Auditor-General's overview

Department of Internal Affairs: Administration of two grant schemes.

The Department of Internal Affairs (the Department) aims to contribute to building strong, sustainable communities, hapū, and iwi. One way it does this is by distributing grants for community projects and organisations.

Many community organisations, such as clubs, charities, cultural bodies, and small incorporated societies, depend heavily on grants for their operational funding or special projects.

The Department is responsible for several grant schemes. My staff audited the Department's administration of two grant schemes:

  • the Lottery Grants scheme (which is expected to distribute about $153 million in 2010/11 to between 2500 and 4000 organisations); and
  • the Community Organisation Grants Scheme, or COGS (which is expected to distribute about $14 million in 2010/11 to between 4200 and 5400 organisations).

The Department processes applications for grants and provides administration, training, and support services to the committees that are responsible for deciding which applicants will receive a grant under each scheme. These committees are appointed by the Minister of Internal Affairs (Lottery Grants scheme) or elected by their communities (COGS).

The Department's approach to administering the two schemes is based on six main principles. These principles are consistent with the good practice guide that my Office produced in 2008 – Public sector purchases, grants, and gifts: Managing funding arrangements with external parties. Appendix 2 sets out these principles and Appendix 3 sets out the associated expectations that the Department has for itself and for grant recipients. I encourage any public entity involved in grant administration to read Appendix 2 and our 2008 good practice guide.

Overall, the Department's systems and processes are effective in helping the Department to put the principles into practice during all four main stages of grant administration: planning how the grant schemes will work, selecting applicants (in this case, supporting the committees in their decision-making), monitoring how the money is spent, and reviewing the effectiveness of the grant schemes.

However, the Department's existing electronic grant administration system, Grants Online, has limitations that affect the effectiveness and efficiency of grant administration. The Department intends to address these limitations by implementing a new grant administration system and other interdependent improvement projects.

In our view, the Department could do more to support greater transparency and accountability in decision-making by the committees. We have made three recommendations to support this improved transparency and accountability. This report also includes some suggestions that we encourage the Department to adopt.

In making our recommendations and suggestions, we have been mindful that:

  • any funding arrangement should be as simple and practical as possible, considering the amounts involved, the complexity of the project to be funded, and the level of risk; and
  • it is appropriate to consider compliance costs for the parties and seek to reduce them where possible.

We expect the Department to consider these factors when responding to our three recommendations and to avoid undue compliance costs for all the parties involved.

Work that the Department has under way

Since 2008, the Department has substantially reviewed its grant systems and processes. That work has identified many of the aspects of grant administration that staff told us needed to improve and that we also observed.

The improvements now under way include putting in place a new electronic grant administration system. In July 2010, the Department selected a preferred vendor for this system and expects to complete contract negotiations by the end of 2010. The Department's original aim of full implementation by April 2011 will be confirmed or otherwise when these negotiations are completed.

If the new grant administration system is effectively implemented, it should make better information more readily available about who has previously received grants, the purpose for which grants were made, and what the effect on the community has been.

It is important that the new grant administration system is implemented in a timely manner and that it meets the requirements that the Department has identified. We have made a recommendation to support this happening.

Better understanding of the results of grants should enable the Department to more effectively assess whether the grants are supporting the intended purpose of building strong, sustainable communities, hapū, and iwi.

I thank the Department's staff for their open and constructive assistance and their willingness to consider and act on suggestions about the improvements they were making. I would also like to thank the committee members and others who assisted my staff during the audit.

Signature - LP

Lyn Provost
Controller and Auditor-General

1 November 2010

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