Understanding the fraud problem in grants
The Australian Government awarded 45,586 grants valued at approximately $16.7 billion from 1 July 2020 to 30 June 2021 (GrantsConnect).1
It is crucial to consider fraud risks when designing and delivering grants programs. Based on international comparators, the cost of reported and unreported fraud and payment error2 could be between 3-5.95% of revenue.3 If this rate of fraud and payment error is applied to the $16.7 billion in grants the Australian Government reported from 1 July 2020 to 30 June 2021, the loss could be as high as $1 billion.
The purpose of grants
Grants are an important method for the Australian Government to meet its policy objectives by delivering valuable services and support to individuals, businesses, industries and communities. The government provides billions of dollars in grants each year to:
- increase and improve social services
- provide opportunities for businesses
- provide emergency relief and aid
- undertake research and innovation.
While grants are necessary to achieve key government objectives, they also carry fraud risks. These risks are often elevated when a grant program is designed and delivered rapidly and/or with limited resources. The risks can also vary based on the type of grant.
Countering fraud in grants administration
Grants must be appropriately designed and overseen to ensure they are used for expected purposes and achieve desired objectives. While the majority of grant recipients do the right thing and comply with their obligations, there will always be some who seek to make dishonest gains through fraud. It is crucial to consider fraud risks when designing and administering grants.
The ‘Grants Administration Counter Fraud Toolkit’ will help Australian Government entities identify and manage fraud risks when designing and administering grants. While the guidance does not provide an exhaustive list of grants fraud risks, it aims to encourage stronger consideration of effective countermeasures during all 5 stages of the grants lifecycle.
This guidance will help Australian Government officials to:
- increase their awareness of fraud vulnerabilities in grants administration
- understand how these vulnerabilities might be open to fraud
- identify useful countermeasures to prevent, detect and respond to fraud.
1 Australian Government grants published on GrantConnect as at 29 September 2021
2 Such losses are judged to be without fraudulent intent, but remain a loss to the government.
3 This estimate is based on meta-analysis commissioned by the Attorney-General’s Department and completed by EY in 2019.