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Grants programs

The NSW Department of Premier and Cabinet categorises NSW Government grants programs into two groups: grants for community projects and grants for service delivery or funding programs. In addition, local councils can provide grants to local organisations and businesses.   

There has been a growing trend over recent years for the NSW Government to outsource the provision of government services to the private sector or non-government organisations (NGOs). Consequently, considerable public money is provided to NGOs, and it is imperative that the risks of corrupt conduct in these organisations are assessed and managed to provide accountability for their expenditure of taxpayers’ money.

A common question to the ICAC is whether NGOs, which receive funding to provide services to the community, come within the ICAC’s jurisdiction. There is no definitive answer to this question, as each case depends on its specific circumstances, such as the:

  • legislative or contractual provisions under which the funding is made available
  • role of the NSW Auditor-General in auditing relevant accounts
  • nature of the alleged corrupt conduct
  • status of the person or the organisation involved
  • the origins of the funding.
Misuse of public funds allocated to NGOs

In 2017, the ICAC held its first public inquiry into allegations of corrupt conduct within an NGO. The investigation found that the former chief executive officer (CEO) of NGO X, who was also the former chairperson of NGO Y, misused up to $773,000 from the budgets of these two organisations.

Each of the NGOs was primarily funded by NSW Government agencies.

The ICAC determined that, while it did not have jurisdiction over the NGOs per se, it did have jurisdiction over staff of these NGOs as they were performing public official functions using public money provided for that purpose.

The ICAC made 24 findings that the former CEO/chairperson had engaged in serious corrupt conduct, including that she improperly:

  • obtained up to $443,000 from NGO X to reimburse the cost of goods and services she had purchased for personal use
  • arranged for the transfer of funds totalling $13,500 from NGO X to a jeweller for the purchase of jewellery for personal use
  • used the NGO X credit card to pay $35,211.39 for personal goods and services, including cosmetic procedures and clothes
  • falsely represented herself to be a qualified psychologist with a PhD in psychology, and provided psychological treatment to NGO X clients and patients referred to her
  • obtained $141,485 for herself and her two sons through submitting invoices to NGO X that falsely claimed they had worked as facilitators
  • spent $18,000 of NGO X funds toward the purchase of a car for her husband and arranged for NESH to reimburse IWHS for that amount.

The ICAC made 12 corruption prevention recommendations to the the NSW Government agenices including that they:

  • develop additional outcomes-based key performance indicators to reflect the critical objectives of the services they fund
  • consider requiring their funded NGOs to maintain an internal reporting or whistleblowing program.

The report also noted that, while people who volunteer to be board members of NGOs are generally motivated by altruism and a commitment to their community, there are significant responsibilities that come with this role and skills needed to perform this duty.

Source: Investigation into the conduct of a principal officer of two non-government organisations and others, September 2018.

Conflicts of interest

Conflicts of interest around grants programs present particular risks in smaller communities, where public officials can be involved in local groups in the immediate area, creating perceived conflicts of interest. A public official’s involvement in a community group should not automatically disqualify that group from receiving funding. However, it does mean the public official should declare a conflict of interest and have limited involvement in decisions of the public official’s agency about whether the group should receive funding from that agency. Conflicts of interest that are known and declared can be managed through a range of strategies. Similarly, there are measures to detect undeclared, secret, private interests that may create a conflict of interest.  

Common corruption risks around grants programs include a public official allocating a grant outside the proper selection process to favour an organisation in which they have a private interest. For example, allocating funds to an aged care facility where a relative resides or to a community group of which they are a member. Another major risk is that the grant funds may be misused or misappropriated by the receiver.

Hidden conflict of interest exploited to obtain funding
The ICAC investigated allegations that a public official had sought payment from an NGO with which he was affiliated to help prepare a grant application for funding from his agency, that is, from his employer. The public official also asked the NGO for an additional sum for a colleague in the agency to favourably review its submission. The agency fined the public official $2,500 and formally cautioned that any similar behaviour would result in disciplinary action. It also developed and implemented a new conflict of interest policy.

Source: Complaint to the ICAC.

Developing a strategy

Creating a process map is a good way to understand the formal and informal processes used by your agency to assess, award and manage grant program funding applications. A process map can highlight specific fraud and corruption risks around decision points and the potential for end-to-end control, where a single person controls whether a recipient will receive a grant.

Written policies and procedures can help ensure consistency and compliance around the administration of grants programs, but only if staff understand the policy, are able to comply and are motivated to comply. Training in the policy is useful for this reason, but only if complemented by other corruption control measures, which are listed below.

  • The aims and objectives of any grants program funding should be defined, as should be the roles, responsibilities and resources of the parties involved.
  • A call for grant applications should have clear criteria, be widely advertised and applications assessed according to an advertised schedule.
  • The assessment process for allocating grants should be fully documented, including recommendation decisions.
  • All grants for service delivery should be underpinned by written documentation, including service level agreements. The documentation should clearly describe:
    • terms and conditions of funding
    • purpose of the grant
    • anticipated outcomes
    • details of the project, including start and finish dates
    • procedures for the payment and receipt of funds
    • procedures for any leftover funds
    • reporting requirements
    • any monitoring, evaluation and audit requirements.
  • Government agencies administering grants for service delivery should adopt NGO monitoring frameworks underpinned by the integration of information about NGO finances, performance and corporate governance arrangements. Ideally, under any such framework, NGOs should be categorised according to risk, allowing agency engagement with NGOs to be targeted and informed.
  • Government agencies administering grants for service delivery should consider requiring NGOs to provide them with copies of their audited financial statements and any management letters written by their external auditors. This information should be reviewed by the agency to help assess whether any financial anomalies have occurred.
  • Key performance indicators should be used to measure the success of grants for service delivery. Australian governments have increasingly started to implement outcomes measurements as a more meaningful way of focusing on the impact of a funded program and the level of achievement that was obtained for a client than simply measuring inputs (for example, hours worked) and outputs (for example, number of courses run).
  • Grants programs should be reviewed every 3-5 years or earlier to see whether an agency's priorities have changed.

Funding is sometimes leftover at the conclusion of projects funded through a grant. Whether the recipient organisation can keep leftover funds will depend on the terms and conditions of the funding arrangement. Terms and conditions should ideally specify how to deal with any unspent funds. If they do not do this, the agency could be involved in a protracted dispute over the funds. Note that such a situation should not arise if the grant process was well planned and the project well implemented, since all funds should have been disbursed as planned and agreed.

Community group does not declare leftover grant funds

A local community-based environmental protection group received funds, administered through a NSW public agency, from various NSW government departments and the federal government.

The funds were to conduct an environmental rehabilitation project. The group’s final report to the agency indicated that all funds had been expended and that the outcomes of the project had been met. More than a year later, the same group wrote to the agency seeking approval to transfer $250,000 leftover from the project to a new project.

The group advised the NSW agency that it had received Federal Government approval for the re-allocation, subject to the agency’s agreement. This request made the NSW agency suspicious that funds may have been improperly managed – otherwise, why was so much money leftover? An agency enquiry did not find any improper conduct, but it exposed inadequate reporting and other accountability arrangements.

The agency introduced several measures to improve the management of grants, including:

  • prohibiting its own staff from being office bearers in groups who receive project funds
  • withholding 10% of project funds until it has received a detailed final report
  • requesting final project reports in a standardised format
  • requiring groups that receive project funding to have a dedicated bank account for that project and to submit quarterly reports on the project.
Source: Complaint to the ICAC.


The ICAC’s publication, Funding NGO delivery of human services in NSW: A period of transition (December 2012) contains detailed advice on preventing corruption involving grants allocated to NGOs.

The Australian National Audit Office has a better practice guide on the administration of grants, titled Implementing Better Practice: Grants Administration (2013). Additional advice is available from the NSW Department of Premier and Cabinet.

Reviewed November 2018