The Local Small Commitments Allocation Program (LSCA Program) began as a policy proposal of NSW Labor prior to the March 2023 election. The policy proposed an allocation of $400,000 to each NSW electorate, to fund the election commitments of local candidates in accordance with program guidelines. The $37.2 million proposal was to be funded from the Community Services and Facilities Fund (CSFF) component of the NSW Generations Fund.

The process behind the decision to deliver each electorate’s allocation through a grants program, the initial nomination of organisations and projects by candidates, and the governance and probity oversight of these activities was overseen by NSW Labor prior to the election.

In July 2023, after the election, the Program Office was established within the NSW Premier’s Department to complete the administration of the program. The Program Office engaged a probity advisor on 25 July 2023, but the advisor was not involved in any events before this date.

The Premier’s Office provided the Program Office with a list of election commitments by electorate on 28 July 2023. The Program Office invited the nominated organisations on the list to submit applications to deliver small local projects. Eligible projects were defined as those that enhance wellbeing and deliver benefits to the local community, including upgrades to community centres, playgrounds and parks, and the delivery of welfare services, education programs and community events.

Where the $400,000 was not all used on nominated community projects, the balance was allocated to local councils to deliver playground and park upgrade projects.

All LSCA Program grants were to be administered in accordance with the LSCA Guideline, the NSW Grants Administration Guide (the Guide), the grants administration requirements in section 10.3A of the Government Sector Finance Act 2018 (the Act), and the requirements of the CSFF and NSW Generations Funds Act 2018.

Where aspects of the administration of the LSCA Program were not performed by an auditable entity, nor by a non-government entity that received state government funding or other resources to deliver a state purpose, these activities fall outside the scope of the Auditor-General’s mandate.

The objective of the audit was to assess the compliance of the LSCA Program with the Guide and the Act.

The audit did not assess the effectiveness or compliance of activities outside of the Auditor-General’s legislative audit mandate, such as those performed by NSW Labor prior to the election.

The LSCA Program was effectively administered by the Program Office from July 2023 and complies with the Act and most of the requirements of the Guide. However, there were 54 assessment panel members’ conflicts of interest declarations that were not identified and managed in accordance with the probity plan. There is also a risk that some payments do not fully reflect the legislative purpose of the funding source for the LSCA Program.

The Program Office conducted an effective process for administering the LSCA Program

Since its formation in July 2023, the Program Office effectively administered the LSCA Program in compliance with the Guide and the Act. The audit identified two exceptions: 54 assessment panel members’ conflicts were not identified and managed from a total of 644 approved projects, and there were some other minor administrative errors.

To assess whether the LSCA Program was administered in line with the Guide and the Act, this audit tested a sample of applications for the program, following their progress through to approval or rejection. Sampling found that assessment officers reviewed applications in line with the LSCA Program guidelines to ensure eligibility for the program and the merit of each project, and probity procedures were performed in accordance with the probity plan. The assessment and probity outcomes formed the basis of written advice to the Special Minister of State.

The Program Office retained documentation for each sample from application through to approval or rejection.

Upon its formation, the Program Office:

• accepted that the list of election commitments provided by the Premier’s Office were all valid pre-election commitments
• obtained verbal assurance that conflicts of interest processes had been implemented by NSW Labor for all electorates
• commenced the assessment and management of risk, as required by the Act
• appointed a probity advisor to develop a probity plan that applied from 25 July onwards.

Key early steps of the grants administration process occurred outside the NSW Government

Compliance with the Guide is mandatory for ministers, ministerial staff and government sector employees for all grants administered by the government sector. The Guide does not envisage a scenario in which non-government sector entities, such as political parties, undertake mandatory steps in grant administration, and therefore does not impose obligations on them directly.

NSW Labor oversaw the decision to deliver each electorate’s allocation as a grants program, and managed the initial nomination of organisations and projects by candidates, including the governance and probity oversight of these activities.

These activities are set out in the Guide as key steps in the grants administration process, but in this case they were not conducted by an auditable public sector entity.

The Guide could be clearer about how the public sector is to administer grants involving election commitments

The Guide notes that the anticipated outcome of a grant involving an election commitment may be announced before the grant assessment process has concluded. Any such grant is still subject to compliance with the requirements of the Guide, and funding cannot be provided until the grant has been approved in accordance with these requirements.

Chapters 5 and 6 of the Guide set out the ‘planning and designing’ requirements that apply to grant opportunities, including, unless otherwise stated, one-off or ad hoc grants. Other than the announcement of anticipated outcomes before the completion of assessment procedures, there is no reference to different requirements applying to election commitments.

The Guide states its key principles and mandatory requirements must be met for all grants, except for specifically provided exceptions. Chapters 5 and 6 of the Guide include exceptions for one-off or ad hoc grants, such as permitting the demonstration of value for money later in the grant cycle, and options for the preparation and publishing of grant guidelines. Other than these exceptions, the planning and design requirements in chapters 5 and 6 of the Guide also apply to one-off or ad hoc grants.

Exhibit 2 below notes that grants administration activities related to the LSCA Program were overseen by NSW Labor, which, as a non-public sector entity, is not required to comply with the Guide.

The Guide does not articulate how it is to be applied by the public sector, when activities commenced as election commitments. The Guide instead sets out the requirements that apply to the end-to-end implementation of grants from the ‘Planning and design’ phase onwards, on the assumption that grants programs are fully controlled by the public sector. The Guide could be enhanced to be more specific about the public sector’s role when dealing with election commitments.

Conflicts declared by assessment panel members were not reviewed by the probity advisor

All members of the Program Office, including those that assessed the eligibility and merit of projects, were required to complete a conflicts of interest declaration form.

There were 54 assessment panel members’ declarations from a total of 644 approved projects, where moderate risk declared conflicts were not provided to the probity advisor for review. The probity plan required the checking of assessment panel declarations prior to the finalisation of written advice to the Special Minister of State on the merits of proposed grants.

The written advice to the Special Minister of State on grants included a Probity Assurance Statement. For grants related to these 54 assessment panel conflicts, the Probity Assurance Statement incorrectly concluded there were no assessment panel declared conflicts.

The probity advisor subsequently reviewed the assessment panel members’ declared conflicts and concluded that they see no issue in the recommendations made to the decision maker that would require updated advice or a review of the decisions.

The Program Office only assessed 17 of the 93 electoral candidates for conflicts of interest

The Program Office’s review of conflicts of interest at the candidate level, was limited to 17 candidates put forward by the Special Minister of State. These candidates each completed a declaration of interest form from November 2023 onwards, after which any declarations were assessed by the Program Office and the probity advisor. The Program Office assessed 118 grants related to these 17 electorates where there were 60 declared conflicts of interest. This assessment resulted in two grants not being approved.

The Program Office advises it received verbal confirmation that conflicts of interest processes had been implemented by NSW Labor for all electorates. The Program Office did not however seek, nor was it provided with, documentation supporting NSW Labor’s conflicts of interest assessments.

The merit assessment criteria should align to the legislative purposes

The summarised merit assessment criteria do not fully reflect the CSFF’s legislative purposes. To the extent that the criteria do not align with the legislative purposes of the CSFF, there is a risk that the Minister was not provided with sufficient guidance to reach the required state of satisfaction that amounts paid promote the purpose of the Fund.

The Program Office note that the decision to fund the LSCA program from the CSFF was made prior to the Program Office being established.

By December 2025, the NSW Government should:

1. consider updating the Grants Administration Guide to include additional guidance on how the public sector is to address financial accountability, probity, record keeping and administrative obligations when a grants administration process has been initiated as an election commitment.

As a matter of priority, the NSW Premier’s Department should:

2. ensure complete conflicts of interest processes are implemented as intended for all future grant programs.

    

Prior to the March 2023 election, NSW Labor proposed an election commitment of $400,000 for each of the 93 electorates in NSW to deliver small projects, including upgrades to community centres, playgrounds and parks, and the delivery of welfare services, educational programs and community events. As this was an election commitment, the implementation of the $37.2 million proposal was contingent on NSW Labor winning the election.

NSW Labor candidates nominated organisations and projects to be funded by this election commitment. NSW Labor then assessed the eligibility of nominated projects.

After NSW Labor formed government the Local Small Commitments Allocation Program (LSCA Program) was created. The LSCA Program is administered by the LSCA Program Office (the Program Office) within the NSW Premier’s Department.

The $37.2 million was allocated to grants for nominated community projects and grants for playground and park upgrade projects.

The LSCA Program Guideline states that all LSCA grants will be administered in accordance with the Guide.

The Guide was issued by the then Department of Premier and Cabinet on 19 September 2022 under Premier’s Memorandum M2022-07 Grants Administration Guide and gazetted on that day. Compliance with the Guide is a requirement of the Government Sector Finance Act 2018 (the Act).

An updated version of the Guide was issued on 18 March 2024 and applies prospectively to all grant activities from this date. Grants activities undertaken in connection with grants programs underway before 18 March 2024 are required to adhere to the requirements under the updated Guide for the remainder of the grants administration process.

The Guide states that it provides best practice guidance and mandatory requirements on the administration of grants. The Guide covers the life cycle of grants, comprising:

• planning and designing the grant opportunity
• promoting the grant opportunity
• receiving and assessing grant applications
• providing grants
• publishing grant information
• monitoring and acquitting grants
• grants evaluation.

The Guide applies to ministers, ministerial staff, and government sector employees within the meaning of the Government Sector Employment Act 2013, and is mandatory for all grants administered by the government sector. The Guide is maintained by the Cabinet Office, which is also responsible for developing resources to support compliance with the Guide.

Premier’s Memorandum M2024-03 ‘Grants Administration Guide’ requires Chief Audit Executives to ensure their agency’s internal audit program includes regular audits of grant programs to monitor and assess compliance with the Guide. The frequency of audits should be proportionate to the value and risk of grants activity undertaken by the agency.

The LSCA Program was established on 25 July 2023 and the LSCA Program Guideline (LSCA Guideline) was approved by the Special Minister of State on 1 August 2023.

Certain initial aspects of the grants program required by the Guide occurred before the Program Office’s involvement from July 2023. Key steps in the administration of the program relating to nominated community projects, including steps that occurred before and after the Program Office’s involvement are in Exhibit 2.

The audit assessed whether the LSCA Program was administered by the NSW Premier’s Program Office in compliance with the Guide and the Act.

The audit focused on compliance by the Program Office with the mandatory ‘must’ or ‘must not’ requirements in the Guide. For the reasons set out below, the audit did not seek to audit the aspects of the LSCA Program that occurred outside of the Program Office.

The Auditor-General’s audit mandate

The Auditor-General’s rights and obligations with regard to the NSW Government sector, are set out in the Government Sector Audit Act 1983 (GSA Act). The GSA Act provides that the Auditor-General may conduct an audit of all or any particular activities of an auditable entity to determine whether the auditable entity is carrying out its activities effectively, economically and efficiently and in compliance with all relevant laws.

The Auditor-General does not have the mandate to audit activity that occurs outside of an auditable entity, except for the ‘follow-the-dollar’ powers introduced in November 2022. The follow-the-dollar amendments to the GSA Act expanded the Auditor-General’s mandate to enable the inclusion of activities of non-government organisations that receive state government funding or other resources to deliver a state purpose in the scope of relevant performance audits.

As noted above, initial grant identification and assessment steps for the LSCA Program were made by NSW Labor in opposition. This includes the initial identification and suitability assessment of projects, and certain candidate level conflict of interest procedures.

Given these initial aspects were not performed by an auditable entity, nor by a non-government entity that received state government funding or other resources to deliver a state purpose, these activities fall outside the scope of the Auditor-General’s mandate.

Clarifying public sector obligations when grants are initiated as election commitments

The Guide could be clearer about how the public sector is to administer grants that are initiated as election commitments

The Guide notes that the anticipated outcome of a grant involving an election commitment may be announced before the grant assessment process has concluded. Any such grant is still subject to compliance with the requirements of the Guide, and funding cannot be provided until the grant has been approved in accordance with these requirements.

Chapters 5 and 6 of the Guide set out the ‘planning and designing’ requirements that apply to grant opportunities, including, unless otherwise stated, one-off or ad hoc grants. Other than the announcement of anticipated outcomes before the completion of assessment procedures, there is no reference to different requirements applying to election commitments.

The Guide states its key principles and mandatory requirements must be met for all grants, except for specifically provided exceptions. Chapters 5 and 6 of the Guide include the following exceptions for one-off or ad hoc grants:

• the demonstration of value for money can be included in the briefing to the decision-maker referred to in section 6.3.1 of the Guide, rather than demonstrated at the planning and design stage
• there are specified assessment criteria to be applied in section 6.1.4 of the Guide
• officials must document why this non-competitive grant method will be used, outline the risk mitigation strategies, and this must be appropriately approved according to section 6.1.5 of the Guide
• grant guidelines are optional, and if they are developed, are not required to be published, as stated in sections 6.5 the Guide.

Other than these exceptions, the planning and design requirements in chapters 5 and 6 of the Guide also apply to one-off or ad hoc grants.

Exhibit 2 above notes that pre-election activities related to the LSCA Program were overseen by NSW Labor, which as a non-public sector entity, is not required to comply with the Guide.

The Guide does not articulate how it is to be applied by the public sector, when activities commenced as election commitments. The Guide instead sets out the requirements that apply to the end-to-end implementation of grants from the ‘Planning and design’ phase onwards, on the assumption that grants programs are fully controlled by the public sector. The Guide could be enhanced to be more specific about the public sector’s role from the point at which an election commitment becomes a government-administered grants process.

Our audit procedures were designed to conclude on whether the LSCA Program was administered by the NSW Premier’s Program Office in accordance with the Guide. Our findings are reported according to three activity categories referred to in chapter 3 of the Guide:

• planning and designing grant opportunities
• assessment and decision-making
• providing grants and publishing grant information.

Planning and designing grant opportunities

The requirements relating to the planning and designing of grant opportunities, are mainly set out in sections 5 and 6.1 of the Guide. These include requirements to:

• demonstrate at the planning and design stage how a grant opportunity will deliver value for money by identifying benefits and costs (economic, social, environmental and cultural)
• identify and manage risks for all grants in accordance with agencies’ responsibilities under the Government Sector Finance Act 2018 (the Act)
• determine the eligibility and assessment criteria
• select an appropriate assessment process, including the development of a plan to manage any conflicts of interest that might arise.

Section 5.1 also states that ‘planning and implementation issues should be considered before commencing a grant opportunity’.

Activities required by the Guide were overseen by NSW Labor when in opposition

Exhibit 2 above lists grant activities that were overseen by NSW Labor, prior to the Program Office’s involvement. The Guide envisages end-to-end implementation of grants by the government and does not envisage a scenario in which grant allocations are made as election commitments.

The Program Office was not provided with documentation confirming that the activities in Exhibit 2 had been performed by NSW Labor.

Once established, the Program Office commenced addressing Guide requirements in a structured way, by implementing an approach to address probity and risk, and establishing the LSCA Program Guideline (LSCA Guideline), including the eligibility and assessment criteria.

The probity advisor was not able to consider the conflicts of interest process undertaken by NSW Labor

The Guide requires officials to seek probity advice for all grant programs that are complex, high-risk or high value. A probity advisor was engaged to assist with probity aspects of the LSCA Program. The advisor’s scope included:

• preparing a probity plan
• reviewing and commenting on the LSCA Guideline
• reviewing and commenting on the LSCA Program assessment plan
• reviewing any conflicts of interest notifications
• providing advice on probity related issues throughout
• preparing a final probity report at completion of the program.

The probity advisor was engaged on 25 July 2023. In evidence to the Public Accountability and Works Committee (PAWC) Inquiry, the probity advisor noted they were not involved in the design of the LSCA Program and were therefore unable to speak to any of the events that predate 25 July 2023.

For government sector administered grant programs, a probity plan would capture probity considerations applying to the initial nomination of organisations and projects, and the assessment of potential conflicts of interest at that point. As these aspects were undertaken by NSW Labor as part of an election commitment, the probity advisor did not have visibility over the probity processes that were applied to these initial phases.

The Program Office only assessed 17 of the 93 candidates for conflicts of interest

The Program Office’s conflict of interest review processes at the candidate level, was limited to 17 candidates put forward by the Special Minister of State. These candidates each completed a declaration of interest form from November 2023 onwards, after which any declarations were assessed by the Program Office and the probity advisor. The Program Office assessed 118 grants related to these 17 electorates where there were 60 declared conflicts of interest. This assessment resulted in two grants not being approved.

The Program Office advises it received verbal confirmation that conflicts of interest processes had been implemented by NSW Labor for all electorates. The Program Office did not seek, nor was it provided with, documentation supporting NSW Labor’s conflicts of interest assessments.

The assessment of some candidate conflicts of interest focused mainly on monetary benefits

A conflict of interest is defined as arising where a person has an affiliation or interest that may be seen to prejudice their impartiality. The probity plan identifies three types of conflict of interest:

• an actual conflict of interest – where a person is in a position to be influenced by their private interests when doing their job
• a perceived conflict of interest – where a person is in a position to appear to be influenced by their interests when doing their job
• a potential conflict of interest – where a person is in a position where they may be influenced in the future by their private interests when doing their job.

The focus of the Program Office’s assessment of conflicts at the election candidate level, at times focused especially on whether the candidate could obtain a monetary benefit from the grant. There was less emphasis in the documentation about the consideration of ‘perceived’ and ‘potential’ conflicts. The following examples of approved projects are taken from the Program Office’s review of conflicts summary, related to the 17 candidates.

The probity plan identified the following principles to be applied in all LSCA Program decisions. Decisions must be:

• impartial
• appropriately documented
• transparent, defensible, and lawful
• supported by appropriate safeguards against fraud, unlawful activities, and other inappropriate conduct.

To ensure each of the three types of conflict of interest are considered, specific assessment and conclusion for each type of conflict is required.

Grants were executed before candidate conflicts of interest were assessed and completed

Of the 118 grants assessed, eight grants were executed before candidate conflicts of interest declarations were assessed by the Program Office. No unresolved conflict issues were subsequently identified with these eight grants. While the later completion of conflicts of interest processes provided assurance after the fact, the appropriate order would be for their completion before grants are executed.

A structured approach to candidate level conflicts of interest assessments that is fully controlled by an auditable entity, considered and documented within the probity plan, and completed at the appropriate stage in the grant cycle, is the most effective way of ensuring public resources are not directed towards private interests. This would ensure that grants are not executed prior to the finalisation of conflicts of interest procedures.

Conflicts of interest declarations were completed by the LSCA Program Office

The probity plan required all members of the Program Office, including those that assessed the eligibility of projects and members of the Assessment Panel, complete a conflicts of interest declaration form. Declarations were required upfront (before grants were allocated), after grants were allocated to assessors and throughout the assessment process. Any conflicts of interest were then to be provided to the Executive Director of the Program Office and the probity advisor for their review.

A number of conflicts declared by assessment panel members was not reviewed by the probity advisor

The assessment of each project commenced with an assessment against the eligibility requirements as set out in the LSCA Guideline. If projects were assessed as eligible, they were then assessed by two independent assessors, referred to as the Assessment Panel.

There were 54 assessment panel members’ declarations from a total of 644 approved projects, where moderate risk declared conflicts were not provided to the probity advisor for review. The Probity Plan required the checking of assessment panel declarations prior to the finalisation of the written advice to the Special Minister of State on the merits of proposed grants.

The written advice to the Special Minister of State on grants included a Probity Assurance Statement. For grants related to these 54 assessment panel conflicts, the Probity Assurance Statement had incorrectly concluded that there were no assessment panel declared conflicts.

The probity advisor subsequently reviewed the assessment panel members’ declared conflicts and concluded that they see no issue in the recommendations made to the decision maker that would require updated advice or a review of the decisions.

Assessment and decision making

The assessment and decision-making requirements are mainly set out in section 6.3 of the Guide. These include requirements relating to:

• the receipt and assessment of grant applications
• documentation and record-keeping obligations
• the provision of written advice to decision makers
• grant decision maker obligations
• assessment processes and one-off and ad hoc grants.

The preparation of grant guidelines is optional for one-off or ad hoc grants but these were prepared by the Program Office for the LSCA Program. The Guide sets out the minimum information requirements to be included in ad hoc grant guidelines when officials choose to develop them. Our audit against the requirements of the Guide included an assessment of whether the administration of the grant complied with the LSCA Guideline.

The Program Office were advised that commitments on the Premier’s Office’s list were nominated as election commitments prior to the NSW State election

Section 3 of the LSCA Guideline requires nominated organisations and projects to have been nominated as an election commitment prior to the March 2023 NSW election. The Program Office did not perform its own assessment of whether this requirement had been met but instead relied on a ‘master’ list of commitments for each electorate, which was provided by the Premier’s Office on 28 July 2023. If the commitment was included on the list, the Program Office accepted that it had been nominated as an election commitment. The commitments included grants to community organisations and local councils.

This list comprised $400,000 in identified commitments for each electorate, and included for each commitment:

• a description
• the capped amount of allocated expenditure
• a contact person and details
• the person notified of the approval, and date of the notification.

The list of election commitments given to the LSCA Program Office on 28 July 2023 contained some errors.

The Premier’s Office advised of corrections to the master list on 1 February 2024, by which time the Program Office had commenced the initial processing of the grants. The following table sets out the changes to grants in the Sydney electorate.

Source: Program Office.

The Sydney electorate’s total allocation remained at $400,000 after the corrections. The organisations that had their funding withdrawn or reduced subsequently received the equivalent amount to the original list allocation from the Premier’s discretionary fund. The payment and approval of grants from the Premier’s discretionary fund was outside the scope of this audit.

The assessment panel was not provided with sufficient procedural instructions on how to assess financial information

The assessment panel was required to assess projects against the following criteria:

• the project will enhance wellbeing and deliver benefits to the local community
• the project is an efficient, effective, economical and ethical use of money and will deliver value for money
• the project can be delivered by the organisation as described.

Nominated organisations were required to confirm they were financially viable and provide a copy of their audited financial statements or annual report when they applied for the grant. When assessing if a project could be delivered by the organisation, assessors were required to have regard to the financial viability of the organisation delivering the project.

The Guide states that officials involved in assessing applications should be appropriately skilled and have access to procedural instructions and/or training before processing grant applications. The Program Guideline and documentation available to assessors did not provide any further guidance as to what should be considered by assessors when assessing financial viability of a nominated organisation. Guidance for example, could have been provided on unacceptable financial risk such as when entities were making losses, pre-defined financial ratios were breached or issues identified in Independent Audit Reports.

It may also have been appropriate for the Program Office, after assessing risks, costs and benefits, to engage experts to assist with the assessment of financial aspects of grants in some instances.

For some grants, there was insufficient evidence to show they represented value for money

The Act states that a minister must not approve a grant to which the Guide applies unless satisfied that the grant is an efficient, effective, economical and ethical use of money, and achieves value for money.

There were instances when organisations provided externally obtained quotes to support their grant applications, and other instances where organisations only provided their internally developed cost estimates. The Program Office did not insist on quotes and stated that it applied a risk lens when determining the acceptable cost information. Councils for example, were identified as being of lower risk than other organisations.

In the NSW public sector, a procurement policy framework applies to the procurement of goods and services of any kind, including construction. A NSW Government entity would generally be required to obtain a minimum of three written quotes for this level of expenditure, to ensure competitive pricing and value for money. This provides assurance that goods and services are obtained at the best possible price.

While the final grant acquittal includes a review of project receipts, it does not necessarily ensure that the project was completed at a competitive market price.

The assessment of value for money may have been more consistent and robust if, as part of the ‘planning and designing’ phase, the Program Office had set out when or how many external quotes should be obtained, or when an internally developed cost estimate would be accepted in order to comply with section 10.3A of the Act. The approach would be informed by a risk assessment of the types of grantees, and the nature of grant purposes.

Providing grants and publishing grant information

Sections 6.4 and 6.5 of the Guide mainly set out the mandatory requirements relating to the provision of grants, and the publishing of grant information. These include requirements relating to:

• the use and content of grant agreements
• variations requested after a grant is decided, including consideration of scope changes
• the publishing of grant information, including upcoming opportunities and grant outcomes.

Grant agreements were not always fit for purpose

The Program Office used the NSW Government’s long and short form funding agreement templates and an internal guide to assist staff when selecting the most appropriate funding agreement template for each successful grantee. The audit noted several instances where short form funding agreements were used, when the Program Office guide required the use of long form funding agreements.

Short form agreements could be used for:

• grants of $50,000 or less
• projects relating to the purchase of supplies / equipment, funding of events or charitable donations
• projects that had already been delivered.

For projects outside of these categories, the Program Office’s funding agreement guide required the use of long form funding agreements. Long form funding agreements contained lengthier terms and conditions which provided more detailed provisions to manage complex risks, responsibilities and legal obligations.

The Program Office generally regarded motor vehicles as a ‘purchase of supplies / equipment’, which led to short form funding agreements being used. Where equipment purchases relate to assets with significant expected future useful lives that can be easily re-sold, such as motor vehicles, it may have been more appropriate for the Program Office to require long form agreements.

It is not clear when a grant variation should be treated as a new grant

The Program Office has an internally developed guide that sets out how it will administer grant variations.

The Guide states that when determining what approvals are required for a change to the funded project, the key issue is whether the change in scope would amount to a new grant. If the change is such that the grant recipient is essentially requesting a new grant (for example, additional funds for an existing program, or the use of the same funds for a different, unapproved purpose), then the change in scope should be treated as a new grant.

The Guide does not specifically address whether the assessment of variations should be at the overall grant program purpose level, the grant purpose level or the individual project level.

If the Program Office had assessed the above variation at the individual project level rather than the grant purpose level, it may have resulted in a different conclusion. Because the amendment was concluded to be a grant variation rather than a new grant, the amended project was not re-assessed against the merit assessment criteria.

The Program Office also applied its guide on variations when assessing changes to the scope of projects on the Premier’s Office’s list of election commitments.

In both of the above case studies, it was not always clear when a grant variation is for a new ‘unapproved purpose’ that should be treated as a new grant, or a ‘not substantively inconsistent’ change that should be treated as a variation of an existing grant.

The Guide could be expanded to provide further guidance on variations.

The Program Office published grant information on the NSW Government Grants Funding Finder

The Guide requires officials to ensure that information about awarded grants is made available on the NSW Government Grants and Funding Finder no later than 45 calendar days after the grant agreement takes effect.

Information about the Local Small Commitments Allocation grant program is included on the NSW Government Grants and Funding Finder website, which then links to the LSCA Program home page. The LSCA Program home page includes the LSCA Guideline, details of approved grants, and scanned copies of advice to, and decisions made by, the Special Minister of State. The sample of grants reviewed in our audit was included on the LSCA Program home page.

The LSCA Guideline notes that the cost of the LSCA Program is to be funded from the NSW Generation Fund’s – Community Services and Facilities Fund (CSFF). The Parliamentary Budget Office’s Costing for the LSCA Program notes that legislation limits the use of money from the CSFF, and that any election commitments must align with the purpose of the fund if they are to be paid from the fund.

The assessment process for LSCA Program projects is set out in section 6.1 of the LSCA Guideline. There are three merit assessment criteria:

• the project will enhance wellbeing and deliver benefits to the local community
• the project is an efficient, effective, economical, and ethical use of money and will deliver value for money
• the project can be delivered by the organisation as described.

The purpose of the CSFF is to provide funding for cost-effective facilities and services throughout New South Wales that improve the wellbeing of communities and the lives of the people of New South Wales, including facilities and services for the purposes of:

• protecting public health and preventing disease, illness, injury, disability or premature death, and
• promoting conditions in which persons can be healthy and safe, and
• promoting involvement with community or culture, and
• increasing participation in programs, services or activities that aim to improve the overall wellbeing of the community, and
• any other purposes prescribed by the regulations.

Legislation requires the Minister to be ‘satisfied’ that amounts paid promote the purpose of the Fund.

The merit assessment criteria should align to the legislative purposes

The summarised merit assessment criteria do not fully reflect the CSFF’s legislative purposes as described above. To the extent that the criteria do not align with the legislative purposes of the CSFF, there is risk that the Minister will not be provided with sufficient guidance to enable him to reach the required state of satisfaction that amounts paid promote the purpose of the Fund.

A range of project purposes were assessed as complying with the merit assessment criteria, as demonstrated in Table 2.

Source: Audit Office of New South Wales.

There is a risk that the application of the more summarised merit assessment criteria did not provide the Minister with complete guidance on how projects promoted the purposes of the CSFF.