Grants and program funding

The provision of grants and subsidies to non-government organisations or local governments is a method of funding used extensively by State and Local Government in NSW.

In this context "grants" refers to any allocation by a NSW public authority of government funds to another person or body that agrees to carry out a public service with the funds provided. Family support services, facilities for the aged and local environmental projects are examples of the types of services that may be funded through a government grant.

Some agencies make grants from their own budget allocation and some administer grant money from several other sources. 

There are potential corruption risks in the awarding of grants and in their administration. To reduce the risks, it is important that the grant purpose and conditions be properly documented and that agencies awarding grants continue to ensure that these funds are properly used throughout the relationship. 

The improper management of grants and funding can constitute corrupt conduct as defined by the Independent Commission Against Corruption Act 1988. Section 356 of the Local Government Act 1993 also sets conditions for the provision of financial assistance by councils.

Corruption risks

A risk assessment of grants and other funding may identify some or all of the following corruption risks:

  • A public official allocating a grant or other funding outside the proper process to favour an agency in which he has an interest, for example, allocating funds to a group home in which a relative resides.
  • A recipient seeking or misusing a grant outside the terms of the agreement and conditions for their personal benefit.
  • An applicant providing a public official with a bribe, gift or secret commission in return for the award of a grant.
  • An applicant falsifying information in an application for a grant.
  • A recipient falsifying information about the use and administration of a grant.


Managing corruption risks

As a minimum your agency should:

  • Introduce policy and procedures for making and managing grants and other funding that contain elements listed in the Policy Development Guide and Checklist (see Tips and tools below).
  • Include in the policy sanctions for any breach of the policy and procedures. 
  • Review the policy every two years.
  • Train all relevant employees in the policy and procedures to ensure they are aware of their responsibilities.
  • Include grants and funding as a risk to be assessed in the agency's internal audit and corruption risk management processes.

The following record-keeping requirements should be included in the policy:

  • Defining aims and objectives of the grant or funding program.
  • Recording roles, responsibilities and resources.
  • Processes for managing conflicts of interest.
  • Funding agreements including details such as:
      - the purpose of the grant
      - anticipated outcomes
      - details of the project including starting and finishing dates
      - procedures for the payment and receipt of funds
      - reporting requirements
      - any monitoring, evaluation and audit requirements.
  • Fully documenting funding recommendations and decisions and including details of the procedures followed and selection criteria used.
  • Preparing a written funding agreement that is signed by both parties stating the conditions that apply to the grant, basing ongoing payments on meeting these conditions.
  • Using performance indicators to measure success.


Risk management strategies

Following your risk assessment of grants you should consider these risk management strategies: 

  • All grants and funding programs having aims and objectives which clearly state the purpose and desired outcomes of the program.
  • Developing selection criteria for approving grants on the aims and objectives of the funding program.
  • Treating potential applicants equally and giving them sufficient information about the funding program.
  • Assessing grant applications and making decisions made about funding allocations according to pre-determined and well advertised criteria and a publicly-known timetable.
  • Reviewing the funding program every three-to-five years or earlier if the agency's priorities change.


Case studies

Case study 1: Leftover funds

A local community-based environment protection group received funds, administered through a NSW public agency, from various NSW government departments and the Federal Government.

The funds were to conduct an environmental rehabilitation project. The final report to the agency indicated that all funds had been expended and that the outcomes of the project had been met.

More than a year later the same group wrote to the agency seeking its agreement to the transfer of surplus funds from the project of approximately $250,000 to a new project. The group advised that it had the Federal Government's approval for the re-allocation, subject to the authority's agreement. This request gave rise to a suspicion that funds may have been improperly managed. A departmental inquiry revealed that this was not the case but that reporting and other accountability arrangements were inadequate. 

The agency introduced several measures to improve the management of grants including:

  • prohibiting staff of the authority from being office bearers in the groups who deliver project funds
  • the agency withholding 10% of project funds until it has received a detailed final report
  • submitting final project reports in a standardised format
  • groups that receive funding through the agency having a dedicated bank account for that project and submitting quarterly reports to the agency on the project.
Case study 2: Improper grant preparation

A public sector agency reported allegations to the ICAC that an agency employee had sought payment from a non-government organisation that he was affiliated with to help prepare a grant application that would be successful. He asked for an additional sum for a colleague in the agency to favourably review the submission.

An investigation revealed that the employee had made these representations and had prepared the submission in breach of the agency's code of conduct. He was fined $2,500 and formally cautioned that any similar behaviour would result in disciplinary action.

The agency also prepared and implemented a new conflict of interest policy.

Frequently asked questions

Do non-government organisations that receive funding or grants from the NSW government to provide services to the community come within the jurisdiction of the ICAC?

There is no clear answer to this question. Each case will depend on its particular facts such as the nature of the conduct, the status of the person or the organisation involved and the consequences of the conduct.

Some non-government organisations come directly within the ICAC's jurisdiction such as "affiliated health organisations" named in the NSW Health Services Act 1977. Others can come indirectly within the jurisdiction of the ICAC, for example through their charitable fundraising activities under the Charitable Fundraising Act 1991 and the Lotteries and Arts Union Act 1901.

Even if they are not regarded as public officials for the purposes of the ICAC Act the ICAC can still investigate activities of anyone who attempts to adversely affect the official functions of a public official.

If any particular matter appears to involve some form of serious wrongdoing and you suspect that some person or organisation involved in, or affected by, that conduct is a public official or public authority, you should seek advice from the ICAC.

I work for a public agency located in a regional area that often funds activities run by local community groups. I am a member of a group that is planning to apply for funds from my agency. What should I do?

Your agency should have a conflict of interest policy that deals with this situation. If not, see your supervisor about what to do. The principle is that you should not be in a position to unfairly advantage your community group in the competition for grant funding. That means that you may need to withdraw from the decision to allocate the funds and the preparation of the group's application to the agency for which you work.

If there is money left over at the end of a project funded by a grant can the grant recipient keep the surplus funds? 

There is no clear answer to this question because it depends on the conditions of the grant. The situation should not arise if the grant process has been well planned and documented. The terms and conditions of the funding arrangement should specify how to deal with any unspent funds. If they do not, the agency could be involved in a protracted dispute over the funds.



  • Administration of Grants Better Practice Guide, Australian National Audit Office 2003 Canberra
  • Conduct Guidelines for Members of NSW Boards & Committees, NSW Department of Premier and Cabinet, November 2001.
  • Good Practice Grants Administration, Premier's Circular C2006-35, August 2006
  • Good Practice Guide to Grants Administration, NSW Department of Premier and Cabinet
  • Administration of Grants - Guide to Better Practice, The Audit Office of NSW, 1995


Relevant websites


Related topics on the ICAC website