If grant applications do not meet policy objectives, as expressed in eligibility criteria, they should not receive funding. It is crucial granting departments across the Commonwealth implement robust arrangements for eligibility assessments—so that eligibility criteria are clearly established, published and consistently applied. The Committee emphasises that departments must immediately give attention to, and remedy, the shortcomings identified by the ANAO so that the decisions to select and recommend grant recipients are transparent, accurate and timely.
2.3
The Committee reiterates that all departments, not just those subject to this Inquiry, should focus, where required, on implementing arrangements and processes that ensure:
sufficient grants expertise in assessment teams;
sufficient education of relevant officers on the CGRGs, so that officers understand and apply these rules and guidelines correctly and consistently;
consistency in the assessment process, including through robust internal quality assurance and review mechanisms, so that all aspects of a programme’s guidelines are taken into account and consistently applied;
accurate and complete records are kept, including making clear to staff the purpose for which records are kept. Defining the types of activities and formal parts of the process, for which formal records must be kept, would assist in achieving this outcome. Records not only inform and support the outcomes of assessments at the front-end of the grant lifecycle, but are ultimately the basis for formulating appropriate and thorough advice to decision-makers, including Ministers, so that the minimum requirements of the CGRGs are fulfilled; and
the establishment and maintenance of an active Grants Community of Practice, so that there is a forum for best practice grants management and the opportunity to openly create an improved governance culture for grants administration.
2.4
The Committee acknowledges the importance of the two Grants Hubs, created as part of the Streamlining Grants Administration Initiative, in fostering consistency, thoroughness, and compliance with the CGRGs across these front-end processes. The Committee strongly encourages departments to work closely with the Grants Hubs, particularly during this period of transition.
2.5
Notwithstanding that different departments have chosen (and will choose) to engage at different service levels with the grants Hubs, policy control and activities such as advice to Ministers remain with the granting department. As such, departments must be mindful that where some of its grants administration functions are managed externally, relevant grants administration expertise is still retained so that effective engagement with the Grants Hubs occurs. The shared arrangements may also create risks where responsibilities are not clearly articulated or understood and intentions and outcomes may misalign.
2.6
The Committee recommends that the Department of the Environment and Energy, the Attorney-General’s Department and the Department of the Prime Minister and Cabinet establish partnership agreements with their respective Grants Hubs, where they have not already done so, and ensure that new or existing agreements:
outline individual and shared responsibilities and corresponding expectations of each party;
provide for joint risk identification and complementary risk management arrangements, including where applicable, for programme design. These risks may be considered either in the agreements or subsidiary risk management plans, with the risks appropriately informed by the different level of service agreement; and
clearly articulate overarching assurance processes that support the balance between better practice administration and the achievement of policy outcomes.
2.7
The Committee also notes that the ANAO made three recommendations, one for each of the respective departments, to address continuing deficiencies in their approach and processes with regard to eligibility and merit assessments. The Committee is pleased that the respective departments are making progress against these recommendations, and emphasises that full implementation is critical. The Committee will recommend that each department separately report back to the Committee on further progress against these recommendations in Chapter 4.
Review of the evidence
2.8
This section focusses on the evidence received by the Committee regarding the application and assessment processes performed by the:
Department of the Environment and Energy (DEE)—for the Award of Funding under the 20 Million Trees Programme (20 Million Trees);
Attorney-General’s Department (AGD)—for the Living Safe Together Grants Programme (LST); and
Department of the Prime Minister and Cabinet (PM&C)—for the Indigenous Advancement Strategy (IAS).
Award of Funding under the 20 Million Trees Programme–DEE
2.9
The objective of the ANAO’s audit into 20 Million Trees was to assess the effectiveness of the DEE’s award of funding. To form a conclusion against this objective, the ANAO examined a number of the department’s activities, including the arrangements DEE established to assess applications for eligibility, as well as for merit.
2.10
The ANAO concluded that DEE appropriately designed 20 Million Trees to align with the government’s programme objectives, with the department establishing a framework to deliver key programme elements, such as published programme guidelines that addressed the mandatory requirements of the CGRGs, as well as planning and guidance materials. However, the ANAO found that there were ‘widespread weaknesses in administrative practices’, including in the receipt and assessment of grant applications. The audit highlighted that these shortcomings undermined the effectiveness of the funding awarded under 20 Million Trees, and that there is ‘significant scope for the department to improve this aspect of its grants assessment practices.’ In particular the audit found that:
published grant assessment processes were not followed;
eligibility assessments were not conducted in a transparent or timely manner; and
assessment practices were not efficient.
2.11
As a result, the ANAO report identified that DEE did not properly handle late applications. Thirty-one late applications progressed to the eligibility and merit assessment process, which unnecessarily expanded the workload of assessors. A further two late applications were accepted without a documented rationale and contrary to the advice of the assessment team and probity advisor (noting however, that neither was recommended to receive funding).
2.12
The audit also highlighted that the assessment of application eligibility was an area where DEE ‘performed particularly poorly’. The ‘consistency and transparency of decision-making and, ultimately, accountability’ was adversely affected by the range of issues in this area, which included:
… inconsistent treatment of applicants in relation to the eligibility of project activities; progressing ineligible applications through to later stages of the assessment process; and the lack of timely consultation with the appointed probity advisor.
2.13
Seventeen applications that failed published eligibility criteria were ultimately funded (under the two competitive grants streams), including 12 that were funded for ‘ineligible activities’ (the funding awarded totalled $58 241). While the department reallocated funding for nine of these grants, to other activities such as ‘administration’, three applications were funded for ineligible activities. The ANAO identified that the department, as part of strengthening its administration in this area, should establish quality assurance processes so that funding for ineligible activities is not an outcome of future grant rounds (refer to Chapter 3 which outlines DEE’s latest quality assurance activities). Further, the ANAO concluded that if DEE had reallocated the $58 241 to fund additional trees, as opposed to ‘other’ funded items, the department could have delivered approximately 12 000 additional trees. Further, the ANAO stated that:
A key objective in implementing a granting activity is to maximise the cost-effective achievement of the outcomes sought by government, while providing transparent and equitable access to grants.
2.14
At the public hearing departmental representatives were asked why these 12 projects were funded, and how the $58 241 was allocated. The department advised that the approach at the time was:
… based on the advice from the then probity adviser, that the ineligible elements of those applications could be addressed in the contracting phase, after the project had been approved, and then, in the contracting phase of that project, negotiations would be held with the applicant to remove those ineligible activities.
2.15
The department highlighted in the hearing that they were not suggesting that this approach was ‘correct’, but that it was the approach ‘at the time’. At the public hearing the Committee queried whether the probity advice referred to was provided in writing. The department further submitted that the probity advisor supported, in writing, DEE’s approach to eligibility. The probity advisor in fact concluded that the proposed approach to be taken ‘is appropriate and defensible from a probity perspective’, but with the following stipulation:
We note that there are some applications… with eligibility issues flagged that require resolution… We assume that the Department will resolve those issues with the relevant applicants prior to entering into agreements with them for funding, such that no funding agreement is entered into on a basis not consistent with the eligibility requirements in the published Guidelines.
2.16
The department proceeded to execute grant agreements for projects that did not meet eligibility requirements against the probity advice.
2.17
The ANAO also found that for the 20 Million Trees competitive grants stream, DEE ‘did not take any action’ in response to the 93 applicants that had made false declarations on their forms. Further explanation during the public hearing was sought from the department, particularly the reason/s for the department’s inaction. DEE considered that this was a matter ‘where there may not have been as full forethought’ on what it was asking applicants to declare, particularly that DEE was asking applicants ‘things that they effectively could not declare’. The department informed the Inquiry that it has:
… looked to revisit [for future rounds] some of those things that we were asking people and to think carefully about whether they are actually feasible, and do they matter for the applicant, for the grant and for the risks around the project.
2.18
The ANAO’s examination of DEE’s arrangements to assess applications for merit also uncovered a number of shortcomings. While the department assessed each application against the published merit assessment criteria, some of the criteria were not weighted, as outlined in the published grant guidelines. As a result, 15 applications which would have been ‘in contention’ for funding, received an unweighted score that no longer placed them within the range of applications that were funded. The audit stated that the department’s ‘failure to follow their published process for merit assessment impacted on the transparency and integrity of the granting activity’.
2.19
The ANAO made two recommendations in its report. One recommendation was specifically aimed at improving the department’s eligibility assessment processes—that the department ‘should implement arrangements for eligibility assessment that clearly establish eligibility criteria and ensure that these criteria are consistently applied’. DEE agreed with the ANAO’s recommendation, and acknowledged in its submission the issues with its approach to eligibility assessment, including that for some cases, the eligibility guidelines were not consistently applied.
2.20
The department highlighted in its evidence to the Committee that its engagement with, and commitment to, the Streamlining Government Grants Administration Initiative is relevant to both of the ANAO’s recommendations for 20 Million Trees as well as the department’s future administration of grants programmes. DEE stated that by working with the Business Hub, it will ensure:
… future administration of portfolio grant programs is undertaken in a consistent and thorough way throughout the lifecycle of each grant program, including the design phase and development of eligibility criteria.
2.21
The department acknowledged that one of the challenges in transitioning to the Business Hub, will be to ensure that, where some of the grants administration functions are no longer managed by the department, relevant expertise remains, so that DEE can ‘engage positively’ with the Hub to deliver its grants programmes.
2.22
More specifically, in its submission to the Inquiry, DEE highlighted a number of actions the department is taking to address the ANAO’s recommendation and improve its processes to ‘ensure’ consistent alignment with the Government’s overarching grants framework. The department outlined that it has ‘prioritised improving eligibility criteria and assessment’ for future grant rounds of 20 Million Trees, and is also conducting activities to establish a robust application process. DEE further specified (see Box 2.1 below) improvements that it is in the process of developing for the next round of 20 Million Trees (Round Three), planned for launch in 2017.
Box 2.1: Improvements currently being designed for Round Three eligibility processes—20 Million Trees
Development of a new HTML application form which will be simpler for applicants to use, including design features to prevent applicants from nominating ineligible project dates and activities, or exceeding funding limits.
Revision of documents, forms and training materials related to Grants Round Three to clarify and simplify eligibility processes.
Revision of the applicant's ‘declarations’ to minimise the likelihood that applicants will inadvertently make false declarations.
Training assessors in the eligibility requirements for the Round and ensuring all assessors understand that the inclusion of any ineligible activities will mean the entire application will be ineligible for funding.
The Department has begun transitioning grant programs to the Department of Industry, Innovation and Science Business Grants Hub. By working with the Department of Industry, Innovation and Science, the Department will ensure future administration of portfolio grant programs is undertaken in a consistent and thorough way throughout the lifecycle of each grant program, including the design phase and the development of eligibility criteria.
A quality assurance process is also being included to confirm that the scoring formula has been correctly applied. Assessment plans and record keeping processes are checked by a senior officer. Assessment panels are chaired by an independent officer and overseen by the Probity Advisor.
2.23
The Committee sought further information from DEE on the assurance processes in-place to ensure that the CGRGs are followed for each grants programme. The department advised that it operates a monitoring and review programme for “finance law” compliance, which extends to the CGRGs. DEE also submitted that in transitioning to the Business Hub (administered by the Department of Industry, Innovation and Science), a number of ‘compliance (assurance) issues’ have been identified for resolution/clarification, and are being worked through by both departments.
Living Safe Together Grants Programme–AGD
2.24
The objective of the ANAO’s audit was to assess the effectiveness of the design of, and award of funding under, the LST. The ANAO examination included whether sound grants administration was applied by AGD, and in particular: that transparent and equitable access to the available funding was promoted through the application and eligibility checking processes; and whether the merit assessment process identified and ranked (in priority order) ‘the best applications’ against the published criteria.
2.25
The audit outlined that planning and design for the LST was conducted in a five week timeframe. Within this period ‘most’ of the important elements of programme design were undertaken. The programme guidelines were developed in less than one month and provided a ‘reasonable basis for the implementation’ of the LST. However, the guidelines did not inform potential applicants of the importance of the:
… link between receiving grant funding and registering on the Directory of Countering Violent Extremism Intervention Services (CVE Directory).
2.26
In this regard, the audit identified that in September 2015, 41 organisations had entered into funding agreements, of which 13 indicated their willingness to participate in the CVE Directory. Two organisations advised AGD that they would not participate, while the intentions of a further 26 remained unknown by the department. A clearer linkage was necessary, as the Attorney-General was advised by the department (at the time he was asked to approve funding) that funding recipients were expected to register for the CVE Directory upon completion of their projects.
2.27
AGD acknowledged that while some organisations happily work with government, they do not necessarily want to be included in a public list, such as the CVE Directory. At the public hearing, this matter was pointed to as an example where consultation with likely applicants on the proposed programme requirements would have been particularly useful to identify why applicants may not want to be listed in the CVE Directory (consultation is a theme which is explored further in Chapter 4, with regard to the Committee’s Inquiry into the IAS). The department flagged that it has reflected on whether it would be more appropriate if agreement from organisations to list on the CVE Directory is dealt with separate to the grants process—noting that ‘where we find ourselves doing a similar program again, I would probably think a little bit differently about that’.
2.28
AGD also advised that subsequently, it had ‘gone back and spoken to all of the organisations’, and that 28 organisations were now included on the CVE Directory (Support Services). The Committee heard that the CVE Directory also includes other organisations that the department works with who have agreed to be listed, but that did not receive grants under the LST.
2.29
Setting aside program design, the ANAO concluded that the application selection process and subsequent award of funding ‘were flawed in significant respects’. The ANAO identified that AGD’s ‘approach to administering programme eligibility was less than adequate’. The two main issues were that the:
requirements were not clearly set out in the programme guidelines; and
department did not assess whether applications had met each of the eligibility requirements, such that ineligible applications proceeded to the merit assessment stage.
2.30
The ANAO found that AGD’s approach to assessing LST’s range of eligibility requirements (as set out in programme documentation) was ‘poorly planned and ineffective’. Only a small number of those requirements were explicitly addressed in the assessment template. The audit’s analysis highlighted that ‘38 applications should have been assessed as ineligible, but instead proceeded to be assessed against the merit criteria (12 of which were subsequently recommended for funding)’.
2.31
The Inquiry flagged the matter of ineligible applications being recommended for further assessment as an important issue with respect to public administration. AGD was asked to explain why this outcome occurred. The department acknowledged lessons to draw from the eligibility assessment outcomes were that:
more grants expertise should have been brought into the eligibility assessment teams; and
there were some aspects in the programme guidelines that were not taken into account in terms of eligibility assessments.
2.32
Nonetheless, AGD was of the view that ‘a relatively robust process’ was undertaken and that the assessment teams ‘looked overall at the claims… and determined that they were appropriate to recommend funding for.’ During the hearing it was raised that if AGD believed there were reasons outside the programme’s existing parameters for applications to be recommended, this may have instead required an amendment of the assessment and criteria applied. AGD agreed that this was a ‘valid observation’ and that this point would be taken into account when developing or designing guidelines for future grants programmes.
2.33
In contrast to the findings on the eligibility assessment process, the ANAO identified that the design of the merit criteria were appropriate for LST and provided ‘a strong underpinning to the conduct of the merit assessment process’. Overall, the report concluded that ‘the assessment process provided a sound basis for the department to identify those applications that should be recommended for funding, and those that should be rejected’. However, AGD’s assessment of the programme’s first merit criterion was ‘inconsistent’ with the guidelines. As a result the audit revealed that:
… a significant proportion of the applications did not meet one or more of the published criteria. This included a high proportion (61 per cent) of applications not meeting the key policy criterion.
2.34
The 59 applications (or 61 per cent) did not achieve scores of 50 per cent or more against criterion one, and subsequently, 46 (of those 59) applications were fully assessed against the remaining merit criteria. The ANAO concluded that four of the 46, were ‘recommended to and approved by the Attorney-General for funding’.
2.35
The ANAO made one recommendation in its report to AGD, which consisted of two parts. The first part stated the need for the department to effectively address the continued shortcomings in its approach to ‘assessing the eligibility and merit of grant applications’.
2.36
The department agreed to the recommendation and its submission to the Inquiry outlined a number of actions it has taken, including:
developing mandatory checklists and guidance material for grants staff;
developing ‘Knowledge Test’ questionnaires to educate programme officers about the department’s Grants Administration Guide and the CGRGs; and
establishing and maintaining an active Grants Community of Practice.
2.37
With respect to the Grants Community of Practice, AGD further outlined that it was established in 2015 (as a direct response to a previous audit report), and has since met eight times. The most recent meeting, held on 22 March 2017, ‘heard an update from the department’s internal auditors on common themes arising from the audit findings and an ongoing review of grants management processes’. The Department of Social Services and the Department of Industry, Innovation and Science have also presented to the Community of Practice on the whole-of-government Streamlining Grants Administration Initiative, and the associated grants Hubs.
2.38
AGD also advised the Committee that it will monitor implementation of its improvements to its grants administration process so that the ANAO’s recommendation ‘continues to be incorporated into administration of its grants programmes’.
Indigenous Advancement Strategy–PM&C
2.39
The ANAO’s audit into the IAS assessed whether PM&C had effectively established and implemented the strategy to achieve the Government’s outcomes. To form a conclusion against the audit objective, the ANAO examined a number of areas, including the department’s administration of grants for the IAS.
2.40
The ANAO found that the department’s processes to select the best projects in support of the Government’s outcomes ‘fell short of the standard required to effectively manage a billion dollars of Commonwealth resources’. The ANAO identified that there was limited assurance available that the projects selected for funding supported the department’s desired outcomes. In particular, the ANAO found that PM&C did not:
… assess applications in a manner that was consistent with the guidelines and the department’s public statements…
2.41
The ANAO highlighted that approximately half (1233) of the total number of applications (2472) received were assessed as non-compliant against the application requirements (which included, maximum page counts, attachments and application size). The report also noted that:
prior to March 2016, applicants were also required to submit a single application form for funding under the strategy, regardless of the number of initiatives for which funding was sought; and
the application form, requirements and process was not tested with applicants prior to the opening of the round.
2.42
The ANAO received feedback from 108 applicants, with 44 per cent (47 applicants) rating the difficulty of the application process as ‘high’, while 18.4 per cent (21 applicants) gave a rating of medium.
2.43
To achieve consistency in the assessment process, PM&C developed mandatory training for staff, however, could not provide assurance to the ANAO that staff attended the training. Furthermore, the audit concluded that the department’s assessment process was inconsistent with the guidelines and internal guidance. Applications were:
… assessed against the selection criteria, but the Grant Selection Committee did not receive individual scores against the criteria or prioritise applications on this basis. The basis for the committee’s recommendations is not documented and so it is not possible to determine how the committee arrived at its funding recommendations.
2.44
Significant flaws in the department’s documentation of assessments and decisions were also identified in the ANAO’s audit, which stated that:
Internal quality controls and review mechanisms did not ensure that applications were assessed consistently, and in some instances introduced errors. The department did not document key decisions or record compliance with probity requirements.
2.45
With regard to documentation of funding recommendations, the ANAO was provided with a spreadsheet in which the Grant Selection Committee recorded the rationale for its individual funding recommendations. However, the audit’s analysis revealed that for 61 of the 85 projects for which the committee recommended a funding amount of ‘five per cent or less of the amount requested, the basis for the funding decision was not recorded’.
2.46
PM&C advised the Committee that during the course of the audit, the department had discussed with the ANAO that formal records of the Grant Selection Committee were not kept. PM&C also acknowledged that formal records of ‘every single meeting’ of the Grants Selection Committee should have been kept, but contextualised this matter by stating that:
There were… 5000 projects being looked at… [and the Grants Selection Committee] did a quite significant briefing to the minister around the set of recommendations and why they had arrived at their recommendations, and that could have been based on scores—the assessment score, the needs score—but also available funding and what previous funding an organisation had.
2.47
The ANAO reiterated to the Committee that the most important aspect for record keeping, from an accountability and transparency perspective, is its purpose, not the process, highlighting that the CGRGs state what should be provided, at a minimum, as part of departments’ advice to Ministers. Complete and accurate records form the basis of the quality of departments’ advice to Ministers. Without keeping complete records throughout the process, PM&C was unable to fulfil this requirement. (The issue of providing complete and accurate advice to decision-makers, including Ministers, is discussed in further detail in Chapter 3).
2.48
As part of the Inquiry, the department was requested to further advise on a number of specific record-keeping matters: what PM&C considers to be formal engagements for which ‘notes’ are kept; and what records of assessment panel deliberations/recommendations and delegate decisions are kept. Through the department’s Regional Network, formal engagements such as contract negotiations and community meetings can occur and ‘generate more formal record keeping’. Further, the department’s grant management system stores: all applications; assessment results (including scores against the selection criteria); Regional Manager endorsement; Programme Owner recommendation; brief of recommendation to the Delegate and Delegate’s decision.
2.49
Regarding other limitations within the assessment process, the ANAO report highlighted that the approach of amalgamating individual criteria scores into one score meant that neither the Grants Selection Committee nor the Minister were provided with assessments against the selection criteria that accorded with the CGRGs.
2.50
The ANAO’s report made four recommendations, one of which targeted PM&C’s future IAS funding rounds, recommending that the department:
a.
publish adequate documentation that clearly outlines the assessment process, the department’s priorities and criteria for decision-making; and
b.
implements the process consistently.
2.51
The department agreed with the ANAO’s recommendation and informed the Committee of progress against this recommendation, specifically that the department has:
revised the IAS Guidelines. The revision includes ‘greater clarity around application processes, a simpler application form, further information on the five programme areas and clearer guidance on the assessment criteria’; and
built into its grants management arrangements a ‘strengthened’ Assessment Management Office (AMO).
2.52
PM&C further outlined that the ‘strengthened’ AMO was in place in March 2016 (after the release of the revised guidelines) to ensure compliance with the CGRGs as well as the ANAO’s Implementing Better Practice Grants Administration.
2.53
As at May 2017, the AMO consisted of 12 staff. The AMO manages and coordinates, end-to-end, the: application receipt; assessment; and selection process for all IAS funded activity. PM&C advised the Inquiry on the expanding role of the AMO, including the advice and support it provides to the department’s assessment teams. Box 2.2 below outlines the role of the AMO, including its main functions and activities.
Box 2.2: Role of the AMO
The AMO provides advice and support including, but not limited to:
working closely with programme areas and the Regional Network to establish assessment panels;
providing advice to assessment panels on the assessment process, probity and risk. Each application received under the IAS is subject to an assessment. Applications are assessed against the IAS selection criteria in the IAS Guidelines and also published in the relevant application kit. Each application is assessed by an assessment panel made up of Departmental staff;
implementing an automated process (wherever possible) for the application receipt, assessment and finalisation of selection process for each grant activity;
receipt and checking of all applications for completeness, compliance and eligibility;
recording a risk rating for each applicant;
overseeing the Department’s assessment process; and
assisting Programme owners with preparing briefing/s for the Minister or delegate and advising on the appropriate content as required.
2.54
PM&C was asked during the Inquiry to further articulate the arrangements in-place to ensure that staff follow the correct processes and criteria, including their understanding and application of the CGRGs. PM&C submitted that:
Applications are submitted against the selection criteria using the PDF SmartForm, which pre-loads application information, including attachments into FOFMS (grants management system).
AMO checks the application for completeness, eligibility and compliance. If the application is compliant and eligible, it is assigned to the Assessment Panel.
Assessors are provided with an Application Assessment Matrix which provides the scoring ratings and description as to the applicability of the rating for each criterion.
2.55
Further, the department also outlined the current processes in place to help ensure staff compliance with the CGRGs. The department’s ‘Grants Operating Model provides the framework to assist staff to deliver the Strategy… [and the] recently updated Grants Administration Manual (GAM) provides staff with a step by step guide through each stage of grants administration, including requirements to adhere to the CGRGs and other relevant legislation’. PM&C also highlighted that:
guidance, checklists and templates are provided for staff to complete a Grant Design Strategy during the grants lifecycle design phase, which address ‘critical elements’ of the grants rules and guidelines; and
all grant applications are received through AMO.