4.2 Commonwealth grant programmes

As detailed in the Commission’s Phase One Report, the Commonwealth spent about $22 billion on grants in 2012-13, across more than 500 grants 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.

In its earlier Report, the Commission recommended establishing a central register of Commonwealth grant programmes to provide transparency for potential grant applicants and to facilitate informed consideration on grant matters by decision makers.

The establishment of a more rigorous assessment process was also proposed to reduce the proliferation of new Commonwealth grant programmes. These new guidelines would require the proposing minister to demonstrate, at the approval stage:

  • 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.

In its Phase One Report the Commission also recommended 20 grants programmes be abolished. It further proposed consolidating all grants programmes with a value less than $5 million across the forward estimates in each portfolio. Funding for grants should also be reduced by 15 per cent by 2015-16.

As part of its second phase deliberations the Commission has examined many of the remaining Commonwealth grants programmes and makes a number of further recommendations.

A summary of the total number of grants programmes by portfolio, together with their value in 2014-15 is outlined at Table 4.3 below. Taking account of the 20 grant programmes the Commission recommended abolishing, as well as the fact that a number of current programmes do not extend into the coming financial year and beyond, some 399 grant programmes remain. Their aggregate expenditure is estimated to be $22.4 billion in 2014-15. A full list is at Annex C.

Table 4.3: Commonwealth grants programmes by portfolio - 2014-15
Portfolio

Number of Grant Programmes

$ million

Agriculture 12 24.8
Attorney-General's 28 410.5
Communications 2 3.8
Defence 10 100.3
Education 63 8,703.7
Employment 5 11.0
Environment 10 312.0
Finance 8 1.2
Foreign Affairs and Trade 2 16.7
Health 117 3,215.2
Immigration and Border Protection 1 0.1
Industry 31 1,388.8
Infrastructure and Regional Development 15 4,337.8
Prime Minister and Cabinet 45 1,136.7
Social Services 36 2,689.9
Treasury 7 4.8
Veterans' Affairs 7 9.9
Total 399 22,367.2

Source: National Commission of Audit.

The largest 50 programmes account for more than 85 per cent of total Commonwealth expenditure on grants. These programmes are all over $50 million per year.

In contrast there are 227 grant programmes involving annual expenditure of less than $5 million. These grants account for around $350 million or 1.5 per cent of total grant expenditure.

The main categories of grants are in the areas of Indigenous affairs, health, schools, social services, mental health, industry assistance, vocational education and training, and infrastructure. They account for approximately 60 per cent of the number of grants.

Of the $22.4 billion of grant programmes in place for 2014-15, the Commission has been advised that commitments or contracts are in place for a significant number (around 40 to 50 per cent of grants).

The Commission has nonetheless undertaken a further examination of the 399 remaining grants programmes and notes substantial opportunities to pursue a further rationalisation of programmes.

Options available to rationalise existing grants programmes include:

  • merging existing grants programmes;
  • ceasing grants programmes; and
  • transferring responsibility for grants programmes to the States.

A discussion of the Commission’s findings is outlined below.

Merge grants programmes

In many instances a large number of grants programmes are directed towards a single common area. These include:

  • Indigenous matters – 76 different programmes, involving aggregate expenditure of $1.8 billion in 2014-15;
  • health issues – 54 different programmes, involving aggregate expenditure of $1.0 billion;
  • schools-related grants – 28 different programmes, involving aggregate expenditure of $230 million;
  • mental health matters – 21 different programmes, involving aggregate expenditure of $503 million; and
  • infrastructure – 15 different grants, involving aggregate expenditure of $4.3 billion.

As outlined in the Commission’s Phase One Report, broad-banding grants programmes could significantly reduce the administrative and compliance burden and lead to better outcomes.

For example, consolidating the 20 or so mental health grants programmes could lead to the $500 million allocated to the area being better spent. This should be a priority for the current review of mental health services and programmes due to report in November 2014.

Likewise, there should be a comprehensive assessment of grant programmes relating to Indigenous matters. As outlined in the Commission’s Phase One Report, there are too many disparate and fragmented Commonwealth Indigenous programmes and there is significant scope for consolidation and rationalisation. This must extend to Indigenous-specific grants programmes.

The Commission has also recommended the establishment of a Health Productivity and Performance Commission arising from the rationalisation of a number of existing Commonwealth health bodies. This new body should assess the efficacy of the 54 health-related grants programmes and assess opportunities to better use associated funding.

Cease grants programmes

In identifying other Commonwealth grants programmes that could be abolished the Commission has focused on the larger programmes – the 172 which spent more than $5 million in 2014-15.

Table 4.4 sets out 14 programmes, accounting for around $330 million, which should be abolished. Taking into account funds already committed (estimated to be about 40 per cent) their abolition could deliver an annual saving of some $200 million. Annual savings of a similar magnitude could be expected over the remainder of the forward estimates period.

Table 4.4: Grant programmes identified for cessation
Agency Name Grant Programme Name

2014-15
$m

Department of Social Services Financial Management Program 104.9
Department of Industry Clean Technology Programs - Industry 78.3
Department of Infrastructure Community Infrastructure Grants Program 29.5
Australian Research Council Linkage – Industrial Transformation Research Program 20.3
Attorney-General's Department International Films Incentive Payments 20.0
Attorney-General's Department National Crime Prevention Fund 19.0
Tourism Australia Tourism Industry Regional Development Fund 12.1
Department of Industry Automotive New Markets Initiative 9.9
Department of Education Improving Educational Outcomes 9.8
Department of the Environment Australian Climate Change Science Program 7.8
Department of Education School Education Reforms Implementation 5.6
Department of Education Australian Institute for Teaching and School Leadership 5.5
Defence Materiel Organisation Skilling Australia Defence Industry Program 5.3
Department of the Prime Minister and Cabinet National Congress of Australia’s First Peoples 5.0
Total   333.0

Source: National Commission of Audit.

The Financial Management Program provides some $100 million to fund financial counselling, money management, emergency relief, retirement information services and the Home Energy Saver Scheme. Around $6 million funds the Gambling Help Online (funding is scheduled to expire on 30 June 2015).

While the funding for problem gambling should continue, there should be a re-assessment of the remaining programmes’ structures and delivery. Some State and local governments provide these or similar services.

The Clean Technology Programs comprise the Clean Technology Investment programme, the Clean Technology Food and Foundries programme and the Clean Technology Innovation programme. Designed in the context of rising energy prices associated with the carbon tax, these programmes provide competitive merit-based grants to assist manufacturing businesses to invest in energy efficient capital equipment and low emissions technologies, processes and products. The Government has decided to discontinue the Clean Technology programmes as part of the package to repeal the carbon tax.

The Community Infrastructure Grants Program involves funding projects for construction or upgrade of local sport, arts, recreation and community infrastructure, identified by local communities as priorities.

While these grants may well serve a useful community purpose it is not clear that the Commonwealth Government should be involved. Under the Commission's Principles of Good Government, as far as practicable, policy and services should be delivered by the level of government closest to the beneficiaries to allow programmes to be tailored to meet community needs. Moreover, the Commission understands this programme has significant uncommitted funding, some of which has been in place since 2010.

The Industrial Transformation Research Program funds the creation of research hubs and research training centres. The programme has up to four rounds a year. The Commission understands the Australian Research Council has diverted funding from this programme towards other priorities, due to low demand for the scheme. It should be abolished.

International Films Incentive Payments programme provides a subsidy to attract international screen productions to Australia. The continued funding of this grants programme should cease, consistent with the Commission's recommendation in its Phase One Report to limit industry assistance to areas of genuine market failure.

The National Crime Prevention Fund provides grants to enhance community safety, such as closed circuit television systems and supports projects aimed at young people at risk of engaging in street crime. While the objectives of this scheme are likely well intentioned, States have prime responsibility for local policing and crime prevention.

The Tourism Industry Regional Development Fund programme supports investment in tourism-related accommodation, infrastructure, experience and facilities. The aim of this programme is to attract tourists to regional areas and encourage them to stay for longer, and in doing so provide jobs, investment and growth in regional Australia.

Most of the benefits accrue to tourism operators.

The continued funding of this grants programme should cease, consistent with the Commission's recommendation in its Phase One Report to limit industry assistance to areas of genuine market failure.

The Automotive New Markets Initiative programme provides $28.2 million over three years for grants to Australian automotive supply chain companies to broaden their customer and product base, both domestically and internationally. Additional Commonwealth funding of $10 million was provided in May 2013 in response to Ford’s announcement that it will cease manufacturing in Australia from 2016.

This grants programme should cease, consistent with the Commission's recommendation to limit industry assistance to areas of genuine market failure.

The Improving Educational Outcomes programme was published in the 2013 Pre‑Election Economic and Fiscal Outlook as a fund available for unspecified activities related to improving educational outcomes. Without the necessary transparency it is not clear whether funding associated with this grants programme meets the Commission's Principles of Good Government including assured value for money.

The Australian Climate Change Science Program provides $31.6 million over four years to support research by the CSIRO, the Bureau of Meteorology, the Antarctic Climate and Ecosystems Cooperative Research Centre, the Centre for Excellence for Climate Change Science and the Australian Academy of Science on the causes, nature, timing and consequences of climate change for Australia and the region. Between them, the agencies and organisations funded by the programme already receive significant direct Commonwealth funding and would be in a position to fund climate change science activities through their existing resources. These funds should be returned to the Budget or allocated to priority areas.

Funding of $11.0 million over two years from 2015-16 is under consideration for the Australian Institute for Teaching and School Leadership, to assist with activities relating to quality teaching and school leadership. A further $14.2 million supports the Australian Institute for Teaching and School Leadership through two separate grants: the development of national reforms to support quality teaching and school leadership; and, to develop resources that will help build Asia-relevant capability, such as training modules and resources for Asian language teachers.

Given the States’ prime responsibility for school education the Commission recommended in its Phase One Report abolishing the Australian Institute for Teaching and School Leadership. Continued funding for it and associated grants programmes should not be continued.

Since 2005 the Skilling Australia Defence Industry Program has provided funding to improve the quality and quantity of skills training in businesses that could seek defence contracts. The continued funding of this grants programme should cease, consistent with the Commission's recommendation in its Phase One Report to limit industry assistance to areas of genuine market failure.

The Indigenous Capability and Development – National Congress of Australia’s First Peoples programme provides for a funding agreement with the National Congress of Australia’s First Peoples, valued at $15.0 million over three years from 2014-15. The Congress is intended to act as a representative voice for Indigenous people and provide advice to government on national strategic matters that affect Indigenous people.

The Commission understands that the Congress represents a very small proportion of the adult Indigenous population (less than 5 per cent) and a significant amount of funding is unspent. The Commission’s Phase One Report suggested that funding support for the National Congress be discontinued given it duplicates existing Indigenous representative bodies. Any savings should be redirected into the new Indigenous education voucher program recommended by the Commission in its Phase One Report.

In addition to the 14 grants programmes identified above for abolition — all of which involve spending of more than $5 million — the Commission has identified many smaller programmes that portfolio agencies could consolidate or rationalise.

Although these smaller grants programmes may appear worthy, it is not consistent with the Commission’s principles to justify spending taxpayers’ dollars on them.

For example, the grant programme Leveraging Australia’s Expat Platform provides $2.8 million to support a global network of more than 20,000 expatriate Australians. While it is likely the network has benefits, expatriate Australians and other private sector interests should fully fund the programme if it is to continue.

Similarly, the Keys2Drive programme that subsidises driving lessons, the Digital Business Kits programme, Musos in Residence, and other programmes have popular appeal. However, spending on lower priorities and in areas that fall outside the Commonwealth’s responsibility should be resisted.

Transfer grants programmes to the States

The Commission also recommends transferring to the States a number of schools‑related grant programmes.

The School Improvement Support Funding programme for both Independent and Catholic schools provides $100 million and $54.7 million respectively to assist them implement various education reforms.

Teach for Australia places high achieving non-teaching graduates in disadvantaged secondary schools for two years while they complete a postgraduate qualification in teaching.

Transferring these grants programmes is consistent with the Commission's recommendations in its Phase One Report that the States should have policy and funding responsibility for government and non-government schools.


Recommendation 16: Commonwealth grant programmes

Further to the Commission's recommendations to improve the administration of grant programmes, including through the establishment of a central register of grants, the Commission recommends that:

  1. all agencies undertake a comprehensive assessment of all existing grants programmes to identify grants programmes that can be merged, abolished and transferred to the States. This assessment should inform the 2015-16 Budget;
  2. that priority be given to broad-banding or merging existing grants programmes in the areas of Indigenous affairs, health and mental health and those that are schools-related with a view to achieving significant administrative savings; and
  3. in addition to the specific grants programmes identified for abolition in its Phase One Report that a further 14 grants programmes identified be abolished.