13.1 Probity relates to ethical behaviour. Establishing and maintaining probity involves applying and complying with public sector values and duties such as honesty, integrity, impartiality and accountability.
13.2 Transparency refers to the preparedness of those involved in grants administration, including agency staff and grant recipients, to being open and prepared to be subject to scrutiny about grant processes and granting activities (including grant programs). This involves providing reasons for decisions and the provision of two-way information to government, the Parliament, grants recipients, beneficiaries and the community. Transparency provides assurance that grants administration is appropriate and that legislative obligations and policy commitments are being met.
13.3 Probity and transparency in grants administration is achieved by ensuring:
that decisions relating to granting activity are impartial; appropriately documented and reported; publicly defensible; and lawful. The key relevant requirements are set out in Part 1 of the CGGs (Section 3, Legislative and Policy Framework and Section 4, Grants-specific Process Requirements);
compliance with the public reporting requirements set out in Part 1 of the CGGs (Section 5, Public Reporting); and
that grants administration by agency staff and grant recipients incorporates appropriate safeguards against fraud, unlawful activities and other inappropriate conduct.
13.4 Chief Executives should ensure that agency fraud procedures and practices comply with the Commonwealth’s Fraud Control Guidelines (FCGs 2011), including those procedures that relate to grants administration. The FCGs place obligations on agency Chief Executives and staff in relation to: fraud risk assessments; control plans; awareness and training; and case handling and reporting. An appropriate FCG compliant system of checks should be in place as part of an agency’s internal controls and audit framework.
Under section 45 of the FMA Act, an agency Chief Executive must implement a fraud control plan for the agency.
Under section 46 of the FMA Act, a Chief Executive must establish and maintain an audit committee.
13.5 Chief Executives should:
establish appropriate internal control mechanisms for grants. For example, the separation of duties can be key internal control. Generally, no single officer should appraise an application for a grant, give financial approval for the expenditure and make the offer to the applicant; and
guard against fraudulent use of grant payments. For example, reported information should be assessed not only against objectives but appropriate benchmarks to indicate appropriate use of funds and agency staff should be aware of the procedures to follow when fraud or misappropriation is suspected.
Section 13 - Commonwealth Grant Guidelines - Probity and Transparency | Zoe
13.6 Actual or perceived conflicts of interest can be damaging to government, the grant applicant, the grant recipient, the agency and its staff. A conflict of interest arises where a person makes a decision or exercises a power in a way that may be, or may be perceived to be, influenced by either material personal interests (financial or non-financial) or material personal associations. A conflict of interest may arise:
where decision makers or agency staff involved in grants administration have a direct or indirect interest, which may influence the selection of a particular project or activity;
where members of expert or advisory panels or committees have a direct or indirect interest in informing a decision about expenditure or providing advice on grants; and
where a grant recipient has a direct or indirect interest, which may influence the selection of their particular project or activity during the application process. Conflicts may also arise when undertaking the grant project.
13.7 Agency staff should establish transparent processes which help manage misconceptions and the potential for personal or related party gain. Chief Executives should ensure that agency policy and management processes for conflict of interest are published to support probity and transparency.
13.8 Chief Executives should put in place appropriate mechanisms for identifying and managing potential conflicts of interest for granting activities. These mechanisms may include:
establishing procedures for agency staff and potential grant recipients to declare their interests;
developing procedures to manage potential conflicts of interest in all phases of grant administration;
maintaining a register of staff interests; and
ensuring that grant guidelines clearly outline what constitutes a conflict of interest.
13.9 Agency staff should conduct granting activities in a manner that minimises concerns about equitable treatment.[66] This can provide assurance to the various stakeholders that public money has been spent for the approved purposes and is achieving the best possible outcomes.
Agency staff should ensure that decisions in relation to the approval of applications for grants are transparent, well documented and consistent with the legislative and policy requirements set out in Part 1, Section 3 and 4 of the CGGs.
Agency staff should put in place a transparent and systematic application and selection process. Such processes assist in informing decisions and enhancing confidence in the granting activity outcomes and grants administration processes, for both stakeholders and the public.
The ANAO has observed that, in its performance audits of grant programs, it has put an emphasis on the geographic distribution of certain grant programs as a measure of equitable distribution and as an indicator of party-political bias in the distribution of grants. The ANAO has emphasised that those involved in grants administration should therefore be aware that the geographic and political distribution of grants may be seen as indicators of the general equity of a program.[67]
A key consideration is whether decision-makers have equitably and transparently selected activities or projects that best represent value with public money in the context of the objectives and outcomes of the granting activity, as set out in grant application guidelines.
13.10 Competitive merit based processes should be used to allocate grants based upon clearly defined criteria, unless specifically agreed otherwise by a Minister, Chief Executive or delegate. Key factors to be considered by agency staff in deciding the most appropriate allocation process include: the objective of the granting activity; the likely number and type of applications; the nature of the grant; the value of the grants; and the need for timeliness and cost-effectiveness in the decision-making process while maintaining rigour, equity and accountability.
13.11 Agency staff should consider the options available for selection processes, including:[68]
open competitive funding rounds which have open and closed nominated dates, with eligible applications being assessed against the nominated selection criteria;
targeted or restricted competitive funding rounds which are open to a small number of potential grant recipients based on the specialised requirements of the granting activity or project under consideration;
a non-competitive, open process under which applications may be submitted at any time over the life of the granting activity and are assessed individually against the selection criteria, with funding decisions in relation to each application being determined without reference to the comparative merits of other applications;
a demand-driven process where applications that satisfy stated eligibility criteria receive funding, up to the limit of available appropriations and subject to revision, suspension or abolition of the granting activity;
a closed non-competitive processes. For example, where applicants are invited by the agency to submit applications for a particular grant and the applications or proposals are not assessed against other applicants’ submissions but assessed individually against other criteria; or
one-off grants to be determined on an ad-hoc basis, usually by Ministerial decision.
13.12 In determining the most appropriate application and selection process for a granting activity, agency staff should consider and document a range of issues associated with the available options, such as nature and needs of grant recipients, maximising access to grants and policy outcome concerns against the advantages and disadvantages, risk analysis, timeliness and cost-effectiveness of the proposed process.
13.13 In some circumstances, it may be appropriate to use a non-competitive and/or a non-application based process. For example, it may be important to strike a balance between the desire to maximise access to a grant and the need for a timely and cost-effective decision making process. It may also be appropriate to target particular individuals, organisations, regions, or industry sectors, depending upon the government policy outcomes to be achieved. Where it is proposed to use a method other than a competitive, merit based selection process, agency staff should document why this approach has been used.[69]
13.14 There may be instances where it is considered necessary to waive or amend the eligibility and assessment criteria established for a granting activity, in whole or in part. Where eligibility and assessment criteria are waived, decisions to approve grants should still be consistent with the policy authority for the granting activity and/or the applicable published objectives. Agency staff should document these decisions.
Agency staff should ensure that grant guidelines document the circumstances in which the eligibility and assessment criteria set out in grant guidelines may be waived or amended.
Agency staff should seek Ministerial or other appropriate authority before invoking provisions for waiving or amending eligibility and assessment criteria and keep appropriate records.
The ANAO has observed that it is important that appraisal and selection processes be transparent and free from the risk of political or other bias.[70] It is better practice for all like applications to be assessed using a common appraisal process, and where there is a departure from the common approved process, the reasons should be documented. Similarly, grant assessors should document when referring to, or relying on, knowledge or documentation other than the application form.
13.15 Accountability and transparency are related concepts. Accountability involves grant recipients, agency staff and decision-makers being able to demonstrate and justify the use of public resources to government, the Parliament and the community. This necessarily involves all parties keeping appropriate and accessible records to evidence the above.
Acronyms
AAO Administrative Arrangements Order
ANAO Australian National Audit Office
CAC Act Commonwealth Authorities and Companies Act 1997
CFO Chief Financial Officer
CGGs Commonwealth Grant Guidelines
CEIs Chief Executive’s Instructions
CPRs Commonwealth Procurement Rules
FFR Act Federal Financial Relations Act 2009
Finance Department of Finance and Deregulation
FMA Act Financial Management and Accountability Act 1997
FMA Regulations Financial Management and Accountability Regulations 1997
FOI Freedom of Information
Glossary
For the purposes of the CGGs, terms have the meanings defined below.
Agency means a Department of State, (including persons allocated to the Department by the FMA Regulations), a Parliamentary Department, or any agency prescribed under the FMA Regulations (see Section 5 of the FMA Act).
Agency staff means officials of the agency. This includes persons who are not employed by the agency but perform a ‘financial task’ for the agency. A “financial task” is defined in FMA Regulation 3 as a task or procedure relating to the commitment, spending, management or control of public money.
Application process refers to the steps that must be followed by individuals/organisations to be considered for a grant. It includes the forms, written documentation and the eligibility and assessment criteria to be satisfied.
Approver means a Minister or agency Chief Executive (including a Chief Executive’s delegate). An approver is authorised to consider and approve spending proposals under Regulation 9. A person may also be authorised to approve proposals to spend money under legislation other than the FMA Act (see FMA Regulation 3).
Allocated official means a person outside the Commonwealth who performs a financial task in relation to grants administration and temporarily becomes an official of the agency while they are undertaking that task. As an allocated official, they are subject to all the requirements of the financial management framework that apply to all officials, including the FMA legislation, the CGGs, the policies of the Commonwealth and the relevant agency’s CEIs.
Assessment criteria are the specified principles or standards, against which applications will be judged. These criteria are also used to assess the merits of proposals and, in the case of a competitive granting activity, to determine applicant rankings.
Beneficiaries include the individuals and entities which directly or indirectly receive a gain or benefit from activities funded by a grant.
Eligibility criteria refer to the mandatory criteria which must be met for a grant application to qualify for a grant. Eligibility criteria may apply in addition to assessment criteria.
Granting activities refers to the process of providing public money to potential grant recipients, whether through a grant program or other grant giving exercise.
Grant administration includes the whole process of granting activity and includes: planning and design; selection and decision-making; the making of a grant; the management of grant agreements; reporting; and review and evaluation.
Grant agreement sets out the relationship between the parties to the agreement, and specifies the details of the grant.
Grant project refers to a combination of activities undertaken by grant recipients funded by the grant money.
Selection process is the method used to select potential grant recipients. This process may involve comparative assessment of applications or the assessment of applications against the eligibility criteria and/or the assessment criteria.
Selection criteria comprise eligibility criteria and assessment criteria.
[1] FMA Regulation 7A provides that the Finance Minister may issue guidelines in relation to grants administration, including grant policies and processes; requirements regarding the publication of grant details; and requirements regarding entering into grants.
[2] The requirements applying to Ministers, as determined by the Cabinet, are co-located in these CGGs for the purposes of clarity. Ministers include Parliamentary Secretaries, consistent with the Ministers of State Act 1952.
[3] FMA Regulation 3 provides that an approver (i.e. a person who may approve proposals to spend public money under the FMA Regulations) means a Minister, a Chief Executive or other person authorised by an Act.
[4] For the purposes of the CGGs, ’agency staff’ means an official for the purposes of the FMA Act (see glossary).
[5] A one-off or ad hoc grant generally does not involve planned selection processes and is designed to meet a specific need, often due to urgency or other circumstances. These grants are generally not available to a range of applicants or on an ongoing basis.
[6] Public money is defined in section 5 of the FMA Act.
[7] A recipient means a recipient of a grant that is external to the legal entity of the Commonwealth. Notional payments and receipts by agencies within the meaning of section 6 of the FMA Act are not grants.
[8] In an accounting sense, a grant is a non-exchange transaction, as government does not directly receive approximately equal economic value directly in return.
[9] If terms and conditions are not specified in legislation, a grant agreement, guidelines or other documentation, agency staff should consider the substantive purposes and characteristics of a financial arrangement to determine the nature of the financial arrangement.
[10] Where third parties are involved, agencies should note that issues relating to the handling of public money by “outsiders” under section 12 of the FMA Act may arise.
[11] This is because the provision of such advice is the performance of a "financial task" within the meaning of FMA Regulation 3. Persons performing financial tasks are officials under the FMA Act and are therefore agency staff for the purposes of the CGGs.
[12] A gift of public property is not a grant as described in FMA Regulation 3A(1). Section 43 of the FMA Act provides for gifts of this kind.
[13] The CPRs provides that in addition to the acquisition of property or services by an agency for its own use, procurement also encompasses a situation where an agency is responsible for the procurement of property or services for other agencies, or for third parties.
[14] Including, but not limited to: payments under the Scheme for Compensation for Detriment caused by Defective Administration; payments under section 73 (Payments in special circumstances) of the Public Service Act 1999; payments under the Remuneration Tribunal Act 1973; and settlements made in accordance with the Legal Services Directions 2005.
[15] Some forms of financial assistance provided by way of concessional loans may be subject to the CGGs.
[21] The Commonwealth has regard to the definition of official development assistance that the OECD has set out in its Development Assistance Committee Statistical Reporting Directives, available on the OECD’s website.
[22] At the time the CGGs were published, the relevant Circular was Finance Circular No. 2013/01: Grants, Procurement and Other Financial Arrangements, available on the Finance website at www.finance.gov.au.
[23] An example of guidance from another agency is the Commonwealth Ombudsman’s report Executive Schemes, August 2009, which outlines the eight best practice principles for agencies to consider when developing and administering executive schemes.
[24] See section 44 of the FMA Act and FMA Regulation 9.
[26] While the CGGs do not, in themselves, create requirements for Ministers, they reflect specific requirements decided by the Cabinet.
[27] More detailed guidance on the operation of the FMA Act and Regulations is available in relevant Finance Circulars. At the time these CGGs were published, the relevant Circular was Finance Circular No 2011/01: Commitments to spend public money (FMA Regulations 7 to 12). Agencies should consult the Finance website at www.finance.gov.au for the most recent Circulars, which are amended from time-to-time.
[28] Section 44 also includes the following note “A Chief Executive has the power to enter into contracts, on behalf of the Commonwealth, in relation to the affairs of an Agency. Some Chief Executives have delegated this power under section 53.”
[29] Arrangement is defined in section 32B and section 44 of the FMA Act, and in FMA Regulation 3. In sections 32B and 44 of the FMA Act, arrangement is defined to include a contract, agreement or deed. In the FMA Regulations, arrangement is defined to mean an arrangement, including a contract or agreement, under which public money is payable or may become payable, other than, (a) an arrangement for: (i) the engagement of an employee; or (ii) the appointment of a person to a statutory office; or (iii) the acquisition of particular property or services under a general arrangement with the supplier of those property or services, for the purposes of providing a statutory or employment entitlement; or (b) an international agreement governed by international law. An arrangement includes an arrangement under which public money is, or may become, payable in the form of a notional payment.
[30] Ordinary services and functions of government means spending relating to the running costs of an agency, such as the payment of staff salaries or building rental. Generally, payments relating to the ordinary services and functions of government will come from departmental appropriations, however there can be situations where they are paid from administered appropriations. If you are unsure about whether an activity relates to the ordinary services or functions of government you should seek legal advice.
[31] Such contracts, agreements or arrangements include grant agreements.
[32] Finance Circular No 2011/01: Commitments to spend public money (FMA Regulations 7 to 12) provides further guidance on the application of the FMA Regulations.
[33] In some circumstances, the Finance Minister’s agreement will not be required – see Regulation 10A.
[34] At the time the CGGs were published, the relevant delegations were the Financial Management and Accountability (Finance Minister to Chief Executives) Delegation 2010 and the Financial Management and Accountability (Finance Minister to Finance Secretary) Delegation 2010. Agencies should consult the Finance website at www.finance.[gov.au for the mos](http://www.finance.gov.au)t recent delegations, which are amended from time-to-time.
[35] Agency staff includes persons allocated to an agency as they are undertaking a financial task (see para 2.8).
[36] An outsider means any person other than the Commonwealth, agency staff or a Minister. The Finance Minister has delegated to agency Chief Executives with conditions, the power to authorise arrangements for the receipt, custody or payment of public money by an outsider.
[37] Many of these policies are the responsibility of agencies outside the Finance portfolio. The agency administering a policy is responsible for providing further information if required. The Administrative Arrangements Order (AAO) includes a list of Departments of State and their responsibilities. The AAO is available from www.dpmc.gov.au.
[38] FMA Regulation 3 provides than an approver (i.e. a person who may approve spending proposals under FMA Regulation 9) can include a Minister, and defines a spending proposal.
[39] Under FMA Regulation 12, an approver of a spending proposal that relates to a grant under FMA Regulation 12 must record the basis of an approval, in addition to the terms of the approval.
[40] For example, a targeted grants program could provide that, subject to specific eligibility criteria being met, particular organisations across a region will be awarded a grant.
[41] Finance Circular 2013/02, Australian Government Grants Briefing and Reporting contains additional guidance on the form of the report, and is available from the Finance website at www.finance.gov.au.
[42] Grant guidelines must be made publicly available (including on agency websites), except where there is a specific policy reason to not publicise the grant guidelines or grants are provided on a one-off or ad hoc basis.
[43] To satisfy the requirements of Regulation 12, it is important for approvers to understand that it is a specific requirement to record the basis under which they are satisfied that the proposed grant complies with Regulation 9, which stipulates certain tests that must be applied, in order for the approval to be given. This includes the requirement that a proposed grant must be consistent with the policies of the Commonwealth, noting that these policies include the guidelines issued in respect to the relevant granting activity. In this context, the basis for recommending or rejecting each proposed grant should be set out in the assessment material for each grant and should reflect the particular merits of each project in terms of the grant guidelines (including assessment against the eligibility and assessment criteria).
[44] Agency staff should be aware of any legislative requirements that may prevent the sharing of information, such as the Privacy Act 1998.
[45] Agency staff should discuss the availability of relevant information with the ACNC. See www.acnc.gov.au.
[46] It may be appropriate in some circumstances to use non-competitive processes, such as, when the number of service providers is very limited and these providers have a well established record of delivering the grant funded activities.
[47] This delegate would normally be a section 44 delegate.
[48] Further information on grants administration risks and factors that should be considered are outlined in paragraphs 7.10 to 7.12.
[49] Where one-off or ad hoc grants are made without the preparation of grant guidelines, these requirements do not apply.
[50] See Estimates Memorandum 2011/19: Process relating to the approval of new or revised program guidelines.
[51] The date of effect will depend on the particular arrangement. It can be the date on which a grant agreement is signed or a specified starting date.
[52] This includes grant variations, where those variations involve additional payments of public money.
[53] Finance Circular 2013/02 Australian Government Grants Briefing and Reporting, contains detailed guidance on the information to be published by agencies. It is available on the Finance website at www.finance.gov.au.
[54] Examples include grant programs as well as one off ad hoc grants, grants awarded through competitive, non-competitive and/or targeted selection processes.
[55] The Model CEIs, which are designed to assist agency staff develop CEIs, cover the eleven core topics applicable to the majority of agency staff, including grants. See Finance Circular No. 2011/05: Chief Executives Instructions - Part 2.
[56] Agency staff should balance this requirement for consultation against any issues that may arise in respect to probity, conflict of interest and the potential for competitive advantage.
[57] Agencies may identify other matters requiring consideration at the planning phase, depending on their specific circumstances.
[58] Beneficiaries include the individuals and entities which directly or indirectly receive a gain or benefit from activities funded by a grant.