Grants and Subsidies – Follow Up

Background

Providing grants to third parties is an important means by which governments and public sector bodies deliver their policy objectives.

To ensure that those objectives are secured economically, efficiently and effectively it is important to have the right
controls in place, from design of grant schemes through to evaluation of their impact.

In December 2017, the then Comptroller and Auditor General (C&AG) issued a report on Grants and Subsidies. The report considered the development, oversight, management and evaluation of grants and subsidies awarded to third
parties by the Government of Jersey.

In December 2022, the C&AG issued a report on Grants to Arts, Heritage and Culture Organisations. The report considered the effectiveness of the plans and processes in place to implement, and monitor delivery of, the new Arts and Heritage Strategies adopted by the Government of Jersey.

The Government continues to make extensive use of grants and subsidies to third parties.

Scope

This follow up audit has assessed:

• the progress made in implementing agreed recommendations from the 2017 and 2022 C&AG Reports
• the extent to which the recommendations as implemented have addressed the improvement areas identified in the Reports; and
• the adequacy of plans for the implementation of any outstanding recommendations.

In doing so, the audit evaluated:

• the effectiveness of the States’ overall arrangements for the development, oversight, management and evaluation of grants and subsidies awarded to third parties; and
• the effectiveness of the arrangements for a sample of grants and subsidies against the criteria used in the 2017 Report and updated as appropriate against more recent good practice. This included good practice developed by the UK National Audit Office and adapted to be proportionate to Jersey.

The audit considered arrangements across a sample of departments and a sample of grants and subsidies schemes. The samples were selected from the Department for the Economy, the Children, Young People, Education and Skills Department, and the Cabinet Office.

Implementation of previous C&AG recommendations has been monitored through the Government of Jersey’s Recommendations Tracker. In addition, Commercial Services has monitored delivery of six recommendations which fell within its responsibility as part of a review for continuous improvement. Separately, the Department for the Economy has overseen the implementation of the recommendations from my audit of Grants to Arts, Heritage and Culture Organisations.

The C&AG has reviewed these monitoring documents to inform my evaluation of the progress made by the Government in delivering the improvements expected from implementation of the recommendations.

The monitoring undertaken by Commercial Services to assess progress made in implementing the recommendations from her predecessor’s report in 2017, includes an assessment of the current governance arrangements for approving new grants and monitoring existing grants. This has concluded that arrangements continue to be applied inconsistently.

A number of recommended actions have been identified by Commercial Services to improve the governance of grant funding. Officers note these will be refined in line with other work on the oversight and management of grant schemes by the Treasury and Exchequer Department following the completion of this follow up audit.

The audit did not extend to the Jersey Overseas Aid Commission, nor did it cover the States of Jersey response to the areas for consideration identified in my Thinkpiece Governance and Accountability of Independent Bodies and Office Holders (December 2022).

Conclusions

Implementation of the C&AGs previous recommendations has been tracked through the Government of Jersey’s Recommendations Tracker. In addition, Commercial Services has monitored delivery of six recommendations which fell within its responsibility as part of a review for continuous improvement. The Department for the Economy uses the Recommendations Tracker to monitor the implementation of the recommendations from my audit of Grants to Arts, Heritage and Culture Organisations.

The 2017 C&AG Report on Grants and Subsidies made 17 recommendations in respect of the overall arrangements within the States to ensure the right controls are in place for the design of grant schemes. Progress has been made in implementing these recommendations, in particular in relation to updating the Public Finances Manual (PFM) with the best practice identified in my predecessor’s report.

There is no clear and consistent States-wide approach or framework against which decisions are made in determining how to deliver services to Islanders. This creates a gap in the support available to officers when they need to decide if the use of a grant or grant scheme is the most effective solution to deliver the intended outcome, rather than through, for example, a contract for services.

A decision-making framework for grant funding would provide a roadmap for mature and effective decision making, by ensuring that grants are assessed, appraised and awarded in a consistent manner and support projects most likely to deliver expected outcomes to Islanders. As part of this, definitions and terminology used in both awarding grants and setting up grant schemes need clarification. This would in turn allow the principles and requirements in the PFM for new and existing grants and grant schemes to be streamlined.

How conflicts of interest are managed varies across Government departments and across grants. In the sample of grants I reviewed, the C&AG could find no record of how conflicts of interest within the States (officers, Ministerial and other States Members) are assessed, documented and evaluated. This exposes the States to a range of reputational risks including a perception of bias and unfairness and eroding public confidence in the integrity of the decision making process relating to the award of grants.

Work undertaken by Commercial Services in response to recommendations from my predecessor and from Internal Audit provides a positive basis on which to continue to improve the governance of grants and grant schemes. To support this however there is a need to revise the PFM section on grants to develop a more proportionate, risk-based approach for the review of existing grants and grant schemes.

There is no consistency in how agreed outputs or outcomes are recorded between the Government and the grant receiving entity. The C&AG noted the use of different documents to record the agreement, and in seven of the twelve grant agreements tested key performance indicators were largely in narrative form which makes them more difficult to measure effectively.

Commercial Services has developed a form for new grant scheme consideration and approval, supported by template agreements, taking into account that schemes vary in size. In addition, there is a model agreement for Arm’s Length Bodies receiving grant funding of more than £1 million. The consideration and approval form is detailed and covers the principles and requirements of the PFM. However, the one completed form in my sample had limited evidence to support the responses in the form. This reduces the reliance that can be placed on whether the principles and requirements have been appropriately considered.

The PFM requirements for new schemes reinforce the need for grant schemes to be linked to organisational objectives and contribute to the strategic aims, priorities and desired outcomes of the States. However, neither the consideration and approval form, nor the grant agreement templates, specifically reference the Jersey Performance Framework and Island Outcomes.

A small number of organisations receive grant funding from more than one Government department. There is an opportunity to streamline processes and oversight for both Government and the grant receiving bodies by identifying a lead officer that engages on behalf of Government with the grant recipient.

There may be benefit in introducing a more specific option to evaluate grants and grant schemes, against agreed risk criteria, to identify those which should be reviewed at least annually, and those which could be reviewed less frequently. This will allow a greater focus on those grants and grant schemes that are at a higher risk, either financially or in terms of non-delivery of the intended outcomes.

As data analytics functionality continues to develop, further analysis should consider what other expenditure, for example through contracts for services, is paid to bodies that also receive grant funding. This will provide a deeper understanding of the relationship between the Government and the grant receiving body. It could also inform the risk-based assessment of existing grants and grant schemes.

In relation to the 2022 report on Grants to Arts, Heritage and Culture Organisations, progress has been made in responding to the recommendations. The C&AG noted the development of a grant analysis framework and reporting process for arts and heritage grants, which has led to greater consistency in the grant appraisal processes. However, the Government has not yet put in place clear implementation plans for the Arts and Heritage Strategies to demonstrate how the objectives of each Strategy will be delivered. There is also more work required to identify performance measures focussed on outcomes rather than inputs and volumes.

The use of individual grants or grant schemes is a valuable part of the States’ framework for service delivery, regulation and resilience. Effective oversight, governance and accountability arrangements are essential in order to ensure grant receiving bodies use the funding in line with overall States objectives, including demonstrating improved outcomes for Islanders.

A number of the recommendations from the previous reports have been implemented or are in progress. However, there is further work required to demonstrate compliance with the requirements of the PFM and there are opportunities to enhance efficiency and value for money in the oversight and use of grant funding.