Processes and record-keeping are again under the microscope in the latest ANAO audit reports.
The management of probity in funding decisions has featured in two recent Australian National Audit Office's (ANAO) audit reports (No 23 2019-20 Performance Audit and No. 23 2019-20 Performance Audit), highlighting that probity continues to be a hot topic for Australian government entities.
Interestingly, the six entities audited are corporate Commonwealth entities for the purposes of the Public Governance, Performance and Accountability Act 2013 (Cth) (PGPA Act). They are therefore (with one exception) not subject to the Commonwealth Procurement Rules (CPRs) or Commonwealth Grant Rules and Guidelines (CGRGs).
In these audit reports the ANAO emphasises that it is critical that the audited entities, and indeed all Australian government entities, uphold high probity standards when making funding decisions (whether through grant or procurement processes), to provide assurance that entities are appropriately managing public funds, particularly with respect to probity risks.
While corporate Commonwealth entities are not subject to the CPRs or CGRGs they can nonetheless benefit from basing their procurement and grant frameworks/practices on the CPRs/CGRGs as doing so will assist in the implementation of robust probity practices in their procurement/grant processes.
The ANAO indicates that not only should entities have in place appropriate probity requirements (i.e. relevant policy) but entities should ensure that they comply with these probity requirements. This requires procurement/grant personnel within entities taking an active, rather than passive, approach to acting on any probity risks.
Probity is, among other things, an exercise in risk mitigation and management. We outline some of the key take-away messages from these audit reports in this context.
Manage conflicts of interest appropriately
A central theme in the audit reports is management (or lack thereof) of conflicts of interest of personnel involved in the processes. The ANAO reminds us that conflicts of interest need to be managed not only at the submission assessment team level, but more broadly across all personnel involved in a process and within the relevant organisation. The ANAO noted in Report No. 23 2019-20 that a shortcoming in the framework for this process was that it did not require employees to declare that they have no conflicts of interest, rather, a declaration was only required in situations where the employee considered that they had a conflict.
A stronger approach, therefore, is to require personnel to declare that they have a conflict, might have a conflict or have no conflict.
Relevance to your organisation: Require all personnel involved in the grant/procurement process to declare if they have, might have or do not have, a conflict of interest. This includes decision-makers.
Create, update and maintain appropriate probity risk registers
Probity "risk registers" such as conflict of interest registers, communications registers, gift registers and probity training registers are all tools which entities can use to document and manage probity risks throughout their processes. These registers, if properly updated and maintained through the grant/procurement process, and in accordance with the rules of the process, provide strong evidence as to an entity's compliance with process rules and an entity's relevant policies.
Relevance to your organisation: Ensure that the probity plan includes a requirement to create, maintain and update probity "risk registers" at appropriate times during the process. Such registers may include conflict of interest registers, communications registers (with respondents to the grant/procurement process), gift registers and probity training registers.
Assess submissions against the published evaluation criteria
When assessing submissions, entities must ensure that the assessment process that is undertaken mirrors the assessment process that is published, including by following the approved steps of the process, obtaining relevant endorsements/approvals at appropriate stages of the process and only applying assessment criteria that is published.
A key message from the ANAO in Report No.23 2019-2020 is that decision-making is best supported by entity advice (ie. advice from the assessment team) that prioritises tenders/applications on the basis of their assessed merit against the published evaluation criteria. Recommendations in relation to funding decisions should be developed through an evidence-based approach.
Not only is this important to maintain the integrity of the process, however, it is also important in the case of relevant procurement processes undertaken by entities subject to the Government Procurement (Judicial Review) Act 2018 (Cth) to mitigate the risk of a challenge under that Act.
Relevance to your organisation: Departing from the approved assessment process or published assessment criteria is detrimental to the conduct of a transparent and equitable grant/procurement process.
- follow the rules of the assessment process as published; and
- only apply assessment criteria that is published.
Appropriate decision-makers who are fully informed
Decision should be made by people who are:
- have the appropriate delegation/the legal authority to make the decision they are making; and
- fully informed as to all of the facts behind the basis of the decision they are making.
Regarding the appropriateness of the decision-maker, it is important to ensure that this person has the appropriate delegation/legal authority to make the decision they are charged with making.
To ensure that the decision-maker is making a "fully informed decision", the grant/procurement personnel should maintain clear document trails and undertake strong record-keeping practices throughout the process in order to preserve evidence supporting a decision.
Reasons for decisions should be fully recorded and all factors which contribute to the award or not of a grant of funding/a contract should be identified by the assessment panel in their report to the decision-maker, with good practice being to include individual assessments of each submission in the evaluation report, not just the final score awarded to each submission.
Where decision-makers do not consider that they have been provided with enough information to make their decisions, they should ask for such further information to be provided to them, to ensure that they are discharging their duties as decision-maker on the use of relevant funds (including, where relevant, to discharge their duties under the PGPA Act).
Similarly it would be desirable for grant/procurement personnel to provide decision-makers with all relevant information to enable the decision-maker to make an informed decision.
Relevance to your organisation: Entities should make sure that there is a process in place (including documenting how the decision-maker is appointed) to ensure that the decision-maker:
- has the appropriate delegation/the legal authority to make the decision they are making; and
- is fully informed as to all of the facts behind the basis of the decision they are making.
Records, records, records
These audit reports reiterate the requirement familiar to all those involved in public sector dealings that entities should maintain full and robust documentary evidence to support their processes, including recording the reasons behind the decisions to show that appropriate processes were followed.
In this regard, the ANAO found that records of the assessment processes were largely adequate, but that in some instances, documentary evidence could have been stronger to support conclusions that personnel understood/applied relevant governance frameworks.
It is also important that entities fully document the handling of any probity concerns. This is particularly important for those entities who undertake procurements subject to the Government Procurement (Judicial Review) Act, in order to support the entity should a claim be made by a Tenderer pursuant to that Act. The maintenance of comprehensive probity risk registers (as discussed above) will help an entity to demonstrate that an entity is appropriately managing risks of inappropriate influences.
Relevance to your organisation: Assessment records should concisely record the reasons for the assessment scores awarded, in addition to recording the scores.
Documentary evidence should be maintained to evidence the process that was followed and that appropriate endorsements/approvals were obtained.
Entities should fully document the handling of all probity concerns