Racing Industry: Grants Management

Tabled: 28 November 2013

2 Managing Applications

At a glance

Background

As with all distributions of public funds, the provision of grants must be transparent and accountable, and should maximise the expected benefit. This is achieved firstly by using effective selection criteria and guidance, and then by documenting assessments to explain and inform decisions.

Conclusion

The Department of Justice (DOJ) is not able to show that all projects funded through the Regional Racing Infrastructure Fund (RRIF) and the Victorian Racing Industry Fund (VRIF) met those programs' funding criteria. This is because DOJ did not start recording assessments until August 2012, and subsequent records of VRIF assessments do not show whether applications meet each funding criterion. Consequently, the grant programs lack the necessary transparency and accountability.

Findings

  • DOJ set up clear application and assessment procedures, roles and responsibilities for RRIF and VRIF.
  • Funding criteria were in place for RRIF and were improved for VRIF, but DOJ has not articulated the standards required to meet each funding criterion.
  • RRIF applications were not managed in accordance with program guidelines.
  • Application requirements for RRIF did not give DOJ enough assurance of applicants' claims, but were substantially better for VRIF.

Recommendations

That the Department of Justice:

  • implement guidelines to assess applications against VRIF funding criteria
  • require VRIF Racing Infrastructure applicants seeking funding for large or complex projects to support their application with a business case
  • improve the rigour of VRIF Racing Infrastructure funding recommendations by advising the Minister for Racing of applications' merits against each funding criterion.

2.1 Introduction

Grants are a form of government funding, typically provided to the non-government sector as a way to achieve policy objectives. As with all distributions of public funds, grants need to be transparent and accountable, and should maximise expected benefits.

Transparent and accountable grants administration occurs firstly by using effective selection criteria and guidance, and then by documenting assessments to explain and inform decisions.

2.2 Conclusion

The Department of Justice (DOJ) is not able to demonstrate that all projects funded through the Regional Racing Infrastructure Fund (RRIF) and the Victorian Racing Industry Fund (VRIF) met those programs' funding criteria.

This is because DOJ did not start recording assessments until August 2012, and subsequent records of VRIF assessments do not show whether applications met each funding criterion. Although administration of VRIF has improved compared with RRIF, a lack of assessment guidelines means it is not possible to determine whether applications were assessed consistently. As a consequence, the grant programs lack the necessary transparency and accountability.

2.3 Grant assessments

An effective grants program requires robust planning that identifies any risks to consistent and transparent grants administration. Roles and responsibilities should be clearly assigned, and the grant administrator should develop and use funding criteria and guidelines to ensure that applications meet the policy objectives, and that assessments are consistent and equitable.

DOJ set up clear application and assessment procedures, roles and responsibilities for RRIF and VRIF grants programs, and developed funding criteria to assess applications. However, weaknesses remain, both in how DOJ assesses applications and in how it records assessments.

2.3.1 Funding criteria

DOJ developed funding criteria for RRIF that reflected the program's purposes and enabled it to assess applications for need, net benefit, and the adequacy of project management and consultation. The funding criteria for RRIF grants were:

  • demonstrated consistency with the eligibility requirements of the program
  • demonstrated need for the project and net benefit to the racing industry, and where applicable, the wider community
  • demonstrated consultation with industry stakeholders and where applicable the broader community
  • project management arrangements
  • consideration given to environmental protection and water-saving opportunities.

The selection criteria for RRIF gave DOJ a reasonable basis on which to assess applications. DOJ strengthened the selection criteria for VRIF Racing Infrastructure—the main program in VRIF—to address weaknesses it had identified. In addition to the existing RRIF funding criteria, VRIF Racing Infrastructure applicants were required to demonstrate:

  • economic viability, and long-term management and ongoing maintenance plans
  • improvement in access for non-traditional users of racing venues
  • measures to determine a successful project outcome for the club, racing industry and the broader community.

These additional criteria reduce a number of risks—applicants overstating benefits, excessive project costs, inadequate project management, and lack of success measures.

2.3.2 Assessment guidance

Assessment guidelines help to ensure that judgements of merit remain consistent where applications cannot be assessed at one time. Where applicants do not face competition for funding, as is the case for RRIF and VRIF, assessment guidelines also help to ensure that funded projects achieve consistent standards of merit.

DOJ set up clear application procedures for RRIF and VRIF, including clear roles and responsibilities for applicants, the Office of Racing and the Minister for Racing. However, it did not establish guidelines to assess proposals against the funding criteria. Assessment guidelines should describe the attributes of projects that adequately meet the funding criteria, so that proposals not meeting these standards can be either improved or rejected.

Without firm guiding standards, there is a risk that insufficient attention is paid to achieving program objectives, and funds may not bring maximum benefits to the racing industry and the community.

2.3.3 Assessing applications

Assessing applications against the funding criteria is the critical step in deciding whether to fund the applicant. Applications need to show how they meet the criteria, and the assessment needs to occur consistently, equitably and transparently.

DOJ was responsible for assessing RRIF and VRIF applications and making funding recommendations to the Minister for Racing. However, it is unclear whether all projects that received RRIF and VRIF funding met the funding criteria, or the extent to which they met it. This is because DOJ did not record its assessments until August 2012, and assessment records since then do not show whether applications meet each funding criterion.

Regional Racing Infrastructure Fund

RRIF guidelines clearly state that DOJ's role was to assess applications and make funding recommendations to the Minister for Racing. However, the application and assessment processes did not conform to the documented procedure, roles and responsibilities.

Before submitting applications, controlling bodies provided the Minister for Racing indicative lists of projects to be considered for funding, as the minister wanted the majority of RRIF funding to be committed within the first two years of the program. DOJ advised that this process effectively resulted in projects being selected for funding before applications were submitted. Consequently, this reduced both the importance and relevance of the grant application process and DOJ's assessments.

Considerable variation in the quality of RRIF applications means it is unclear whether DOJ consistently achieved confidence in applicants' claims against the funding criteria. As shown in Figure 2A, the sample of funded projects that VAGO examined contained a proportion with incomplete applications, cursory responses to funding criteria, and incomplete supporting documentation.

Figure 2A
Quality of applications for RRIF and VRIF Racing Infrastructure funding

Grant files for which criterion is satisfied

Criterion

RRIF

VRIF Racing Infrastructure

All sections of application completed

95 per cent

89 per cent

Description of project benefits—cursory, adequate, or comprehensive(a)

53 per cent adequate or comprehensive

83 per cent adequate or comprehensive

One or more project benefits are quantified with targets

20 per cent

22 per cent

Description of project management—cursory, adequate, or comprehensive(b)

30 per cent adequate or comprehensive

67 per cent adequate or comprehensive

Letter of commitment from funding contributors other than the controlling body

None of the eight files for which this is relevant

None of the three files for which this is relevant

Plans and diagrams included with application

76 per cent of the 38 files for which this is relevant

88 per cent of the 16 files for which this is relevant

Project costing included with application

60 per cent

94 per cent

(a) Cursory descriptions were unclear or incomplete, adequate contained limited information but identified at least one benefit and comprehensive contained clear and comprehensive information and quantified measures where relevant.
(b) Cursory descriptions were unclear or incomplete, adequate were clear but contained limited information and comprehensive contained clear and comprehensive information.
Source: VAGO assessment of a sample of DOJ Racing Infrastructure grant files of Greyhound Racing Victoria—seven RRIF and four VRIF, Harness Racing Victoria—13 RRIF and three VRIF, and Racing Victoria Limited—20 RRIF and 11 VRIF. VRIF grant recipients include clubs and controlling bodies.

RRIF application forms required only that applicants provide a comment against each of the funding criteria. Yet RRIF supported 13 projects with grants of over $1 million, the largest being a grant of $4.69 million for a project valued at $6.70 million. Application material did not require projects over a certain size to give more comprehensive justification, such as a business case, so that DOJ could be assured that criteria for need and benefit would be satisfied.

VAGO's assessment of RRIF files found that the majority of applications contained only limited supporting information. Of the applications from one controlling body, around two-thirds included no costing, which raises doubt about how DOJ assessed the expected net benefits of the proposals.

Despite the inconsistent quality of RRIF applications, all 117 applications attracted funding. It was not possible to understand why this was the case, because DOJ did not record its assessment of applicants' claims against RRIF funding criteria. Not documenting assessments is a fundamental breakdown of basic grants administration and invites questions about the transparency, accountability and integrity of the process.

Victorian Racing Industry Fund

The quality of applications to VRIF is markedly better than for RRIF, although the quality of assessments has not similarly improved. As Figure 2A shows, VRIF performed better than RRIF against the following criteria:

  • descriptions of project benefits VAGO rated as adequate or comprehensive—83 per cent compared to 53 per cent
  • applications in which one or more claimed benefits were quantified with targets—22 per cent compared to 20 per cent
  • descriptions of project management arrangements that VAGO rated as adequate or comprehensive—67 per cent compared to 30 per cent
  • proportion of applications supported with project costings—94 per cent compared to 60 per cent.

VRIF Raceday Attraction files also showed that DOJ thoroughly scrutinises applications, obtaining clarifications from applicants and identifying costs that are ineligible for VRIF funding.

In January 2013, DOJ revised VRIF application forms, requiring applicants to show that their procurement arrangements would meet public sector guidelines. DOJ also strengthened other information requirements, including the reasons for not including specified documentation in support of the application, such as quotations and tender documents, project budget, project plans, planning and building permits, project reports, and letters of support from controlling bodies and funding contributors.

However, as with RRIF, applicants for VRIF Racing Infrastructure grants are not required to support large or complex projects with a business case. As at 30 June 2013, VRIF had funded four projects with grants of over $1 million, the largest of which was $3 million for a project worth $9 million. While applicants may have prepared business cases for their own purposes, without evidence of such analysis, DOJ cannot be sure that applicants' claims of need, net benefit and economic viability are valid.

DOJ has not established assessment guidelines despite this being better practice since at least 2002. It is unclear whether the applications received at different times were assessed against consistent standards. This uncertainty is made worse by continued weaknesses in how DOJ records its assessments against the funding criteria. Despite this, as of June 2013, 87 of 89 VRIF Racing Infrastructure grants have been funded, with 92 of 101 Raceday Attraction Program grants also funded.

DOJ has trialled tools for assessing applications, and since August 2012 has used a standard form to record the applicant information on which its assessments are based. While it records whether the proposal is consistent with funding criteria, it does not record its judgements against each criterion, particularly whether the project's net benefit justifies the contribution of public funds. It is therefore not possible to understand how DOJ decides on its funding recommendations. As a consequence, transparency and accountability weaknesses remain.

2.4 Grant approvals

Approving grants requires that the decision-maker has sound advice and recommendations on which to base the decisions. This is fundamental to a transparent and accountable process.

For RRIF and VRIF, the Minister for Racing decides which projects will receive funding, based in part on DOJ's advice and funding recommendations. However, weaknesses with DOJ's assessments mean funding recommendations are not based on complete and robust information about the application.

2.4.1 Ministerial briefings

DOJ briefs the Minister for Racing on applications it receives under RRIF and VRIF. These briefings include recommendations about which applications to approve, supported by a range of information.

Briefings for RRIF funding decisions included information on the status of the RRIF program, the application and proposal, and DOJ's funding recommendation. Despite briefings and recommendations being supported by information to assist the minister's decision-making, DOJ's inadequately documented assessments meant the minister was unlikely to have received either comprehensive or sufficient advice on which to base decisions.

For VRIF, DOJ improved its briefings, adding:

  • a breakdown of project costs, including the allocation of costs to funding sources for Raceday Attraction Program applications
  • evidence of compliance with Victorian Government procurement requirements, including copies of quotes for major cost items in the case of applications for Raceday Attraction Program grants, and justification of any procurements without quotes or tenders
  • a copy of the funding application, estimated project costs and DOJ's application assessment sheet.

However, ongoing weaknesses with VRIF application assessments mean the minister still does not receive comprehensive information on applications' performance against the funding criteria. While some improvements to the process have been made, DOJ has missed an opportunity to more thoroughly review its processes to improve assessments and advice to the Minister for Racing.

Recommendations

That the Department of Justice:

  1. implement guidelines to assess applications against Victorian Racing Industry Fund funding criteria
  2. require Victorian Racing Industry Fund Racing Infrastructure applicants seeking funding for large or complex projects to support their application with a business case
  3. improve the rigour of Victorian Racing Industry Fund Racing Infrastructure funding recommendations by advising the Minister for Racing of applications' merits against each funding criterion.

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