Good Practice: Plan and Design

• Align the goals of each grants program with the core business and goals of the agency.
• Coordinate grants planning with the agency's Results and Services Plan.
• Use the cross-agency grants planning model to identify need and remove overlap or duplication between grants programs.
• Establish systems and procedures to ensure proper management and accountability for grants programs.
• Develop performance measures to be used for monitoring during the life cycle of the grant and to evaluate the program.
• Incorporate an appropriate risk assessment process.
• Identify the unit costs of processing a grant to minimise administration costs.
• Establish a NGO reference group to support effective working and funding relationships.

Guidelines and Resources

Establishing the Program

The decision to develop or to continue a grants program should be taken in the course of agency strategic planning. Careful planning is required to ensure financial assistance to non government organisations is compatible with agency objectives and that administration of the financial assistance is based on appropriate policies and procedures. Integrating grants program planning with agency corporate planning will help ensure that community projects or funded services are those required by agencies and that:

• Allocations are consistent with government priorities
• Programs are established with clear and non-conflicting objectives and based on evidence of need
• The potential is reduced for duplication of programs across agencies; and
• The program is administered by the agency with the most appropriate infrastructure, expertise and experience.

The Cross-agency Grants Planning Model has been designed to provide:

• Alignment of available funding with government priorities and evidence of community need
• A capacity for greater community input into determining how needs can be addressed and improve service delivery
• A process to enhance the relationship between the Government and NGO grants recipients
• Better cross-agency participation in resolving grants funding issues
• Support to move from one year funding agreements to three or four year funding agreements, where appropriate.

Policy and procedures by which the grants program will be managed in the agency should be established in order to:

• Inform consistent and transparent practice by the agency in all elements of grants administration
• Provide clarity to all grants administration about what to expect when making an application for a grant to the agency.

Develop performance measures

Performance measures should be used for monitoring during the life cycle of the grant and to evaluate the program as a whole. Refer to the good practice guidelines, Monitor and Acquit and Evaluate for further information.

Performance measures are simply explicit statements that define how the success of a program is to be measured and the criteria or benchmarks to be used in judging success. These criteria for comparison include standards, targets, time and other programs.

Performance measures should be clear and easy to understand and use. They should assist decision makers and community groups to understand program performance requirements and inform performance improvement.

Quantitative measures
The use of performance measures is intended to bring precision into the judgements about the program's performance and therefore they tend to be expressed in quantitative or numerical terms such as percentages, ratios and rates.

Qualitative measures
Some measures such as the degree of client satisfaction or the completion of a project within schedule or budget cannot be counted or be expressed meaningfully in numerical terms. These qualitative indicators are best expressed in narrative terms. Qualitative indicators can inform program managers about stakeholder opinions, judgements and ideas and so help to improve the program.

When developing performance measures:

• Be clear on intended program outcomes
  Ensure the performance measures relate to the intended outcomes of the program.
• Have a comprehensive set of measures
  A single performance measure can only indicate one aspect of the program's performance. A comprehensive set of measures on appropriateness, effectiveness, efficiency and economy of the program will contribute to an overall evaluation of the program's performance.
• Test measures before use
  Performance measures should be tested to ensure that they measure what you want them to measure (i.e. they are valid) and that they measure accurately and consistently (i.e. they are reliable). They also need to be credible to grants recipients and it can be useful to ask community organisations and NGOs to comment on proposed performance measures.
• Review measures from time to time
  Performance measures used in performance monitoring should be reviewed from time to time to ensure that they are still valid. Unnecessary changes to performance measures should, however, be avoided as they make comparisons over time difficult.

Determining and managing risk

The planning stage should incorporate appropriate risk assessment. Risk assessment can be used to streamline processing costs, both for the grant giving agency and grant recipients, and to determine risk in direct negotiation with funding recipients.

Follow these links to publications for guidance on determining and managing risk:

• NSW Treasury Risk Management Toolkit
• Financial Management Framework – What You Do and Why: An Agency Guide to Defining Results and Services (TPP 04-4). An important part of the Government's Results and Services Plan (RSP) process is identifying significant service delivery risks and how those risks are to be managed.
• Guidelines for Managing Risks in Direct Negotiations. This Independent Commission Against Corruption (ICAC) publication provides guidance when deciding to enter into direct or exclusive negotiations between a government agency and a proponent (such as a grant applicant) without first undergoing a genuine competitive process. It highlights a number of probity risks that can compromise apparently competitive contracting, and methods to manage those risks. Many of the risks apply to grants administration and include overly close relationships with recurrent proponents, poor continuity planning forcing agencies into de facto direct negotiations, and the issue of proponents as customers/stakeholders of the agency.

Determining administration costs

Administration costs are an important consideration in grants planning and management. It allows agencies to identify and adopt cost-effective processes and maintain internal controls.
Administration costs for grants programs are broad in nature, but generally fall in the categories of salaries/wages and operating costs and typically include the following activities:

• Grants planning
• Community consultation
• Grants promotion and advertising
• Assessment of applications and selection of recipients
• Monitoring and assessment of grants

Operating costs associated with grants programs include, but are not limited to, costs for:

• Contractors/consultants
• Travel
• Printing
• Advertising

Each agency should identify the unit cost of processing a grant and utilise benchmark costs to test the performance of the overall administration of its grants programs. Where integrated services can be provided across grant giving agencies, the unit costs of these should also be developed.

Improving the efficiency and reducing the cost of administrative processes for grants programs can be achieved through:

• Adopting standardised procedures across agencies, sectors and whole-of-government
• Adopting 'best practice' including setting targets for administration costs either as a specific dollar amount, or as a percentage of grant program value
• Greater use of automated systems
• Recognising the need for following administratively efficient paths through the grants planning process.