Grants watch 2024: Audits, investigations and reviews

Independent’s bid to end pork barrelling

Independent federal MP Helen Haines has introduced an “End Pork Barrelling” bill to end the practice of targeting marginal electorates for big-spending grant programs in a bid to win votes.

Ms Haines said her private member’s bill would increase fairness, transparency and accountability, and followed multiple representations by integrity institutions, auditors and political watchers for restrictions on the practice.

These representations included a keynote address at SmartyGrants’ 2022 Grantmaking Intelligence Conference by former Grattan Institute CEO Danielle Wood, who now heads up the Productivity Commission.

“Taxpayer money should be spent on the needs of communities not the wants of the major parties,” Dr Haines said in a statement last month.

“Funding decisions should be evidence-based, with grants awarded on merit and need.”

Dr Haines said elections were too often a time in which “the major parties use taxpayer money to shore up votes in marginal seats”, citing “sports rorts”, commuter car park grants, and spending on community solar batteries.

She claimed the latest Dunkley by-election in Melbourne’s southern suburbs had been yet another example of pork barrelling in action, although she did not specify the promises she was referring to.

“Rorting grants programs wastes money and destroys public trust in government processes.”

Dr Haines has worked with the Centre for Public Integrity to draw up the bill, which would:

• require all grants programs to have clear and publicly available selection criteria
• ensure robust reporting to the Parliament to increase accountability
• create a parliamentary committee with oversight of grants administration and guideline compliance

The bill is consistent with the 2021 call by the Centre for Public Integrity for major reform to the Australian grants system.

Dr Haines’ bill would require ministers to tell Parliament when they give money to their own electorates, and when they have ignored the advice of their own department.

She described the bill as comprising practical reporting measures to ensure both Parliament and the public know how funding decisions have been made and why grants have been awarded.

Fellow independent David Pocock said he would back the bill and he was “hopeful” that Labor would support it in the Senate.

Dr Haines is the deputy chair of the parliamentary oversight committee for the National Anti-Corruption Commission.

Dr Haines will join Catherine Williams and Geoffrey Watson SC from the Centre for Public Integrity to discuss the issue in a free livestreamed event from Wodonga at 7pm on Wednesday, March 6.

Research reveals most business grants aren’t competitive

A research study has found the vast majority of federal grants handed to business between 2018 and 2022 were non-competitive.

Less than 17% of the $3 billion awarded went through a competitive process, representing a massive skewing toward the use of non-competitive grants for business purposes. By comparison, general community grants were twice as likely to go through a competitive process.

Non-competitive grants are handed out on a demand basis, meaning business applicants that meet the criteria are awarded grants. Applications do not require any assessment of merits relative to other applications.

The Institute of Public Accountants-Deakin SME Research Centre study, released in early February, confirms concerns raised earlier by the Australian National Audit Office about the high rate of non-competitive grants.

Key findings:

• Nearly 84% of business grants were awarded on a “demand-driven” basis
• Competitive selection processes were least likely for business development, small business and innovation grants
• Small business grants awarded on an ad-hoc basis (at ministerial discretion) had higher average values than those using Commonwealth rules and guidelines
• $540 million in ad hoc grants were awarded “with almost no public scrutiny or oversight”
• The average value of individual business grants was nearly $228,000.

Centre director Professor George Tanewski said, “These reports raise serious questions about the integrity, transparency, and accountability of a Commonwealth Government system that hands out billions of taxpayer dollars to companies with virtually no strings attached.”

The study is the first of a three-part series to be published by the middle of 2024. The next report will examine the productivity and performance of companies that receive grants, with the final report to address community grants in Australia.

Read the full report

Federal watchdog agrees to more grants scrutiny

Australia’s auditor-general has agreed to recommendations from a wide-ranging inquiry into Commonwealth grants administration.

Grant Hehir, the head of the Australian National Audit Office (ANAO), has written to the Joint Committee of Public Accounts and Audit promising to adopt two recommendations affecting the agency:

• to consider auditing the process by which the federal finance minister is told of grant approvals which are against the recommendations of an awarding agency
• to include an information report on federal government grants reporting in the ANAO’s 2024–2025 audit program.

The ANAO is so far the only agency to have formally responded to the eight recommendations by the parliamentary committee, which holds Commonwealth agencies to account. The Joint Committee examined seven grants programs as part of the grants inquiry and tabled its findings in June last year.

The inquiry made eight recommendations after discovering:

• many instances of non-compliance with the Commonwealth Grants Rules and Guidelines (CGRGs)
• a growing trend towards non-competitive grant processes
• a lack of definition of election commitments
• inadequate records of decisions taken by officials and ministers
• the growing use of unspecified “other factors” in grants assessments.

The inquiry supported the extension of CGRGs to all Commonwealth entities and proposed that “grants hubs” used to administer funding should be better planned, face more stringent performance measures, and improve their data quality.

A Joint Committee representative said the remaining responses were expected by May 2024.

Read the full report here.

Agencies can’t risk ignoring insights

The latest edition of the Australian National Audit Office (ANAO) journal Insights reveals a close connection between organisations facing adverse overall conclusions in audits and those facing negative risk management findings.

Insights: Audit Lessons, published in January, reveals that 19% of all recommendations that follow investigations – including those affecting grants – relate to risk management.

The ANAO looked at audits over the past five years to distil eight lessons:

• Put the fundamentals in place
• Create a positive risk culture
• Tailor administration based on risk
• Embed risk management into decision making
• Establish fit-for-purpose risk controls and treatments
• Keep a watch out for emerging risks
• Consider additional factors for shared risks
• Continually monitor and review.

Insights provides a plain English explanation of those lessons, laying out processes to check that entities have good practices.

Several case studies highlight common strengths and weaknesses among organisations, along with suggested areas of improvement, and links to appropriate resources are provided.

Read more of the ANAO’s Insights publication.

Read the SmartyGrants 2021 whitepaper Risk Management and the Grantmaking Lifecycle.

Health care report lands, black spot probe underway

Grantmakers with an interest in evaluation will be interested in the recent review of the federal Health and Aged Care department’s Primary Health Networks program.

The Australian National Audit Office (ANAO) has just released an assessment of the department’s performance management framework. This follows submissions to the inquiry from across the health sector, which closed late last year.

The study examines:

• how well the department established a performance management framework for the Primary Health Networks program
• whether the department ensured that the terms and conditions of the program’s grants were followed
• whether the program is meeting its objectives,

The Primary Health Networks program aims to provide for the health needs of different regions, while targeting priority areas such as mental health, Aboriginal and Torres Strait Islander health, population health, the health workforce, digital health, aged care, and alcohol and other drug services.

The audit found that the department had been “partly effective” in its performance management, but it also found a series of weaknesses. The ANAO made eight recommendations including calling on the department to “fully comply with transparency and accountability requirements established in grant agreements”.

Other recommendations related to better performance measures; better risk methodologies; better data assurance; more prompt, detailed and public reporting; better IT systems; and a new evaluation plan to show whether the network was meeting its objectives.

The department agreed to all of the recommendations.

Read the full report.

Separately, the ANAO is preparing a report into the Mobile Black Spot Program and is set to release the results in May.

Submissions to that inquiry closed recently, with the auditor set to examine round six of the program. The inquiry will examine whether the program followed Commonwealth guidelines, the grant guidelines themselves, and whether the funding decisions were properly informed by clear advice.

Tasmanian election puts grants probe in spotlight

Grants have again been the subject of political claims in an election campaign, as the state’s integrity watchdog expressed disappointment that recommendations to clean up grants before the state elections were ignored.

Tasmanians are set to go to the polls on March 23 after Liberal premier Jeremy Rockliff called an early election to form a new government with a clear majority.

The battle is already being fought over the controversial Macquarie Point stadium, alongside concerns about health, housing, and of course the state’s economy.

Serious questions are also being raised about Integrity Commission investigations involving grants.

While the Commission has previously stated it has been investigating two elected officials over separate grant programs, those politicians have not been formally named.

The Integrity Commission’s “Olegas” probe – launched in 2022 – is examining the “improper expenditure of public funds and failure to declare and manage any conflicts of interest”.

According to the Commission’s most recent annual report, “Assessment Olegas considered allegations that a grants program improperly used public funds to pursue electoral goals, and that conflicts of interest were not properly declared”.

Similarly, the Integrity Commission investigation dubbed “Loyetea” is looking into a politician’s “failure to declare and manage conflicts of interest when making policy and expenditure decisions”.

The Labor opposition has now called on the Rockliff government to out those under investigation. Labor’s economic development spokesperson, Dean Winter, in a statement released last month, demanded answers.

“Jeremy Rockliff has one simple question to answer today: is Jane Howlett (Lyons MP) being investigated by the Integrity Commission? A simple yes or no is all that's required.

“The Premier cannot simply say this is 'in the past'. A two-year investigation by the Integrity Commission would mean it is very much a current issue – one that he would be aware of.”

Mr Winter said it appeared “almost certain” that a key member of Rockliff’s team was under the microscope and said there appeared to be no laws preventing the MP in question from being named.

Anti-corruption expert Geoffrey Watson from the Centre for Public Integrity told the ABC last month that in the interests of transparency, voters should know more about who and what is being investigated before the polls are held.

The Integrity Commission has previously released two papers examining ethical and misconduct risks during Tasmanian elections.

The first paper, published in 2021, dealt with pork barrelling, which it also referred to as “indirect electoral bribery”, and it proposed a series of reforms, finding “It is not currently possible for the Tasmanian Electoral Commission to adequately investigate or enforce compliance with the corrupt practices provisions in the Tasmanian Electoral Act.”

A 2022 paper examined grant commitments during elections, and at the time urged the government to introduce tougher guidelines before another election was held, including introducing new mandatory grant rules modelled on the Commonwealth Grant Rules and Guidelines.

Asked to comment on those recommendations, Integrity Commission CEO Michael Easton this week said: “The Tasmanian State Government is yet to respond to the Integrity Commission’s recommendations in these reports.”

“This is disappointing, and we hope to see reforms implemented to improve the safeguards around the use of public funds.”

$5 billion NSW covid-19 grants program ‘lacked integrity’

The state auditor for NSW has criticised a $5 billion grants program aimed at helping communities to recover from the effects of the covid-19 pandemic.

The WestInvest program, since renamed the Western Sydney Infrastructure Grants Program, had the aim of building new and improved facilities and infrastructure to help communities hit hard by covid-19.

The program, which was first announced in September 2021, was divided into three streams:

• $3 billion for NSW government projects, with funding open to government agencies
• $1.6 billion for competitively assessed grants for community projects, open to organisations in 15 local government areas (LGAs) west of Sydney
• $400 million for local government projects in those 15 LGAs.

The investigation by the Audit Office of NSW– released in late February – found that:

• the program “lacked integrity”, and wasn’t informed by research or analysis that would justify the spending
• $1.1 billion of the funding was allocated to projects considered of moderate or low merit
• the government failed to consider the program’s impact on the state's credit rating
• the treasurer’s office made program design decisions without consulting affected communities, for reasons not documented or made public
• funding allocations for 11 of 27 projects announced by the former government (worth $1.5 billion) were redirected to 17 other projects after Labor took office at the NSW state election
• funding allocations did not follow departmental advice, while many funded projects did not meet the program objectives
• two rounds of the program were largely administered effectively, although there was a “significant imbalance” in funding between the 15 local government areas.

In examining the program, the auditor acknowledged that NSW Treasury was asked to develop the program quickly, limiting its ability to conduct a thorough analysis to support its development. No business case or economic analysis was conducted. Decisions about eligibility, focus areas, and LGAs able to apply were all made by the treasurer’s office.

The auditor recommended:

• considering whether competitive grants were the best way to achieve program aims
• completing program design and guidelines before announcements
• ensuring adequate quality assurance
• ensuring departmental advice was distinct from other advice or political considerations.

Officials from the Premier’s Department and from NSW Treasury acknowledged the report and recommendations.

The secretary of the Premier’s Department, Simon Draper, said in his response, “I fully support the process of ongoing review and evaluation of grant activities across NSW grants programs to drive continued improvement and uphold the public sector values of integrity, trust, accountability and service.”

Read the report in full.

$11 billion Victorian covid grants scheme hit by fraudsters

A report released by Victoria’s auditor-general has found “a risk of significant fraud and serious deficiencies in grant program delivery and controls over fraud and error” during the Victorian Government’s covid-19 grant payments program.

The Victorian Auditor-General’s Office (VAGO) assessed how $11 billion in grants were spent between 2020 and 2022 and found “prima facie evidence that there was a risk of significant fraud”, especially in grants given to businesses.

“It remains likely that undetected fraud occurred and errors were made in payments to some applicants,” the probe found.

The investigation focused its attention on grants handled by the government’s former Jobs, Precincts and Regions department, which was authorised to rapidly deploy a large-scale grants program to support businesses at the start of the covid-19 pandemic.

The programs mostly closely examined were the Business Costs Assistance Program (BCAP) and the Licensed Hospitality Venue Fund (LHVF) grants programs.

The BCAP saw $4.5 billion paid out to businesses, while the LHVF handed $1.1 billion to licensed venues.

An analysis of tax data by VAGO shows the department paid out $426 million to businesses that did not appear to meet eligibility criteria, which were linked to GST registration.

VAGO acknowledged the department’s challenges, describing a scenario that was “unprecedented in its experience”, including the fact that it had to process 700,000 applications for the grants programs.

VAGO found that it was reasonable, in the circumstances, for the department to “establish a 'high trust' front end to its approach to verifying eligibility for each grant round”, including accepting businesses’ “attestations” that they satisfied the grants criteria.

But it also said that there should have been post-payment checks to minimise the chances of fraud and error.

“Risk is an important consideration in designing such control measures and when they operate,” says the VAGO report, which was released in late 2023.

The department failed to properly administer these checks.

“Checks on eligibility were not aligned to program intent and decision-making was poorly reasoned. Consequently, it is likely that fraud occurred and, to date, remains undetected. It is also the case that payments were made in error; and that businesses with the same underlying circumstances were treated differently and inequitably.”

VAGO found that the department “failed to provide full and frank advice to government throughout the program”, including wrongly advising the minister that it was chasing more than $18 million in fraudulent or erroneous payments.

At the time the report was published last year, there had still been no program evaluation relating to the second round of the business grants or the licensed venues funding.

VAGO recommended that the department appoint an independent evaluator to assess and report on the effectiveness of the programs to test their value for money, and to recommend changes to future programs.

The department accepted the recommendations.

Read the full report.