Rethinking Government Grants: A Call for Transparency, Accountability, and Fairness

Grants
Written By Intellect Labs
Rethinking Government Grants: A Call for Transparency, Accountability, and Fairness. Intellect Labs analysis on the efficacy of the curent government grant funding system and where there could be improvement.

Australia hands out nearly $1 billion in government grants to businesses each year[i], but how effectively is this money spent? While grants have enormous potential to drive innovation and growth, their value hinges on how they are allocated, monitored, and evaluated. Without transparency and accountability, public funds risk being squandered on underperforming projects.

We’ve drawn on our experience with Federal and state government grant programs, as well as data from various studies and reports, to review historical problems with grant programs. But this is not a call to eliminate grants — quite the opposite. It’s an appeal to ensure that the time and resources spent on applications are rewarded with fair and transparent processes, and that public funds flow to the right projects, producing measurable impact for the economy and society.

The Promise and Perils of Government Grants

The Australian Government provides grants to businesses to foster innovation, drive economic growth, and promote societal benefits. They are intended to stimulate economic activity, create jobs, and encourage entrepreneurship, especially in high-growth or strategically important sectors. The National Reconstruction Fund priority industries[ii] are a good example of industries currently being targeted by multiple Federal grant programs.

Some grants are intended to address market failures by reducing the risk for businesses to invest in long-term or high-risk projects, such as early-stage technologies[iii].  The Australian Government also uses grants to support regional development, helping economically disadvantaged areas transition to new industries. Other grant programs are intended to attract foreign investment, boosting international partnerships and trade while benefiting the domestic economy.

Despite their promise though, evidence suggests that the current grant allocation system is inconsistent, opaque, and sometimes compromised by political priorities rather than public good. A white paper by the Institute of Public Accountants-Deakin University SME Research Centre, Efficacy of Australian Commonwealth Business Grants [iv], details outcomes of a study that tracked the performance of the 141,800 firms that received a total of $4.2 billion in grants from 2018 to 2022. The results of the study are revealing:

  • The study identified widespread inefficiency in the use of grants in Australia. Specifically, while grants generate significant benefits for some companies, many grants produced no significant improvements in recipients' employment, turnover, or productivity.

  • The study also identified a kind of dependency risk in companies that received grants. Almost two-thirds of businesses that received more than one grant exhibited low efficiency and productivity, suggesting that the current grants system might be propping up underperforming “subsidy businesses.”

When targeted appropriately though, grants can achieve their desired outcomes. For example:

  • Industry innovation grants led to a 9.53% increase in return on assets (ROA) among larger firms, along with single digit increases in employment, turnover, and human capital efficiency across various categories of recipients.

  • Small business grants led to an 8.15% increase in full-time employment among micro and small businesses, with startups and young firms recording significant growth in sales turnover (5.84% and 7.82%, respectively).

This underscores that while grants can be an effective tool for economic stimulation, the structure and targeting of grant programs (particularly the selection process and performance evaluation) can materially influence their effectiveness.

Building the Case for Reform

While there are clear benefits to government grants, the challenges highlighted by recent research point to a troubling reality: the current system is not always delivering the intended outcomes.

Other reports and submissions have highlighted similar issues and proposed reform to grant programs and administration. The Australia Institute has drawn attention to how grants, awarded without competitive processes, and particularly when subject to political influence, can sustain underperforming businesses, reducing the effectiveness of public spending[v]. Likewise, the Queensland Audit Office’s (QAO) report on improving grant management identified a lack of consistent risk management and performance tracking across multiple state-level programs. It recommended standardising grant administration processes to drive greater efficiency and accountability.

Both reports echo a growing concern that political discretion in the allocation of grants can distort outcomes. For example, the QAO found inconsistencies in how grant applications were assessed, while the Australia Institute went a step further highlighting risks of ‘pork barrelling’ - the practice of governments and politicians directing public funds toward projects driven by electoral interests, rather than by public need or the greater good.

Lessons from the Frontlines

At Intellect Labs, we work closely with innovative and high-potential companies to secure public funding through grant programs. Through these collaborations, we’ve seen firsthand the transformative impact of well-targeted grants: companies unlocking groundbreaking technology, launching new products, creating jobs, and driving economic growth.

However, alongside these success stories, we also witness the frustration businesses face when grant processes are unclear or inconsistent. Businesses invest substantial time and money preparing applications, often without clarity on how decisions will be made. Some are told only that their application was rejected due to “highly competitive” conditions, without receiving detailed feedback or scoring. Others are left waiting for months, uncertain if approvals are being strategically delayed for political timing, or not advised of how a change in Government might impact their application.

These experiences demonstrate why fairness and transparency must be at the heart of grant program administration. Businesses that meet the published guidelines and merit funding deserve a level playing field. When processes are unclear or unfair, it discourages participation, wastes applicants' time, and ultimately undermines the effectiveness of public spending.

A Roadmap for Reform

Government grants clearly have the potential to drive significant innovation and economic growth. But without reform, we risk perpetuating a system where public money funds inefficiency. Equally, businesses that invest time and resources into grant applications should, at the very least, have the assurance that their submissions will be evaluated according to transparent, published guidelines and criteria, rather than being subject to shifting political priorities or behind-the-scenes decision-making.

Upcoming articles will draw on findings from key reports, such those from the Australia Institute and Queensland Audit Office, to present reforms including the case against Ministerial Discretion (a widely used mechanism in grant programs), and the case for a consistent Grant Allocation and Monitoring Standard.

By adopting transparent, merit-based processes, governments can restore public trust and ensure that grants serve their intended purpose — fostering sustainable growth, innovation, and economic resilience.

 

If you would like to talk more about how we can help you foster your ideas, please don’t hesitate to reach out.

 
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