Part 2: A grant administration framework and adherence to grant criteria

New Zealand Trade and Enterprise: Administration of grant programmes - follow-up audit.

In this Part, we discuss our findings on NZTE’s:

  • introduction of a grant administration framework;
  • guidance for interpreting criteria for grants; and
  • adherence to that criteria.

A framework for administering grant programmes

Overall finding from 2004 report

In 2004, we concluded that NZTE had not set up a framework to ensure that it considered important aspects of grant administration, including risk assessment, data collection and reporting, documentation, and monitoring practices.

Our expectations

We expected NZTE to have:

  • reviewed its grant programmes to ensure that it administers them consistently; and
  • applied an effective set of administrative principles and standards to policies and procedure manuals, risk assessment, documentation, decision-making processes, and monitoring of grant recipients.

Our findings

NZTE has carried out a major and rigorous business process improvement project since 2004 that has improved the consistency of its grant administration. The project included setting up an effective framework for administering NZTE’s grant programmes.

Review of grant programmes and business process improvement

When NZTE set up the business process improvement project in early 2004, the focus was on aligning the different business processes and practices that had resulted from the merger of NZTE’s predecessor entities.

After we published our 2004 report, NZTE widened the scope of the business process improvement project to include a substantial review of all grant programmes. The project also sought to ensure that NZTE addressed the recommendations made in our 2004 report.

NZTE has reviewed each of the grant programmes it administers. A specialist business process improvement team has worked with business units responsible for managing individual grant programmes to:

  • map and review existing business processes to identify areas for improvement;
  • create guidelines, procedures, and templates for administering grant programmes; and
  • carry out reviews after changes to a grant programme’s administration have been implemented to test whether new processes and requirements are being followed correctly.

This detailed review process has several strengths:

  • A high level of consistency of administration processes and documentation standards was evident between the different grant programmes we examined.
  • Important documentation for administering grant programmes (such as procedure manuals and operating guidelines) clearly defines roles and responsibilities, and states requirements for the main aspects of grant administration. These include ensuring that grant programmes are consistent with the Government’s intentions, clearly defining eligible activities for grant funding, and outlining necessary administrative procedures to be followed.
  • A document control system is in place that gives the business process improvement team responsibility for updating and amending processes and procedures for grant programme administration. In our view, this also helps to reduce the likelihood for changes to be inadvertently made to grant programmes that are inconsistent with either the Government’s or NZTE’s intentions.
  • Review processes are used after a grant programme’s administration procedures have been re-designed (such as mini file reviews, post-implementation reviews, and internal audits). These reviews are an effective and transparent way of testing adherence to new requirements.

NZTE has demonstrated its strong commitment to its business process improvement project by regularly reporting project progress to its Board. Initially, this reporting was monthly; more recently, it has been quarterly.

The business process improvement project was formally completed in February 2008. Functions from the project have been shifted to normal operations in NZTE.

We understand that NZTE is planning a new project in 2008 to review and improve the way it interacts with its clients. This includes identifying ways in which NZTE can further improve or, if necessary, streamline grant administration processes. The project should help ensure that NZTE’s grant administration processes are appropriate for the outcomes they support.

The grant administration framework

NZTE’s review of its grant programmes has led to it implementing a grant administration framework. The framework’s aim is to provide detailed guidance to ensure that all grant programmes meet government requirements. The framework describes processes and documentation required, to ensure their consistency and transparency and effective management.

The framework clearly sets out how staff should follow NZTE’s grant administration processes and procedures. It defines and describes the purpose of the documentation that staff are required to use for different aspects of grant administration (such as assessing and approving applications, or administering contracts and claims).

The grant programmes we examined generally followed the new framework, although the SIF programme could improve its adherence to all framework requirements.

Guidance for interpreting, and adhering to, criteria for grant programmes

Overall finding from 2004 report

In 2004, we found that all the grant programmes we examined were not always meeting Cabinet criteria for approving grant funding. In our view, NZTE was in breach of its output agreement. This agreement requires NZTE to ensure that it delivers all grant programmes in keeping with policy recorded in relevant Cabinet papers.

Our expectations

We expected:

  • NZTE to have clear and comprehensive guidelines for setting out how assessors should interpret criteria for grant programmes; and
  • grant applications to explicitly address all relevant Cabinet and NZTE criteria, supported by appropriate documentation.

Our findings

As part of its business process improvement project, NZTE has thoroughly reviewed Cabinet papers for most of its grant programmes, except for grant programmes where limited criteria were provided. NZTE has reviewed the Cabinet papers for all three grant programmes we examined. These reviews identified all required criteria and listed where the documentation for grant programmes addresses them. In our view, this is an effective way of ensuring and demonstrating that NZTE is implementing grant programmes in keeping with the Government’s intentions.

All the grant programmes reviewed under the business process improvement project have had project checklists completed to ensure that NZTE’s business processes meet all government requirements. This is good practice.

Operating guidelines

NZTE’s business process improvement project introduced operating guidelines for all grant programmes. The guidelines provide detailed guidance on all aspects of grant programmes, including their objectives, eligibility criteria, and requirements covering application, assessment, and administration.

The operating guidelines we examined for the GSF, SIF, and EDG-MD programmes all explicitly stated the relevant criteria, and clearly differentiated between Cabinet and NZTE criteria. The guidelines also included useful information for staff on how to interpret the eligibility of applicants against those criteria.

Adherence to criteria

All the grants in our sample from the GSF, SIF, and EDG-MD programmes met Cabinet and NZTE criteria for funding eligibility.

For one GSF grant we examined, the documentation noted that the Programme Manager approved waiving a Cabinet criterion that applicants should “... (indicatively) have no more than 100 full-time equivalent employees”. Given that this criterion is indicative rather than prescriptive, it provides NZTE with some discretion. However, the file did not document the reason for applying the waiver. In our view, it is important that NZTE clearly documents the reasons for decisions waiving any indicative Cabinet criteria.

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