The second edition of the Commonwealth Grant Guidelines (the Guidelines) was issued by the Finance Minister in December 2012. The Guidelines come into effect on 1 June 2013.
Background to the revised Guidelines
The revisions to the Guidelines are the result of the 2010 Productivity Commission Research Report on Contribution of the Not for Profit Sector (NFP), the 2011 National Compact, the 2012 Williams High Court decision1, and amendments to the Financial Management and Accountability (FMA) Act and Regulations (1997). As a result of the Williams decision, all grant programs must now have legislative backing in addition to any Appropriation Acts authorising the funding. Consequently, a broader category of grant decisions are now reviewable under the Administrative Decisions (Judicial Review) Act 1977.
The changes to the Guidelines can be categorised under three broad headings:
- changes reflecting the policy developments;
- changes reflecting the Williams decision and amendments to the relevant legislation; and
- changes promoting best practice in grants administration by agencies (following a number of ANAO audits of grant programs).
- Changes reflecting policy developments
Requirement for greater collaboration – greater emphasis on agencies to work collaboratively on program design and implementation with the NFP sector and grant beneficiaries, in order to achieve government policy outcomes. This includes consideration of longer term arrangements where appropriate.
Removal of suppression clauses – agencies cannot use suppression clauses in grant agreements preventing grant recipients from advocating on policy issues.
Re-use of government held information – agencies should seek to use information about grant applicants that has already been collected by Government. This places a positive obligation on agencies to check what information is held by the Australian Charities and Not-for-Profit Commission (ACNC) and other Government regulatory bodies about an NGO/grant applicant.
Intellectual propertyto stay with grant recipient - Commonwealth should not seek to own IP resulting from a grant but should consider seeking a licence to use the IP for purposes such as reporting.
- Changes reflecting the Williams decision and legislative amendments
Establish that the activity is a grant – agency staff must establish and document that an activity is a grant before applying the Guidelines. The definition of the term ‘grant’ has been revised in the Guidelines to ensure consistency with changes to the FMA Act and Regulations.
Identify the legislative basis for the grant - there must be a legislative basis (primary or by reference in the FMA Regulations) for the grant in addition to any Appropriation Acts authorising the funding.
- Changes reflecting best practice in grant administration processes
Use new template agreement for low risk grants –the templates will be issued by the Department of Finance and Deregulation.
Whole of life approach to grant administration - –includes the planning and design of the grant and review and evaluation when the grant is acquitted.
Agency must have relevant skills - agency staff should have relevant skills in grants management, stakeholder liaison and financial management.
Agency must undertake risk assessment - agencies developing new grant program guidelines must conduct a risk assessment of granting activities and guidelines in consultation with the Department of Finance and Deregulation and the Department of the Prime Minister and Cabinet. Three types of risks have been specifically identified: grant program risk; grantee risk; and project risk.
Use a merit-based selection process- grants should involve a merit-based selection process with clearly defined criteria unless the Minister, Chief Executive or delegate agrees otherwise.
Grant agreements should be fit for purpose - both for the agency administering the grant and the grant applicant.
Third party advisors to be treated as agency staff - external third parties are to be treated as agency staff for the purposes of the Guidelines where they are members of the advisory panel or expert committee advising the approver.
New guidance relevant to Ministers -
- Where the Minister is the FMA Reg approver – they must receive written advice from their agency which complies with the minimum requirements set out in the Guidelines;
- Exceptions to reporting on grants in the Minister’s electorate are set out in the Guidelines; and
- Ministers must report to the Finance Minister any award of a grant which their agency recommended be rejected.
- Chief executives of agencies must report non-compliance with the Guidelines in their annual Certificate of Compliance;
- Web reporting of grants has been extended from 7 to 14 days; and
- Agency must identify whether a grant agreement has confidentiality provisions.
What does this mean for FMA agencies?
By 1 June 2013, FMA agencies need to ensure that the following agency documents have been updated:
- CEIs on grants;
- Operational Guidelines on grants;
- grant agreement templates (especially suppression, IP, confidentiality clauses); and
- risk tools and methodologies used for grant administration.
Furthermore, on 30 June, FMA Agencies must prepare a report on non-compliance with the Guidelines for their Certificate of Compliance for 2012-2013.
Recent ANAO reports on Grants Administration
There are a number of common themes emerging from ANAO audits of grant programs in the last twenty four months. These audits are useful for agencies to consider when planning, designing, implementing and administering a grant program. Some recurring recommendations in ANAO program audit reports are that agencies should:
- develop an implementation plan for the program;
- maintain records about panel members' conflict assessment and management;
- avoid using a single aggregate score for assessment of applications, as some applicants might not satisfy one or more of the merit criteria but might still obtain a high aggregate score;
- develop a strategy for dealing with receiving more grant applications than anticipated;
- not depart from the merit assessment process as published in the program guidelines;
- provide explanations both to applicants and the approver that an aggregate low score against the merit criteria may still result in a successful application if the proposal contributes towards the program objectives and satisfies the statutory requirements of efficient, effective, economical and ethical use of resources;
- ensure that unsuccessful applicants are provided with useful feedback as to how they were assessed against the published eligibility and merit criteria; and
- develop key performance indicators to assess effectiveness of the program and achievement of the program objectives.
- The revised Guidelines have been issued under Section 64 of the Financial Management and Accountability Act 1997 (FMA Act) and Regulation 7A of the Financial Management and Accountability Regulations 1997 (FMA Regs) and are deemed to be a legislative instrument under s64(3) of the FMA Act.
- On 28 May 2013, the Not-for-Profit Sector Freedom to Advocate Bill 2013 was passed by both houses of parliament. The Act will commence on the day after it receives the Royal Assent. This Act invalidates past, present and future suppression clauses in Commonwealth government contracts with NFPs. This is to remove the threat of Government funding being cut off to NFPs that engage in advocacy. Therefore, agencies should consider the implication of any existing suppression clauses.
- Finance Circular 2013/01 – Grants, Procurements and other Financial Arrangements.
- Finance Circular 2013/02 – Australian Government Grants: Briefing and Reporting.
- Finance Circular 2013/03 – Certificates of Compliance – FMA Act Agencies.
- Finance Circular2011/01 - Commitments to Spend Public Money (Regulations 7-12).
- Contribution of the Not for Profit Section - Productivity Commission Report 2010.
- National Compact 2011.
- Commonwealth Grant Guidelines – 2nd (ed).
- Financial Management and Accountability Act 1997.
- Financial Management and Accountability Regulations 1997.
- Implementing Better Practice Grants Administration (ANAO).