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A large majority of business grants are awarded through non-competitive processes, contrary to government guidelines, new research reveals.
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IPA raises transparency concerns with government grants for business
12 February 2024
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A study by the IPA-Deakin SME Research Centre has found that the overwhelming majority of Commonwealth Government grants awarded to businesses between 2018 to 2022 were non-competitive.
The research indicated that 83.77 per cent of the business grants in this period were awarded on a demand basis, with applicants that met stated eligibility criteria awarded grants up to the limit of available funding without any assessment of their merits relative to other applicants.
The skewing towards non-competitive processes was far greater for business grants than for general community grants, the IPA said in a white paper on the research.
Competitive selection processes were rare for all categories of business grants with competitive processes particularly scarce for business development grants, small business grants and industry innovation grants.
For small businesses, grants offered via ad hoc and closed, non-competitive processes had higher average values of approximately $1.7 million, than grants subject to open, competitive processes at $1.5 million, the white paper stated.
Inherent problems with the grants system were previously identified in the 2021 Australian National Audit Office review, the white paper said.
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“Yet, more than two years since the ANAO review, our research into business grants reveals that the administration of this perpetual multi-billion-dollar pipeline of Commonwealth public expenditure remains, to a significant degree, shielded from public scrutiny — and mostly without competitive selection processes for grant applicants,” the IPA-Deakin SME Research Centre said.
“These issues raise questions about the integrity of a system that has already been tarnished by high-profile political controversies — including the so-called ‘sports rorts’ affair — and leaves the system potentially open to ongoing misappropriation or misallocation of public money.”
Deakin University Professor of Accounting George Tanewski said the new study is the first chapter in a three-part series that is designed to promote transparency around Commonwealth government grant selection criteria, the allocation processes used, the key stakeholders involved, and the public value the system creates for the Australian people.
“These reports raise serious questions about the integrity, transparency and accountability of a Commonwealth Government system that hands out billions of taxpayer dollars to companies, with virtually no strings attached,” said Mr Tanewski.
The white paper has called for four key recommendations including a requirement for full public disclosures where government ministers overrule public service or expert committee recommendations to award grants.
It has also called for disclosure requirements for ad hoc grants to be awarded by government ministers, for the names of all applicants for competitive grants – both successful and unsuccessful – to be published, and for government agencies to publish more information about the grants they provide and their intended outcomes.
Institute of Public Accountants chief executive Andrew Conway said Australians have the right to know how the government spends their money, and that more transparency is needed to improve the outcome of taxpayer-funded grant programs.
“Accountants have a duty of care to represent their client’s best interests, and as a professional body we have a duty of care to represent that public interest,” said Mr Conway.
“Public trust in our institutions is decreasing, and we need to change, and we need to change for the better. It’s absolutely critical that governments use the best accounting practices for business grants to promote transparency, and accountants have an important role to play in ensuring taxpayer money is being used appropriately.”
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