A range of financial arrangements can be used to address policy outcomes. It is the responsibility of each entity to decide what type of financial arrangement is most appropriate and to apply the relevant framework. Officials must ensure that they use the latest versions of the CPRs and CGRGs when considering the type of arrangement an activity might be. In making this decision, it should be underpinned by analysis and a strong policy rationale that is well documented.
For some funding programs, it can be difficult to determine whether they are a grant or a procurement. To assist in determining what the financial arrangement is likely to be, there are some considerations and questions that can be asked. We are currently trialing an online tool to assist entities and would welcome feedback, please contact firstname.lastname@example.org
Officials often need to determine if an arrangement a grant or a procurement or something else?
Often these distinctions aren’t immediately obvious.
In determining the answer to this question, entities need to consider:
- What is the substantive purpose for which the funds are to be provided;
- What are the characteristics of the arrangement;
- What is the source of the funds; and
- Where services are provided and who is the beneficiary of the services (a Commonwealth entity or part of the community?).
What is considered a Grant
A ‘grant’ is an arrangement for the provision of financial assistance by the Commonwealth or on behalf of the Commonwealth.
- under which relevant money or other CRF money is to be paid to a grantee other than the Commonwealth; and
- which is intended to help address one or more of the Australian Government’s policy outcomes while assisting the grantee achieve its objectives. (CGRGs 2.3)
Grants may include: research grants; grants that provide for the delivery of services; grants that help fund infrastructure; or grants that help build capacity.
The following considerations may assist when determining if a financial arrangement is more likely to be a grant. These include:
- The services, either in whole or in part, would be provided anyway, without a contribution from the Government.
- Financial assistance is provided to a target population.
- The financial assistance is for the purposes of conducting a pilot, facilitating research or entrepreneurship.
- The financial assistance is intended to build capacity or capability in the business or organisation.
There are some financial arrangements that are not grants for the purposes of the CGRGs (see CGRGs 2.6). An example is a financial arrangement by or on behalf of the Commonwealth that is a ‘procurement’. A procurement has its own legislative framework in the Commonwealth Procurement Rules or CPRs.
To help understand whether your agency may be seeking to undertake either a ‘grant’ or a ‘procurement’ a simple guide is below:
Note: Resource Management Guide 411 provides useful information on a range of financial arrangements, including grants and procurement, and may assist further. If in doubt, please consult your agency’s legal area.
Questions to help determine the type of financial arrangement
This tool is a guide to help when determining what type of financial arrangement is being considered. It is recommended that you contact your legal and/or internal grants team on specific advice on what the financial arrangement is.
Will you be purchasing goods or services for your entity’s own use? (or on behalf of another relevant entity)
Procuring supplies and equipment, consultancy services, memberships, advertising and travel.
- an entity purchases stationary for it’s own use
- An entity procures the services of a consultant to conduct stakeholder consultation or prepare a research report.
The arrangement is likely to be considered a procurement.
Procurement includes the acquisition of goods and services by an entity for its own use and, the acquisition of goods and services on behalf of another entity or a third party. Where an arrangement meets the definition of a procurement, then the CPRs apply.
Procurements are subject to:
Will a third party be procuring on behalf of a Commonwealth entity?
- A software developer (the third party) is engaged to manage the delivery of an ICT project and conducts a procurement on behalf of a relevant entity. The software developer enters into a contract with the supplier on behalf of the relevant entity.
- A software developer (the third party) is engaged to manage the delivery of an ICT project and conducts a procurement on behalf of a relevant entity. The relevant entity enters into a contract directly with the supplier.
The arrangement is likely to be considered a procurement.
The acquisition of goods and/or services for the Commonwealth or third parties is typically done as a procurement.
Procurements include the acquisition of goods and services on behalf of another entity or a third party. Where an arrangement meets the definition of a procurement, then the CPRs apply.
If the goods or services being delivered by the Third party were previously provided by a Commonwealth official or entity, and the goods and services are now being provided by a third party this is likely to be a procurement.
If the goods or services delivered by the third party would not be provided if the Commonwealth declined to provide financial support this is likely to be a procurement.
The CPRs outline third-party procurement (4.17 and 4.18)
Procurements are subject to:
Will all or part of the service/activity be provided by a contribution from the Government?
For example: Where an organisation delivers a service/activity to the community, that both the organisation and the government have provided a financial contribution to. Grants are used to promote policy objectives through the provision of financial assistance with or without conditions.
Is the activity a contribution to the achievement of an Australian Government policy outcome?
For example: services described as contributions/outputs and/or outcomes:
- Improved health outcomes amongst a target population:, such as quit smoking programs
- A reduction in homelessness, such as provision of shelter services
- Improved employment outcome for a target group
- A contribution to assist a business sector to promote products to become more competitive
Will the contribution by the Commonwealth be to individuals or organisations that are separate to the government, the purpose of which is to achieve an outcome on behalf of the Government, (i.e. a recipient other than the Commonwealth)?
For example, payments to help an organisation provide services, such health services and legal services or help fund infrastructure that will assist to achieve Government policy outcomes.
Will a third party administer the grant on behalf of the Government?
For example: a commonwealth entity may engage another independent organisation to administer grants to other organisations to deliver services on behalf of the government.
Is the funding intend to help to address one or more Commonwealth policy outcomes as well as achieve the organisations own objectives (consistent with Commonwealth goals?
For example: where an entity provides financial assistance to an organisation to deliver a service to the community on the government’s behalf. At the same time achieving the organisations outcome of providing support.
The arrangement is likely a grant
Grants promote policy objectives both for the Australian Government as well as the grant recipient through the provision of financial assistance with or without conditions.
Grants can include gifts of relevant money, benefits or entitlement payments, subsides, rebates, sponsorships and scholarships.
It's likely NOT a grant, but another type of financial arrangement
Grants and procurements are not the only financial arrangements available to Government. There are financial arrangements.
It is recommended that you contact your legal and/or internal grants team on specific advice on what the financial arrangement is. Under the Commonwealth Grants framework it is the entity that will have the determination on the type of arrangement.
Payments to States and Territories – RMG 419 Guide to classifying payments to other levels of government for specific purposes and Commonwealth own-purpose expenses.
Loans and Investments – RMG 115 Accounting for concessional loans
Benefits and entitlement payments
The Commonwealth can also provide finances through, gifts of relevant property, compensation payments, benefit and entitlement payments, tax concessions or offsets, investments, loans and act of grace payments. A breakdown of these arrangements is provided in RMG 411