Value for money and grants administration
Achieving value for money is important to ensure the benefits of grants are maximised for the people of NSW.
What is value for money?
Determining value for money in grants administration requires an assessment of the lifetime benefits of a grant opportunity against its lifetime costs.
These costs and benefits will be affected by a range of factors including how they are distributed among different groups across the community, the efficiency with which outputs are produced, and the appropriateness and effectiveness of the grant in achieving outcomes and objectives.
Value for money assessments guide the prioritisation of resources towards initiatives that maximise net social benefits and use taxpayer money to best effect.
A cost-benefit analysis offers the most comprehensive means of assessing value for money; it incorporates the complete range of expected benefits and costs across the grant lifecycle. It can consider economic, social, cultural and environmental benefits and costs, as well as their distribution across the community.
How and when should value for money be considered in administering a grant?
Value for money should be a key consideration across the grant lifecycle, from its initial design
The Guide requires that value for money is considered at the following stages:
Planning and designing grant opportunities
Guide Reference: 5.5
To inform decisions about whether a grant opportunity should proceed, officials must demonstrate at the planning and design stage how it will deliver value for money by identifying expected lifetime benefits and costs. This should include consideration of all benefits and costs – economic, social, cultural and environmental – both monetary and non- monetary. A cost-benefit analysis offers the most comprehensive means of assessing value for money as it incorporates the complete range of expected benefits and costs across the grant lifecycle.
Assessment and decision- making
Guide Reference: 6.3
Where the decision-maker is a Minister, officials must provide written advice which, among other things, includes the merits of the proposed grant or grants having regard to the grant guidelines and the key principle of achieving value for money.
A Minister (or other decision-maker) who approves or declines a grant must record the decision in writing, including the reasons for the decision (and any departure from the recommendation of the assessment team) having regard to the grant guidelines and the key principle of achieving value for money, and manage these records in accordance with the requirements of the State Records Act.
The Guide also provides best practice guidance on achieving value for money throughout a grants process (see section 5.5) and recommends that value for money is specifically addressed at the following stages:
Planning and designing grant opportunities
Assessment and decision-making
Guide Reference: 5.5
Officials should consider value for money at both the individual grant level and in respect of the overall grant opportunity. (Although the Guide acknowledges that consideration at the individual grant level may not be practicable for high-volume grants such as those for emergency relief).
Monitoring and acquitting grants
Guide Reference: 6.6.1
Officials should monitor individual grants as well as the overall grant opportunity.
Monitoring is an ongoing and systematic process of collecting and analysing information about a grant opportunity, for the purpose of: tracking progress of grant activities; establishing whether funds were dispersed correctly and used for intended purposes; and assessing outcomes and benefits for future assessment of value for money.
Guide Reference: 6.7
Following the implementation of a grant opportunity, officials should implement an outcomes evaluation to assess if and how it led to intended changes and met objectives. The outcome evaluation can also inform an economic evaluation, which assesses value for money.
How is value for money assessed?
The approach taken to assess value for money should be proportionate to the value and risk of the grant, and the capability of the applicant.
A number of Treasury Policy and Guidelines Papers provide guidance that assists in determining value for money. In particular:
NSW Government Business Case Guidelines
Treasury Reference: TPP 18-06 (PDF 1.2MB)
requires a business case to be completed for any new grant program or individual grant over a certain value. A business case involves the comparison of feasible options for achieving the policy objectives, including consideration of the costs, benefits and risks of each option. Business cases may also be appropriate for proposals that may not involve significant expenditure but have a significant impact on the community, economy or environment.
NSW Government Guide to Cost-Benefit Analysis
Treasury Reference: TPP 17.03 (PDF 1.34MB)
Requires a cost-benefit analysis (CBA) for new grant programs or individual grants over a certain value. A CBA offers the most comprehensive means of assessing value for money; it incorporates the complete range of expected benefits and costs across the grant lifecycle. It can consider economic, social, cultural and environmental benefits and costs, as well as their distribution across the community. The evaluation guidelines are set to be updated in 2022 as Treasury Policy and Guidelines: Evaluation.
Treasury Reference: TC-18.03
Sets out the overarching requirements for the evaluation of existing and new programs. All agencies are expected to conduct periodic evaluations of their programs, both existing and new, to assess their continued relevance, relationship to government and cluster priorities, and efficiency and effectiveness in delivering outcomes. Evaluations should be prioritised, planned and conducted in line with the NSW Government Program Evaluation Guidelines.
For smaller or time-critical grant opportunities, value for money may be assessed with more streamlined approaches, such as a rapid CBA. Agencies should liaise with NSW Treasury to determine if a rapid CBA value for money assessment is most appropriate.
Where it is not practicable to quantify or monetise benefits, other appraisal methods may also be considered, such as a cost-effectiveness analysis.
While these NSW Government Guidelines are not mandatory for smaller grant opportunities, they provide helpful guidance for officials.
FAQs about value for money
Value for money is an essential consideration in grants administration. However, this does not mean that each and every grant application must be assessed against a value for money criterion in each and every grant opportunity. As the Guide acknowledges, this may not be practicable for high-volume grants such as emergency relief grants.
Where value for money is not contemplated in the selection criteria for a particular grant opportunity, it is still an essential consideration for the grant opportunity as a whole. For example, where the decision-maker is minister, officials must provide written advice which, among other things, includes the merits of the proposed grant or grants having regard to the grant guidelines and the key principle of achieving value for money. This may be done by outlining the overall value for money considerations that informed the design of the grant opportunity.
Officials can consider what support and resources might assist applicants to make assessments in a cost-effective manner. This may include providing guidance on how to capture data and identify key benefits and costs, or providing CBA templates and logic models.
Officials can also work collaboratively with grantees to ensure a shared understanding of the objectives and intended outcomes and benefits of grants, and the approach to monitoring these. Officials can consider what support or resources might assist grantees to identify and monitor grant outcomes and benefits.
In a CBA, the benefit–cost ratio (BCR) and the net present value (NPV) are key metrics to indicate whether the quantified benefits outweigh the quantified costs of the initiative. Decision-makers can also consider non-monetary benefits and costs, distributional analysis, and the appropriateness of the proposed grant activity in meeting government objectives.
This Fact Sheet supports understanding of the value for money considerations set out in the Guide (see section 5.5) and should be read alongside that section.