Canberra is sitting on hundreds of millions in grants savings

I spent my early career working as a deputy secretary in government, but the most recent 25 years building a business with a social mission. This has made me focus on the things governments talk about a lot but struggle to prioritise: productivity, operational simplicity, efficient administration, and deep respect for taxpayers’ money.

The shift to make these things real within government is urgent because Australia is once again entering a period where governments, particularly the federal government, are under intense pressure to reduce budgets, improve service delivery and justify public sector expenditure.

Some downsizing of the public service is necessary and sensible. Some of it will be deeply counterproductive, especially where capability is stripped out of areas that genuinely require expertise. If governments are serious about productivity reform, there are areas where savings and improvements are plainly achievable without damaging frontline capability. One of those areas is grants administration.

The grants administration problem is a wicked one for the feds.

This is an area I know intimately, having worked across both state and federal reform efforts for many years.

Governments spend tens of billions of dollars annually through grants programs. These programs are critical policy instruments. They nudge us towards important outcomes in health, education, the arts, regional development, research, social services, sport, infrastructure and international development. Yet the systems used to administer grants are often fragmented, bureaucratic and extraordinarily labour-intensive. This creates waste. A lot of waste.

Some years ago, the federal government established the Grants Hubs model. At the time, the logic was understandable: centralise administration, standardise processes and improve efficiency and consistency. In practice, the model has proven to be deeply inefficient, burdening grant managers and grantees alike with bureaucracy and exorbitant costs.

Today, the Grants Hubs system employs more than 1000 staff and costs in excess of $140 million annually. Much of the work of grantmaking has been centralised into administrative units, many of which lack subject-matter expertise in the policy areas they support. That matters deeply. Grants are not merely transactional processes. Good grants administration requires an understanding of program design, stakeholder ecosystems, risk, community capability and policy intent. Separating grants management from domain expertise frequently weakens outcomes rather than improving them.

Meanwhile, the federal government’s broader grants reform agenda has largely stalled. Its appetite and capacity for reform, which in truth barely existed other than in name, has diminished to zero. Much of its effort appears to have focused on updating guidelines and governance frameworks rather than fundamentally redesigning systems and operating models.

Centralising the wrong things

The problem is not standardisation. In fact, governments absolutely should standardise grants technology, data structures, applicant experiences and reporting frameworks wherever possible. Shared platforms create consistency, reduce duplication and improve visibility across government.

The mistake is centralising operational control and expertise into large administrative hubs removed from policy departments.

The key to effective grants reform is this: Centralise the technology. Build in minimum standards. Decentralise the expertise. Competitively market test the costs in running the programs.

Departments should retain responsibility for designing and administering grants programs because they understand the policy intent, the stakeholder environment and the delivery risks. Health grants are not the same as arts grants. Research grants are not the same as Indigenous community grants. International development grants are not the same as local infrastructure programs. Knowledge of the policy area matters enormously.

The federal government’s Grants Hubs model has effectively stripped much of the operational responsibility for grants administration away from departments and relocated it into large centralised administrative structures. The result has been predictable: more layers, more process, less flexibility, less clarity, weaker accountability and dramatically higher administration costs.

The states are moving ahead

What makes this more frustrating is that several state governments are already demonstrating what effective reform can look like.

New South Wales began a substantial grants reform program several years ago, under a Liberal government, and has continued at pace under a Labor government, proving politics does not always get in the way of good reform. The central grants unit has moved NSW agencies towards a unified grants platform that allows standardisation where appropriate, while still preserving flexibility for departments with different policy needs. The reform has enabled visibility and standardisation across government while saving millions in costs and without imposing rigid uniformity.

For transparency, I should acknowledge that after a lengthy procurement process, NSW selected SmartyGrants (my company’s homegrown Australian software) as the tech tool of choice for its reform program.

Other states, including South Australia, Tasmania, Western Australia and Queensland, are also undertaking reforms using different governance approaches but pursuing similar objectives: reducing duplication, simplifying administration and improving consistency. (My home state of Victoria is lagging well behind.) These reforms are saving governments tens of millions of dollars while improving usability for applicants and administrators alike.

A better federal model already exists

If the federal government is offended by learning from state-based initiatives, it can look to its own backyard instead. Some years ago, an innovative section of the Department of Foreign Affairs and Trade was exempted from the Commonwealth Grants Hubs model. Instead, it implemented a far leaner centralised grants administration approach (yes, using SmartyGrants) to manage complex international programs operating across more than 40 countries.

The entire system is managed by just two extraordinary public servants and entails software costs of roughly $200,000 annually. This is not a simple grants environment. The department’s programs are sophisticated international operations that involve diverse jurisdictions, currencies, legal systems and risk environments.

Under the Grants Hubs operating model, a comparable system would require probably dozens more staff and another $15 million in additional administration costs. That should prompt serious reflection. I do hope the Department of Finance might have a moment of lucidity.

The federal government should seriously consider dismantling or radically shrinking the Grants Hubs model and returning operational responsibility to departments, supported by a modern shared technology platform and a small central coordination team. You do not need 1000 people in a grants bureaucracy to administer grants effectively. You need good systems, clear rules, clean data, and capable departmental staff who understand the outcomes grants are supposed to achieve.

The budget savings are sitting in plain sight

Canberra is currently searching everywhere for budget savings. Yet one of the clearest opportunities sits in full view. Most federal departments are wasting tens of millions of dollars annually on unnecessarily cumbersome grants administration processes, duplicated systems and oversized operational structures. Across government, the inefficiency almost certainly runs into hundreds of millions.

Importantly, these savings do not require reducing frontline services or abandoning important programs. In many cases, reform would actually improve service delivery while reducing costs. Imagine this: community organisations spend less time navigating bureaucracy; departments regain control over program delivery; ministers are able to see outcomes more clearly; taxpayers receive better value for money. That is what genuine productivity reform looks like – not arbitrary staffing cuts, endless reviews, another rewrite of the grants guidelines, another auditor-general’s report. Less vapour, more substance.

The potential savings have been identified, the models exist, and the case is unambiguous. The only thing missing is the political will to act.

A version of this article was first published in The Mandarin

Denis Moriarty AM is the founder and group managing director of Our Community, which developed and hosts the SmartyGrants platform. Previously, he was head of the Victorian government’s Information Service, MD of Strategic Australia and commissioner, and deputy CEO of the Victorian Tourism Commission.