Smooth runs the water where
the brook is deep
2 Henry VI, Act three, Scene
one.
I thought it might be worthwhile to have a quick look at
the most recent Estimates Hearings related to the Indigenous portfolio. Held on
Friday 27 October (link
here), the hearings were predictably anodyne. I am not seeking to provide a
comprehensive overview but thought I would focus on just a few issues that
struck me as significant (albeit under-appreciated). In particular, the
transcript is interesting for two reasons: first, for the issues that were
avoided during the questioning; and second, for what it tells us about the
approach of the various committee members.
Unsurprisingly, the dominant presence during the hearings
was the Oppositions spokesperson on Indigenous Australians, Senator Nampijinpa
Price. She appeared to have two main
objectives. The first was to pursue the extent of the involvement of various
agency and statutory corporation staff appearing before her in supporting the
Yes case in the recent referendum. Her efforts on this front failed to strike
the gold she perhaps was searching for, but the insistence of her efforts, and
the recourse of those being interrogated to providing answers later ‘on notice’
left an impression that at least in some instances some unspecified red line
had been inappropriately crossed. The second objective was to seek out
information and further detail on a range of presumed accountability failures.
Here I suspect her intent was to lay the groundwork for a future political attack
on the government for the lack of accountability in the Indigenous sector.
Interestingly, her focus was wide and shallow rather than deep and narrow, and
overwhelmingly focussed on the Northern Territory, which happens to be her own
constituency. In other words, she appears to be laying down the outline and
precursors for a future political campaign directed towards reinforcing the
longstanding predispositions of her non-Indigenous constituents.
There were two meta-issues that struck me as particularly
significant insofar as they are almost certain to have substantial policy and
financial implications into the future but were almost completely ignored or
avoided by the committee in its questioning.
The first relates to the ANAO
audit of the four NT land councils. The second issue raised only
tangentially during the Hearing relates to the preparations for the divestment
of the Ayers Rock Resort by the ILSC. This second matter is slightly complex
and speculative, so I shall deal with it in a future post.
Turning to the ANAO, all four land councils were called to
appear before the Estimates Committee. Questions from Senator Price covered
their support for the referendum and issues raised by the ANAO audit
recommendations, including governance shortcomings, and progress on section 19
lease approvals (an issue that plays into deeper conservative beliefs regarding
the constraints on economic development arising from communal and inalienable
title). Labor Senator Sheldon asked the land councils about their respective
processes of membership selection (a matter also raised in the ANAO reports,
but without identifying major concerns). Pages 39 to 45 of the transcript cover
Senator Price’s pursuit of the NLC, the TLC and the CLC in relation to various
technical recommendations of the ANAO in relation to their fraud control
policies and conflict of interest policies not being up to scratch. What a
close reading of the transcript reveals however is that Senator Price neglected
to raise the issues of actual conflicts of interest and various other
shortcomings identified by the ANAO in relation to the management of the Anindilyakwa
Land Council.
Senator Price also went out of her way to raise the land
council audits when the ANAO appeared before the Senate Finance and Public
Administration Legislation committee on 24 October (link
here). Again, she raised a series of technical issues relating to the NLC,
and at the end of the session as time was running out, went out of her way to
state that she had extra questions:
…I would like to have the
opportunity to ask all the questions that are before me – they are obviously
very important – with regard to all of the land councils within the Northern
Territory.
She had that opportunity later in the week in the Cross-portfolio
hearing, but didn’t raise any substantive issues relating to the ALC. It was
almost as if, to use a rugby term, she was running interference for the ALC.
Avid readers of this blog may recall that in June and
August of this year I published three separate posts reviewing the ANAO audits
(link
here and link
here and link
here). In my last post, I provided the following high-level assessment of
the impact of the audits for the land councils:
The overall picture has been
positive, although the ANAO findings in relation to the ALC in particular are
in my view extraordinary and of serious concern. In relation to the ALC audit,
we are yet to see any formal or public response by Minister Burney nor NIAA,
though one hopes that action is underway behind the scenes.
My post dated 1 June 2023 (link
here) had recounted quite significant and disturbing ANAO findings within
the Anindilyakwa Land Council’s governance structure. Shortcomings which — in
theory — could be utilised to facilitate actual fraud and mismanagement. To be
clear, the ANAO did not identify any instances of fraud or financial mismanagement.
Of much more significance was the ANAO analysis which identified a complex
array of related corporations which while technically and legally independent
of the ALC have substantial overlap in terms of senior management involvement.
The result is that they are effectively either controlled or influenced by the
senior management of the land council and are both the recipient of substantial
benefits and investments emanating from the land council and yet outside the
purview of the ANAO as they were private companies. See figure 4.1 of the
ANAO report at page 68 (link
here) although this diagram does not include the revenue streams related to
the two private trusts referenced below. The financial flows involved are
significant, especially when extended into the medium term.
The NIAA annual report reports payments to the ALC of $59m
in 2022-23 for distribution to royalty associations representing traditional
owners. Over say ten years, the amounts involved would be extraordinary, likely
totalling around half a billion dollars. In addition, the ALC document Invested
in our Future (link
here) indicates that there are two further trusts established to receive
negotiated royalties arising from mining agreements with GEMCO. That document
suggests that these two trusts had a balance of $262m in 2020, and expect to receive
a further $370m, in future royalties and interest payments over the decade to
2030. This takes total royalty and associated revenues flowing into Groote to
around a billion dollars over the coming decade.
Given the quantum of funds flowing to Groote, the potential
consequences of risks such as fraud, or mismanagement, or commercial loss for
ALC constituents arising from poor due diligence of commercial development
proposals are orders of magnitude higher than those related to the mere (mis)use
of Commonwealth funds appropriated for the operations of land councils. Yet all
these risks can be traced back to institutional arrangements established by,
and theoretically overseen by, the Commonwealth. In a worst-case scenario, were
significant royalties and other monies to be diverted away from the intended
beneficiaries utilising complex private rather than public governance
structures, the Commonwealth would be unlikely to escape legal and fiduciary responsibility,
as well as significant political responsibility. Yet neither the Government nor
the Opposition are focussed on addressing the issue of potential risks.
A major contributing factor to this short-sightedness is
that there are a plethora of Commonwealth (and NT) regulatory oversight
agencies each looking at a slice of the total picture: the NIAA, ORIC, ASIC,
AFP, NT Police, the NACC, and the ANAO each have potential roles in
oversighting elements of the financial structures in play on Groote. The ANAO
adopts an extraordinarily narrow view of its responsibilities, notwithstanding
it is purporting to undertake ‘performance’ audits. In his evidence to the
Estimates Committee on 24 October at page 135 (link
here), the Auditor General laid out in detail his overly narrow approach to
his job, in effect leaving it to other agencies to investigate suspicions of
fraud and indicating that his legislative remit does not extend to non-government
entities. This is a matter I have argued, in my post dated 17 August 2023 (link
here), that requires both more adventurousness by the ANAO and probably
legislative reform.
What is missing is any oversight agency with a remit to undertake
a wholistic risk assessment of these royalty flows. Moreover, the issues related
to financial risk on Groote are replicated at probably ten other mine sites
across the nation, mostly in WA.
Conclusion: an action agenda
It strikes me as more than strange that neither the
Government nor the Opposition are prepared to initiate an open discussion about
the financial risks and implications arising from the ANAO’s narrow and minimalist
findings into the ALC. Clearly there are multiple angles with potential
political implications: a Commonwealth entity facilitating direct Aboriginal
investments into a joint mining venture with a privately owned company (AUS
China International Mining Pty Ltd) with limited resource development
experience; potential environmental issues related to strip mining of manganese
and the associated infrastructure on Winchelsea Island and the northern coast
of Groote Eylandt; an extraordinarily ambitious development agenda for Groote Eylandt
apparently endorsed by the NT Government’s Local Decision-making Framework (link
here) and supplemented by slick marketing and PR most evident in the 2022
document on the ALC website Invested in our Future (link
here) [note the caveat at the end of this document]; a commercial and administrative presence in
Darwin and Cairns (link
here); and not least the paradox of poverty and dysfunction amongst revenue
plenty (link
here [see data point two] and link
here).
These risks are balanced against the important focus on
building a sustainable fund to underpin the future viability of the Groote
economy outlined in the document Invested in our Future on the ALC web
site. The plan to establish a perpetual fund to provide an income stream to Anindilyakwa
people post mining has real merit, although it is unclear how robust the estimates
are and why the focus is limited purely to the negotiated royalty streams and
not the statutory royalties. However if significant risks eventuate, they will
threaten the viability of creating a sustainable future fund for Groote people.
This is why the issues raised in this post are so important and demand
policymakers; attention.
There are also serious management questions that are worth
asking. For example, the ALC CEO who received $419k in total remuneration in
2021-22 is also listed as the Transition Manager of Groote Holdings Aboriginal
Corporation (GHAC) in the 2022 document on the ALC
website Invested in our Future. That document lays out the extraordinarily
ambitious development agenda being pursued by the ALC and its associated
entities. The ALC 2021-22 Annual Report (link
here) (page 125) lists the CEO as both a Director of GHAC and also a
Director of Winchelsea Mining. The ANAO in figure 4.1 (page 68) (link
here) go out of their way to make clear that not only is the ALC CEO a Director
of GHAC and Winchelsea, but his spouse is the Chief Operating Officer of GHAC
and an Executive Assistant within Winchelsea. Moreover, ENMARK the company
providing the Chair of the ALC Audit Committee is also responsible for
governance and accounts in GHAC (see page 34 of Invested in our Future).
As the ANAO said in para 4.46:
4.46 AAAC holds 60 per cent of
the shares in Winchelsea Mining, and GHAC will own the Little Paradise
logistics base assets being developed to support the Winchelsea Mining venture
(see paragraph 1.29). Figure 4.1 shows the directorships and senior positions
of, and main financial flows between, the ALC, AAAC, GHAC and Winchelsea
Mining. The figure shows that the ALC Chair and CEO have interests in GHAC and
Winchelsea Mining, either as Chair, CEO or director.
Setting aside the question of whether the ALC CEO ( a full
time position) is being paid additional remuneration by GHAC and/or Winchelsea,
there remains the question whether the Land Council (a complex organisation with
a range of governance challenges as identified by the ANAO) is getting adequate
attention from its CEO given these competing responsibilities.
As an aside, the effectiveness of the Estimates Committee (and
the currency of this post) has not been helped by the fact that, contrary to
the Department of Finance guidelines, the 2022-23 Annual Reports for the four NT
land councils are yet to be tabled (as of 14 November) notwithstanding that the
expected date for tabling is in advance of the October estimates hearings. This
is a matter that falls within the responsibility of the portfolio minister, and
which deserves an explanation. Neither the Government members, the NIAA, the
land councils, nor the Opposition or Greens commented on the absence of these
reports in the Estimates transcript.
The avoidance of any questions to the ALC by the
Opposition, and the apparent inaction of the Government following the ANAO
report, serve to add weight to the view that all is not what it might seem in
relation to the commercial development agenda of the ALC on Groote, and the relationship
between the ALC and government in both the NT and Canberra. Moreover, this
silence only heightens the questions relating to the quality of the overall management
and allocation of the ALC’s extraordinary royalty revenues, and the concomitant
risks.
Whether or not there is maladministration or worse is not
the point. The real issue is that the current policy frameworks in relation to
royalty management, commercial development and social services delivery are contributing
to a much more fluid and complex policy environment. In turn this is throwing
up new challenges and opportunities, including ensuring that the essential
oversight of corporate activities are fit for purpose. Addressing the economic,
social and commercial challenges at Groote, and grasping the opportunities in ways
that are able to be sustained and grow, will require strong management and
governance. The success or failure of these efforts will have real world
implications for the people resident on Groote. The existence of substantial royalty
flows, and the financial implications and significant commercial risks of the
current ALC strategy, merely reinforce this point.
A close reading of the ANAO report suggests that they had
serious concerns but lacked the forthrightness to make their concerns clear. Their
recommendations were anodyne. Their remit, and thus their recommendations are
limited insofar as they are directed only to the ALC and do not address the
issues being pursued by the ALC’s associated entities. Notwithstanding the
excellent work of their audit team, the ANAO senior management appear to have
baulked at the last hurdle.
I am sure that within NIAA, there is an appreciation of the
risks of a substantial and monumental policy failure in relation to royalty
management on Groote. They too have a responsibility to provide the Minister
with forthright advice. Following the robodebt debacle, the possibility
(however remote) of a Royal Commission at some point in the coming decade
should be front of mind for public servants advising the Minister on these
issues.
And the Opposition shadow on Indigenous Australians also
has a responsibility to focus on these issues. It seems to me highly unlikely
that she is unaware of at least some of the issues on Groote. Whatever her
motivation for avoiding asking the hard questions in the recent estimates
committee, she would be wise to get on the front foot and play a constructive
role in shaping effective policy outcomes going forward. In our democratic
system of government, the role of the Opposition is not merely to criticise the
Government (important as that is), but to play a part in ensuring that policy
outcomes are effective and in the public interest.
Given the magnitude of the economic and political risks,
and the adverse social consequences if those risks come to pass for the Groote
populace, it would be smart if the Minister for Indigenous Australians were
to initiate an independent and wide ranging inquiry into the current
developments at Groote. If all is well, there is no downside to pursuing
such a course, and it will expand trust in the judgment and probity of the
policymakers involved, and send a clear signal to future leaders and managers
that their policy choices need t be robust and well directed. If all is not
well, then the sooner we identify the issues and address them the better. Doing
nothing and acting as if there is nothing worth examining in relation to Groote
would be both irresponsible and short-sighted.
A second action worth
initiating would be for NIAA to develop (ideally in conjunction with Treasury
and Finance) advice on policy options to ensure better and more coordinated regulatory
oversight of the increasingly complex Indigenous commercial development policy domain.
The absence of regulatory coordination exacerbates the likelihood of a major commercial
and financial disasters particularly where royalties and native title payments
are substantial. Indigenous citizens are more vulnerable to the impacts fo such
occurrences than other Australians.
15 November 2023
No comments:
Post a Comment