The Commonwealth spent about $22 billion on grants in 2012-13, across more than 500 programmes. This total — which excludes grants for foreign aid, grants to the States and local governments, and other scholarship grants — represented approximately 6 per cent of total Commonwealth expenditure. It is also double the amount of grants expenditure in 2002-03.
Grants are used to achieve the government’s policy objectives in different ways. Grant activities involve individuals, small businesses or the not for profit sector, while others involve large corporations, primary producers or whole industry sectors. Some grants support ongoing delivery of services, infrastructure or research over a number of years, while others provide short-term or one-off assistance.
While the Commonwealth Grant Guidelines exist to provide a guide on 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.
There is also no comprehensive whole-of-government repository of information about grant activity across the Commonwealth at present. This reduces transparency and the quality of information available to government in its decision-making.
Grant assessment and payments processes can be improved by enhancing transparency, raising the capability of staff involved in grant administration and improving the quality and consistency of grants guidelines and application processes.
The Commission considers that significant changes are required to both grants administration and the composition of grants programmes. Better alignment of grants programmes and government priorities is needed. All grant programmes should have measurable outcomes and outcomes achieved should be regularly assessed.
New models of grant development and management should also be considered. For example, ‘payment for results’ models involve the government paying only for effective interventions. Participatory grant models provide a mechanism for engaging communities and stakeholders in deciding the structure of the grant and the allocation of funding.
Red tape also can be reduced for grant recipients by applying contemporary risk-based approaches to grant management, balancing the need for responsible financial reporting and accountability against reporting burdens placed on grant recipients.
There is also potential to reduce administrative burden and compliance costs, through the use of broad-banding grants programmes (for example in research, Indigenous, family and community support programmes or the arts).
Given the large number of grants programmes, the Commission has identified a sample of grants for abolishing or merging. In addition to the grants identified for abolition elsewhere in this Report, the following eight specific grant programmes are identified for abolition or merging:
- in the Environment Portfolio: the Voluntary Environment, Sustainability and Heritage Organisations programme; the National Environmental Research programme; the Suburban Jobs Program; and the Australian Biological Resources Study National Taxonomy Research Grant;
- in the Communications Portfolio the Community Broadcasting programme; and
- in the Education Portfolio the National School Chaplaincy and Student Welfare programme; the Parliament and Civics Education Rebate; and the Creative Young Stars programme.
The complete list of grants proposed for abolition or merging is at Annex D.
The Commission further proposes that, for each portfolio, all grants programmes with a value of less than $5 million across the forward estimates should be consolidated. Funding for these grant programmes should also be reduced by 15 per cent by 2015-16.
The Commission understands that the United Kingdom, as part of a broader package of reform, reduced grant budgets by up to 28 per cent over four years as programmes were consolidated and financial control devolved to lower levels of government.
To reduce the proliferation of new Commonwealth grant programmes the Commission recommends that a more rigorous assessment process be adopted at the approval stage, which requires the proposing minister to demonstrate:
- the need for the new grant;
- that a grant is the most appropriate mechanism;
- its relationship with existing programmes;
- why it cannot be accommodated within existing programmes; and
- whether a new model of grant development or management is appropriate or could be trialled.
This would focus consideration on whether a grant is the most appropriate vehicle and, if so, whether an existing programme could be used or augmented to achieve the desired objective.
Recommendation 49: Grants programmes
The Commonwealth spent about $22 billion on around 500 grants programmes in 2012 13. The Commission recommends significant changes be made to the administration of the Commonwealth's grant programmes including by:
- establishing a central register within the Department of Finance of all grants programmes with complete transparency on all grants awarded;
- reducing red tape for grant recipients by applying contemporary risk-based approaches to grant management;
- decreasing the number of existing grant programmes by abolishing, merging or consolidating existing grants programmes;
- addressing the proliferation of new grant programmes by introducing a rigorous grant assessment process at the approval stage; and
- ensuring all grants have measurable outcomes which are regularly assessed.