10.17 Grants programmes


Grants are a substantial proportion of Commonwealth expenditure, in the order of $22 billion in 2012-13 across over 500 programmes, depending on the definition used (Australian Government, 2013). This represents approximately 6 per cent of total Commonwealth expenditure. This report largely uses the definition of a grant included in the Financial Management and Accountability Act 1997 (FMA Act) regulations, which excludes foreign aid, payments to the States and local governments and scholarships or ‘grants’ made by Commonwealth Authorities and Companies Act 1997 (CAC Act) entities (Australian Government, 1997).

Broadly, a grant is an arrangement for the provision of financial assistance by the Commonwealth:

  • under which money is to be paid to a recipient other than the Commonwealth;
  • which is intended to assist the recipient to achieve its goals;
  • which is intended to promote one or more of the Commonwealth Government’s policy objectives; and
  • under which the recipient is required to act in accordance with any terms or conditions specified in the agreement.

The FMA Act definition of what does and does not constitute a grant payment is at Attachment 10.17.1.

Grant programmes vary in form and scale. They range from one-off measures to project-based or ongoing services with a high level of specification around deliverables. Grants can be competitive or entitlements, capped or uncapped. The amounts paid can span the very small, such as $210 under the Indigenous Capability and Development programme for a sporting event (Department of Social Services, 2014), to $224 million to a mental health foundation (Department of Health, 2013a).

Grants activities involve individuals, small business, community organisations, the not-for-profit sector, corporations, primary producers and whole industry sectors. Accountability requirements for grants range from simple to complex, often reflecting the risk appetite of the granting body, rather than risk assessment.

The Australian National Audit Office’s submission to the Commission notes that:

The precise number and value of grants made by the Commonwealth Government in any one year is difficult to establish as details are contained in individual entity documents... Nevertheless, it is fair to say that total grants expenditure in any one year is many billions of dollars, many thousands of grants are made by the Commonwealth, and the administration costs associated with grants is considerable, representing a sizable amount in some agencies’ departmental budgets (Australian National Audit Office, 2013).

An indication of the number of government grant activities can be garnered from the 2008 Strategic Review of the Administration of Australian Government Grant Programs (Strategic Review) that found that more than 49,000 discretionary grants were approved in 2007 under some 250 separate funding programmes (Australian Government, 2008).

The States also administer significant grant programmes. For example, in 2011-12, Queensland Government grants amounted to $11 billion (representing 24 per cent of government expenses) with over 400 individual grant programmes to nearly 90,000 recipients (Queensland Government, 2013). In 2007-08, New South Wales spent $5.5 billion or 12 per cent of general government expenditure on grants that were neither subsidies nor inter-agency payments (New South Wales Government, 2009).

There is no comprehensive whole-of-Commonwealth-government repository of information about grant activity at this time. In addition, different definitions of what constitutes a grant are used within the Commonwealth. For example, the FMA Act definition excludes assistance provided under the Higher Education Support Act 2003, such as Commonwealth Grant Scheme (CGS) funding to higher education providers for students enrolled in bachelor degrees (Australian Government, 1997). However, the CGS is included in the Government Financial Statistics (GFS) definition of what constitutes a grant used to calculate the value of grants included in the Final Budget Outcome, published in the Commonwealth Budget papers.

The Commonwealth Grant Guidelines require that all grant payments that are awarded to recipients are published on agency websites (Department of Finance and Deregulation, 2013), but does not require this to occur on a single Commonwealth web page. As such, data can be difficult to find and assimilate. The commencement of the online initiative, Grants.gov.au, in 2016 will provide information on contracts for grants awarded in the same way AusTender does currently for procurement contracts. This will significantly improve the information available on Commonwealth grants.

Rationale for government intervention

The Strategic Review noted that discretionary grants have three interrelated purposes:

  • promote change within a policy area by establishing a regular competitive grant allocation process;
  • incorporate an element of flexibility which allows the programme to be tailored for an uncertain or variable policy environment; and/or
  • enable a government to exert influence over a policy area where it lacks a legal or moral standing to deliver programmes directly (Australian Government, 2008).

Grants are often used for issue-management and ad hoc policy-making and can be seen as a convenient vehicle for addressing emergent issues expediently.

Current structure of grants programmes

The Commonwealth Grant Guidelines set out the Commonwealth grants policy framework and are a legislative instrument under the FMA Act. Agencies develop their own specific grants practices based on these guidelines.


Grants are a substantial proportion of spending by the Commonwealth. Both the number and, as shown in Chart 10.17.1, value of grants awarded has doubled over the past 10 years – from a total value of around $11.1 billion in 2002-03 to $22.4 billion in 2012-13 (Australian Government, 2013).

Chart 10.17.1: Grants actual and estimated spending from 2002-03 to 2016-17

This chart shows the increase in the value of Commonwealth  actual and estimated grants expenditure from 2002-03 to 2016-17.

Source: Australian Government, 2013.

As Chart 10.17.2 illustrates, the Commonwealth uses grants programmes to fund most functions of government. In 2012-13, three functions – Education, Health and Social Security and Welfare – comprised around 80 per cent of grants.

Chart 10.17.2: Share of the value of grants by sector, 2012-13

This chart shows the split by function of Commonwealth grants expenditure in 2012-13.

Source: Australian Government, 2013.


Limited competition

More than one third of grants selection processes are non-competitive in nature (Australian National Audit Office, 2012). Competitive grants can improve efficiency and innovation and encourage new programme providers. These benefits are unlikely to be realised where there is limited competition, ongoing rollover of grants or the allocation process does not encourage new entrants or limits the market.

The Australian National Audit Office has also noted the potential for ‘electoral advantage’ to arise, or be sought, from the making of grants.

Disparate approaches

While the Commonwealth Grant Guidelines establish the overarching requirements for grants administration, agencies largely determine their own practices including advertising, application, agreement and reporting processes. Disparate grant administration practices within and across agencies can generate red tape and costs for recipients and government. While a single approach is unlikely to suit all grants, there is capacity to improve consistency according to types or categories of grants.

UnitingCare Australia’s submission to the Commission notes that:

Multiple processes and requirements associated with government contracts, grants and funding managed by different Commonwealth departments and agencies, each with their own specific practices, are a critical issue for the UnitingCare network.

A lack of transparency

As noted above, there is currently no single, whole-of-government repository of information on grants. This reduces transparency and the quality of information available to government in decision-making.

In many cases, programme knowledge and expertise reside in the agency responsible for administering grants and they have the discretion to determine their own practices and approaches to risk management. This can lead to an ad hoc approach to programme development and poor design, which in turn can lead to the risk of fraud, outcomes not being achieved and waste. This is particularly evident where there are limited timeframes, lack of capacity and involvement of multiple entities.

Additionally, it is difficult at this time to ascertain whether organisations are the recipients of multiple grants and, with that, the total amount of support that the Commonwealth is providing to such organisations (see Box 10.17.1).

Combined, the Commonwealth may be providing very significant subsidies for particular services or outcomes without a good understanding of the level of subsidy provided and consequently value for money.

Box 10.17.1: Social and Community Services

In 2011-12, the Commonwealth provided over 5,000 individual grants to social and community service sector service providers valued in the order of $1.8 billion. A range of service providers benefited, including disability, mental health and family support programmes. Of the more than 3,000 service providers receiving grants in 2011-12, over 1,600 received more than one grant (over 750 received more than two grants). The Commission understands that some received over 50 individual grants.

A focus on acquittal

According to the Strategic Review most performance management and evaluation of grants focuses on ensuring the financial probity and effectiveness of grant spending. These are necessary under the FMA Act but, as recommended in the Strategic Review, can be informed by considering and adopting appropriate risk-based approaches, including the abolition of any need to provide receipts to support expenditure below a material threshold. This would reduce administrative burdens on recipients and administrators.

Often, processes tend to focus on acquittal rather than on outcomes and effectiveness.

Grants may not be the optimal mechanism

In some cases grants are being rolled over almost automatically for the same organisation each grant round. In other cases, grants are funding procurement-like activities. In both cases grants may not be the most effective or efficient funding arrangement. In those cases where grants are not allocated on the basis of competition, it may be that other options may be more appropriate such as ongoing project funding, procurement or gifts.

A weak case for Commonwealth involvement

The Commission’s Terms of Reference ask it to identify, among other things, whether there remains a compelling case for activities to continue to be undertaken. Given the number of grant activities and the amount of expenditure, it is likely that grants are being delivered in areas outside of the Commonwealth’s core responsibilities, or where the States may be better placed to assess need, eligibility and outcomes of certain grant activities.

Emerging approaches

Governments here and around the world continually examine options to address these issues and new models are evolving to improve the outcomes and administration of grant programmes.

A risk-based approach to grant making

The Commonwealth Grants Guidelines advocate a risk-based approach to grant management:

For low risk grants, where the likelihood of identified risks occurring is remote or the impact of the identified risk is minimal, the Guidelines stipulate that grant agreements should cover those risks that can be appropriately managed through the agreement and ensure that the grant recipient is not overburdened (Department of Finance and Deregulation, 2013).

Improved whole-of-government reporting

The Grants.gov.au initiative (Australian Government Grants System) announced in the 2013-14 Budget will provide whole-of-government data and can be expected to lead to efficiencies for agencies and recipients when it is operational in 2016. It is intended to provide a single point of reference for potential grant applicants to identify, register and apply for Commonwealth grants. It will also provide for consolidated reporting on granting activities and could encourage standardisation of application processes and forms.

Broadbanding grant programmes

There is potential to reduce administrative burden and compliance costs, by broadbanding grants programmes. The chief advantage of this approach is that it provides for greater flexibility to manage funding needs and priorities within the total pool of funds allocated (Box 10.17.2).

Box 10.17.2: Grant consolidation and broadbanding

In Australia, the Department of Health undertook a process of programme consolidation that reduced 159 programmes into 18 larger flexible funds, many of which are grant based (Department of Health, 2013b). To support this, the Department of Health has also centralised its grants making activities within the Department.

The United Kingdom has devolved significant financial control to local authorities and ended the ‘ring-fencing’ of the majority of local government revenue grants. The number of separate core grants has been reduced from over 90 in 2010-11 to fewer than 10 (excluding schools, police and fire). At the same time, local authorities are being required to make choices on how services are to be delivered with reduced allocations.

Overall, as a result of these and other measures, local government was expected to receive around a quarter less funding over the four years to 2014-15 (United Kingdom Government, 2010).

In practice, it takes time to bring grant programmes together because of, among other things, staggered grant terms and expectations regarding rollover of funding. Additional impetus, such as a requirement to address new priorities with fewer resources, may be needed to drive consolidation. Considerations when assessing the viability of consolidating grant programmes include:

  • the nature of the client group (disparate groups with an interest in one grant programme would benefit less from broadbanding than groups which access a number of grant programmes);
  • whether broadbanding is appropriate for grants which are routinely rolled over (and whether this is considered optimal); and
  • the degree to which broadbanding pushes decision making down a level which may be further removed from the government of the day’s priorities.

Thoroughness is required upfront to address these issues and maximise the benefits of this approach. Additionally, while broadbanding of grants may be used to provide flexibility and efficiency, transparency and evaluation of grant programmes remains essential.

Participatory models

‘Participatory grant making’ provides a mechanism for engaging relatively small communities in deciding the allocation of grant funding. Under this model, public events are held to decide the criteria for choosing between applications, which applications should be funded and how much money they should receive. The Strategic Reviewfound that successful models seem to work when programmes are located within geographically defined regions, where the programme aims to increase the involvement of either the local community or sectors within the community, and when the process is transparent and seen to be fair to all (Australian Government, 2008).

The Strategic Review concluded that participatory models may be an option worth exploring if the Commonwealth intends to continue offering discretionary grant programmes, which provide small amounts of funding to encourage community engagement and capacity.

Payment for results and social impact bonds

'Payment for results' grants are a growing area of interest in Australia and overseas, particularly in the United Kingdom. This model is intuitively attractive because the government does not pay for interventions if results are not achieved. However, there are a number of practical considerations including:

  • the difficulty of, and costs associated with, measuring outcomes;
  • the difficulty of attributing causality, particularly for complex social problems and in the absence of benchmarking and control groups; and
  • the capacity of organisations, particularly smaller not-for-profits, to cover the costs of delivering an intervention until they can demonstrate agreed outcomes have been achieved.

In both the United Kingdom and New South Wales, governments are trialing ‘social impact/benefit bonds’ as a means of addressing this last issue by providing up-front finance from a third party to service delivery organisations, on the basis of the government's commitment to pay for the delivery of results. These ‘bonds’, however, come not only with their own opportunities, but also challenges. These challenges include measurement and causality issues (similar to those for payment for result models), as well as the need to consider a range of risks and regulatory arrangements.

Potential areas for reform

Improving grant administration and reporting

There are opportunities to improve grants administration by building on the work already underway to implement Grants.gov.au as the mandatory whole-of-Commonwealth-Government grant application lodgment system by complementing it with a mandatory register of grants programmes. This would significantly improve transparency and the information available to decision makers. It could also reduce administrative and search costs for both government and stakeholders.

This should be complemented by measures to move towards an underlying whole‑of‑government grants management system, including common application and reporting templates and the promotion of the professionalisation of grant contract management. This would also help to reduce administrative costs and improve outcomes.

Reducing red tape

Red tape and other administrative costs could be further reduced by requiring the use of standard contracts, as far as is practicable. For projects or activities where longer-term grant funding is considered optimal, consideration should also be given to longer-term contracts which would reduce the number of times organisations are required to reapply for funding. It would also provide them with greater certainty. Where contract extension options exist, a minimum of six months’ notice to grant recipients should be provided about whether the grant will cease or be extended. There are currently examples of much shorter notice periods being given which can make it difficult for organisations to consider and adapt to changed funding circumstances.

Red tape could also be further reduced for grant recipients by applying contemporary risk-based approaches to grant management, particularly balancing the need for responsible financial reporting and accountability against reporting burdens placed on grant recipients.

Reduced grant expenditure

The Commission proposes the cessation or merging of the grant programmes at Attachment 10.17.2. Given the large number of grants programmes, a sample of grant programmes has been identified for cessation or streamlining. These proposals generally reflect the outcomes of sectoral analysis undertaken during the Commission’s Review, as departments submitted very few grant programmes for cessation, streamlining or review.

Streamlining grant programmes

Previous reviews of grant programmes and administration in the Commonwealth, Queensland and Western Australian Governments have a common theme of streamlining grant programmes to improve transparency, coherence and clarity of objectives, as well as reducing administrative costs.

The Queensland Government Commission of Audit recommended that grant programmes across government be rationalised and consolidated, with a view to:

  • reducing the piecemeal and fragmented nature of current programmes;
  • adopting a consistent definition and treatment of grants across government, separate from subsidies, service level agreements and other forms of payment for services rendered;
  • ensuring the efficiency and effectiveness of grant programmes in achieving stated objectives;
  • providing a more informed basis for future decisions on the nature, range and scope of grants proposed to be made, and the organisations receiving these grants; and
  • achieving better value for money for the large expenditure made on grants (Queensland Government, 2013).

The Western Australian Government’s Economic Audit Committee recommended streamlining the administration of grants by replacing the existing range of grants and grant programmes with a smaller number of broadbanded grant programmes (Western Australian Government, 2009).

The Strategic Reviewrecommended:

grant-administering agencies be encouraged to review the structure of their grant programmes with a view to reducing the overall number of programmes, achieving greater coherence and clarity of objectives, improving transparency, reducing but sharpening the range of performance indicators, and achieving administrative savings (Australian Government, 2008).

In the United Kingdom, grant consolidation was coupled with a reduction in funding to drive grant programme integration and the reallocation of funds to the highest priorities (United Kingdom Government, 2010). A similar model could be applied in Australia.

The Commission suggests that in the short term, all grant programmes that are less than $5 million over the forward estimates could be consolidated within portfolio departments with funding reduced by 15 per cent by 2015-16 to drive efficiencies.

The merits of a more comprehensive assessment of other grant programmes over $5 million could better ensure value for money and alignment with government priorities. Such an assessment could determine whether each grant programme should be:

  • consolidated with other grants through broadbanding programmes;
  • delivered through a more relevant mechanism (such as procurement);
  • transferred to the States; or
  • ceased.

A more comprehensive assessment could be based on consideration:

  1. of the individual programmes against the Department of Finance’s Expenditure Review Principles (Department of Finance, 2013) (see Attachment 10.17.3);
  2. of opportunities to cluster and consolidate similar programmes (for example, research, Indigenous or family and community support programmes); and/or
  3. against portfolio or sector specific principles.

A comprehensive assessment of this type would provide the opportunity for systemic consideration of options to consolidate grants, both vertically (within portfolios) and horizontally (across government), with resultant reductions in administrative burdens and compliance costs.

The Australian National Audit Office’s submission to the Commission notes that:

From a policy perspective, the increasing number, value and diversity of grants coupled with the cost of administration for both the Commonwealth and grant recipients, suggests there would be tangible benefits in a periodic assessment of the range of grants programs to provide confidence that they are consistent with the Government’s strategic objectives and being managed efficiently (Australian National Audit Office, 2013).

There may be opportunities to broadband a portion of the more than 80 grant programme activities administered by the Department of Social Services to deliver administrative savings, reduce red tape for providers and promote better outcomes. This could include, for example, the creation of an ‘early intervention family and community support’ broadband, with the flexibility to support communities to meet the changing needs of families and individuals. It could link with, but not duplicate, secondary and tertiary services managed by the States.

There may also be opportunities to consolidate a number of specialised grant programmes in the arts space into a single arts grants programme. This could help to minimise duplication and allow for a more strategic targeting of funding to particular individuals and organisations.

Care would need to be taken to ensure such consolidations bring together only those programmes where synergies can be found and that grants continue to be the most efficient and effective means of achieving the policy objective. Steps also would need to be taken to ensure transparency over the allocation of funds is not lost.

Reducing the proliferation of new grant programmes

To reduce the proliferation of grant programmes, the Commission recommends a more rigorous grant assessment process at the approval stage that requires the proposing minister to demonstrate:

  1. the need for the new grant;
  2. that a grant is the most appropriate mechanism;
  3. its relationship with existing programmes;
  4. why it cannot be accommodated within existing programmes; and
  5. whether a payment for results or participatory model is appropriate or could be trialled.

This would put the onus on ministers and departments to consider whether a grant programme is the most appropriate vehicle and, if so, whether an existing programme could be used or augmented in the first instance. This should help to ensure grant programmes are not established where another approach (e.g. procurement) is more appropriate. Box 10.17.5 provides further details on implementing the Commission’s recommendations on grants programmes.

Box 10.17.5 Implementation notes

To implement its recommendations on grants programmes, the Commission considers that the following actions should be implemented to deliver the desired outcomes.

In relation to transparency:

  1. the central register of all grants programmes should be managed by the Department of Finance, with departments and agencies required to keep information up-to-date; and
  2. Grants.gov.au, which will publish Commonwealth grants awarded, should be implemented as soon as possible and, similar to AusTender (the Commonwealth’s procurement information system), should also provide the whole-of-government grant application lodgment system. Use of Grants.gov.au should be mandatory.

In relation to reducing red tape, departments and agencies should:

  1. use standard contracts, as far as possible;
  2. provide greater certainty through longer-term funding for ongoing grant programmes (three to five years), where appropriate;
  3. where contract extension options exist, requiring a minimum of six months’ notice to grant recipients about whether the grant will cease or be extended;
  4. continue to move to a whole-of-government grants management system; and
  5. promote professionalisation of grant contract management.

In relation to addressing the proliferation of new grant programmes, the Government should require, at the approval stage, that the proposing minister demonstrate that a grant programme is the most appropriate vehicle to achieve the objective by justifying:

  1. the need for the new grant;
  2. that a grant is the most appropriate mechanism;
  3. its relationship with existing programmes;
  4. why it cannot be accommodated within existing programmes; and
  5. whether a payment for results or participatory model is appropriate or could be trialed.


Australian Government 1997, Financial Management and Accountability Act 1997, Australian Government, Canberra.

Australian Government 2008, Strategic Review of the Administration of Australian Government Grant Programs, Canberra.

Australian Government 2013, Final Budget Outcome 2002-03 to 2012-13, Australian Government, Canberra.

Australian National Audit Office 2012, Performance Audit Development and Approval of Grant Program Guidelines Department of Finance and Deregulation, Audit Report no.36 2011–12, Canberra.

Australian National Audit Office 2013, Submission to the National Commission of Audit 2013, unpublished, Canberra.

Department of Finance 2013, Expenditure Review Principles, Canberra.

Department of Finance and Deregulation 2013, Commonwealth Grant Guidelines – Second Edition, Canberra.

Department of Health 2013a, Grants Reporting for the 2012-13 Financial Year, Canberra.

Department of Health 2013b, New flexible Funds – Program Consolidation, Canberra.

Department of Social Services 2014, Grants Funding, Canberra, viewed January 2014, <http://www.dss.gov.au/grants-funding/current-funding>.

New South Wales Government 2009, Auditor-General’s Report Performance Audit - Grants Administration, New South Wales Government, Sydney.

Queensland Government 2013, Queensland Commission of AuditFinal Report, Queensland Government, Brisbane.

United Kingdom Government 2010, Spending Review 2010, London.

UnitingCare Australia 2013, Submission to the National Commission of Audit 2013, Canberra

Western Australia Government 2009, Putting the Public First Partnering with the Community and Business to Deliver Outcomes, Economic Audit Committee, Perth.