Achieving 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. 

 Achieving value for money is important to ensure the benefits of grants are maximised for the people of NSW. Value for money should be a key consideration across the grant life cycle, from its initial design through to implementation and evaluation.

Some ways officials may deliver value for money in grants administration include:

• efficient and effective grants design and delivery
• working with stakeholders to develop or modify grant opportunities
• using processes and procedures proportional to the grant’s value and risk
• promoting the ethical use of public resources
• managing risk to minimise unintended consequences, such as wasteful or fraudulent use of resources
• maintaining flexibility to respond to changing circumstances
• supporting grantees to achieve value for money in their grant activities
• monitoring whether funds are being used for the intended purposes, and programs or projects remain on track. 

Ways in which grantees may contribute to delivering value for money include:

• considering the most efficient and innovative means of carrying out grant activities
• considering how government objectives and their identified needs can be mutually achieved
• adopting an effective approach to identifying and managing risks
• collaborating with officials in monitoring and evaluation processes.

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. The approach taken to assess value for money should be proportionate to the value and risk of the grant. A grant’s lifetime begins at implementation and ends when significant benefits and costs are no longer realised. 

TPP 18-06 NSW Government Business Case Guidelines 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.

Similarly, TPP 17-03 NSW Government Guide to Cost-Benefit Analysis requires a cost–benefit analysis (CBA) for new grant programs or individual grants over a certain value. A CBA should consider a range of realistic options to achieve the stated objective. 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 life cycle. It can consider economic, social, cultural and environmental benefits and costs, as well as their distribution across the community. Benefits and costs that cannot be quantified can be accounted for qualitatively. A CBA should also account for risk and uncertainty in expected benefits and costs through sensitivity analysis.

While these NSW Government policies are not mandatory for smaller grant opportunities, they provide helpful guidance for officials.

The benefit–cost ratio (BCR) and the net present value (NPV) are key metrics produced in a CBA. A BCR greater than one and a positive NPV indicate that quantified benefits outweigh the quantified costs. These metrics are not the sole means of demonstrating value for money but, where CBAs are required, decision-makers should be provided with these metrics in the formal advice from the assessment team. Decision-makers should also consider non-monetary benefits and costs, distributional analysis (i.e. how costs and benefits are distributed across different groups or parts of the community), and the appropriateness of the proposed grant activity in meeting government objectives. A CBA includes information on these qualitative components, and gathering community perspectives through research and consultation is critical to these considerations.

For smaller or time-critical grant opportunities, value for money may be assessed with more streamlined approaches, such as rapid CBAs, which are based on the same principles but requires less precision. Agencies should first liaise with NSW Treasury to check whether a rapid CBA is appropriate. Where it is not practicable to quantify or monetise benefits, other appraisal methods may also be considered, such as a cost-effectiveness analysis.

Officials should also consider value for money at the individual grant level. This may not be practicable for high-volume grants such as those for emergency relief. The approach taken to assess value for money in grant applications should be proportionate to the value and risk of the grant, and the capability of the applicant. Officials should 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, where appropriate.