Summary
It is important that public entities administering grant programmes award grants in keeping with the Government’s intentions, and that recipients spend the funding as planned.
Our performance audit of the Foundation for Research, Science and Technology (the Foundation) is the second in a 3-year series we are undertaking, examining how public entities administer grant programmes.
The Foundation is a Crown entity. Its main purpose is to invest in science and technology research that benefits New Zealand. The Foundation administers grant programmes worth around $400 million a year, making it the largest public sector provider of grants for research, science, and technology.
We looked at grants administered under the largest of the Foundation’s programmes, Research for Industry (RFI), and 2 schemes which are part of the fourth largest programme, Technology New Zealand (TechNZ). RFI accounted for nearly 46% of the total funding allocations for Foundation grant programmes in the 2005-06 budget appropriations, and is predominantly directed at public sector institutions. TechNZ made up slightly more than 13% of the allocations, with grants mainly going to private sector recipients.
The 2 schemes we examined within TechNZ were Technology for Business Growth (TBG), which dominates overall TechNZ funding, and Grants for Private Sector Research and Development (GPSRD), which targets small and medium-sized firms.
Our findings
Overall, the Foundation is effectively administering the grant programmes and schemes we examined.
The Foundation met our expectations that grant programmes should:
- involve effective assessment, approval, and management of applications that comply with well-defined guidelines and procedures;
- have effective monitoring of approved grants; and
- be evaluated to determine whether the expected results of funding are being achieved.
Assessment and approval of grants
The Foundation has sound systems and processes in place for ensuring compliance with Government and Foundation criteria for grant schemes. Grant applications were generally consistently assessed against criteria.
The Foundation effectively assesses applications for the TechNZ schemes against most applicable criteria. We found only 2 exceptions in the TechNZ schemes where criteria were not always consistently considered as part of the approval process. For the GPSRD scheme, there was rarely any assessment of a criterion that applicants would be more likely to start a project and complete it earlier with the scheme’s funding. Similarly, the assessment of TBG applications seldom addressed a criterion that projects are unlikely to proceed without the funding.
We did not audit whether applications approved under the RFI programme met assessment criteria, because of the complex and scientific nature of typical projects. However, we found a rigorous assessment process is used for assessing applications. This involves using clear and detailed decision-making criteria, and weightings by panels of external advisers.
The Foundation sensibly uses a risk-based system for assessing and signing off funding approval of its grant programmes, depending on the size of individual grants. For GPSRD grants – which are for $100,000 or less – recommendations for funding approval are made by Business Managers within the Foundation, with funding sign-off decided by an Investment Sub-committee of the Foundation’s Board. The TBG scheme uses a tiered approach for funding sign-off approval, with smaller grants approved by Foundation management, while larger grants have to be approved by the Investment Sub-committee. The Investment Sub-committee also approves funding for RFI grants (which can typically be worth several million dollars) based on the recommendations of the panel of external advisers.
Documentation
The paper-based grant files we audited were well-organised. File management practices were consistent in each of the Foundation’s 3 regional offices that we visited.
The Foundation has created, and continues to improve, web-based systems for administering some of its grant programmes. We found these systems easy to navigate, and it was easy to find information on individual grants or clients.
The amount of information stored either electronically or as paper records varied between the grant schemes we examined. The TechNZ schemes have been designed to be largely electronic, while RFI still mainly relies on paper. It was slightly harder to follow decisions and review actions taken in the assessment and approval of RFI grants than TechNZ grants.
However, the Foundation is seeking additional capital funding from the Government in 2006 to fund a project to integrate all of its grant programmes into a single electronic administration system. If this integrated system is funded, it is likely to improve the consistency of data collection throughout all of the Foundation’s grant programmes, and enhance the Foundation’s ability to effectively monitor and evaluate grant programmes.
Monitoring of grant programmes and schemes
The Foundation has adopted a risk-based approach to monitoring and auditing grants, which works well.
The Foundation has effective processes and systems in place to ensure that grant recipients submit regular progress reports about funded projects. A shift to quarterly reporting, being implemented for RFI grants, should further improve the quality of monitoring with that programme.
Evaluation of grant programmes and schemes
Evaluation of grant programmes is undertaken by both the Ministry of Research, Science and Technology, and the Foundation (or through commissioned independent research). The evaluation involves a range of methods, including case studies, user and stakeholder surveys, portfolio evaluations, and outcome indicators.
However, the respective evaluation roles of the Ministry and the Foundation were unclear to us. We are not aware of any formal agreement between the 2 entities defining roles and responsibilities for evaluating grant programmes.
Our recommendations
We recommend that the Foundation for Research, Science and Technology:
- ensure that its assessment processes for awarding Grants for Private Sector Research and Development meet the Ministerial criterion that a project is likely to start sooner and complete earlier with funding support;
- review the effectiveness of existing arrangements with evaluating agents of the Grants for Private Sector Research and Development scheme for evaluating completed projects;
- ensure that its assessment processes for awarding Technology for Business Growth grants meet the Ministerial criterion that a project is not likely to proceed without the scheme’s funding support;
- amend its web-based system for administering Technology for Business Growth grants to automatically detect breaches of funding limits;
- clearly record in paper files or electronic systems the reasons for approved variations to payment drawdown schedules by grant recipients;
- use a consistent file identification and management system for its Research for Industry grant programme so that applications can be easily linked to approved grants; and
- liaise with the Ministry of Research, Science and Technology to define clearly their respective roles and responsibilities for evaluating grant programmes administered by the Foundation.