Implementing the NDIS review: risks and opportunities for Indigenous interests

                                   Who seeks and will not take, when once ’tis offered,

                                Shall never find it more.

Anthony and Cleopatra, Act two, Scene seven

 

 This posts provides a link to a recent working paper of mine, Implementing disability policy reform: Challenges and opportunities, published on the Centre for Indigenous Policy Research (formerly CAEPR) website (link here) which takes as its starting point the 2023 Review of the NDIS (link here) and assesses the challenges involved in implementing that Review’s recommendations. While the paper considers the key mainstream recommendations of the Review, including their relationship with the complex shared funding arrangements with the states and territories, the Working Paper’s primary focus are the challenges that are embedded in the Review recommendations for Indigenous interests.

 

In particular, the design of the mainstream NDIS scheme, based as it is on the existence of private sector disability services providers, creates substantial risks for the effective delivery of disability services in remote settings. The Review made a series of recommendations for addressing this issue, however successful implementation will involve overcoming the significant risks of implementation failure.

 

The paper begins from an assumption that the Government will broadly accept the Review recommendations, and suggests that the implementation challenges and risks are formidable. In relation to the Indigenous elements of the Review implementation agenda, the working paper (inter alia) argues for a stand-alone cross-agency implementation capability incorporating Board or Advisory Council membership nominated by Indigenous interests to be established with a finite lifespan of say five years. The Working Paper argues that the risks of implementation failure are high and that effective and successful implementation will require sustained advocacy by Indigenous interests across all jurisdictions.

 

 

30 July 2024

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Royalties, flawed governance and non-transparency: a potent brew

 

Thou monstrous injurer of heaven and earth!

Call not me slanderer; thou and thine usurp

The dominations, royalties and rights

Of this oppressed boy…

King John Act two, Scene one.

 

This post provides a high-level overview of how the institutional structures related to payments to traditional owners related to mining on Groote Eylandt have evolved in recent years.

In 1963, prior to the existence of land rights, the Church Missionary Society which had a presence on Groote presciently had secured mining tenements on Groote as a means of protecting Aboriginal interests. They used their commercial leverage to negotiate a royalty arrangement with BHP to ensure that the local Anindilyakwa people would benefit from mining. As part of that negotiation, royalties began to flow in 1965 and in 1969 the Groote Eylandt Aboriginal Trust (GEAT) was established. While the Trust has had a chequered history, it appears to be operating well and has accumulated a balance of over $200m based on royalty payments from GEMCO and its ongoing investments (link here).

GEAT provides an annual grant program aimed at benefiting the traditional owners of Groote. In the 2022 and 2023 financial years, the grants made were around $$5m. and $7m respectively. The following analysis does not deal with GEAT, which is independent of the ALC, and it is mentioned here for the sake of completeness. As I understand it, the more recent mining agreements on Groote under ALRA in effect net off the benefits directed to Groote in calculating the payments made to the ALC for on payment to the AMT.

This post focusses on the complex and I suggest problematic financial and governance arrangements between the Anindilyakwa Land Council (ALC), the   Anindilyakwa Mining Trust (AMT) and the Anindilyakwa Royalties Aboriginal Corporation (ARAC). The aim is to identify points of potential concern in terms of good governance, to raise some questions regarding what appear to be some problematic financial transactions, and finally to explore some broader policy reforms that these issues suggest may be required. It is not intended to be a comprehensive analysis.

In 2007 the AMT was established to receive the negotiated payments arising from a revision of the revised agreement between manganese miner GEMCO and the ALC. Under the current mining agreement between GEMCO and the ALC, GEMCO pays a negotiated royalty to the ALC, a portion of which is then transferred to the AMT to be invested and distributed in accordance with the Trust Deed. The original Trust Deed was revised in 2010, and sets out the rules governing the operation of the AMT. The revised Trust Deed is available on the ACNC website (link here).  

As I understand it, the more recent mining agreements on Groote under ALRA which provide for payments to AMT in effect supplement the continuing payments directed to GEAT.

For our purposes, key elements of the AMT Trust Deed include the power of the ALC to approve the appointment of new Trustees, a requirement for there to be at least two ‘responsible persons’ appointed as Trustees (essentially fulfilling roles akin to independent directors), the provision of quite broad powers to allocate royalty funds for community purposes, the inclusion of standard conflict of interest provisions, and of a power for Trustees to delegate their powers to an individual or individuals. Normal provisions for minute taking and annual meetings apply. The current Trustees are listed on the ACNC website (link here) noting however that Mr W, the former Chair of the ALC, is recently deceased.

The most recently available financial statements, for the year to June 2023, indicate that the AMT controls net assets of $274 million, and is in receipt of an annual income of almost $20 million in negotiated royalties and just over $8m in investment income. These income flows clearly vary from year to year.

The ALC is also in receipt of section 64(3) payments, often referred to as ‘royalty equivalents’ because they derive from provisions of the Aboriginal Land Rights (Northern Territory) Act 1976 (ALRA) which appropriate an equivalent amount from the Commonwealth Consolidated Revenue for all royalties received by the NT Government from mines on Aboriginal land. In turn the ALC is required by section 35 of the ALRA to disburse these funds within six months of receipt to Aboriginal Corporations representing traditional owners. These corporations must be incorporated under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act) to facilitate more intensive governance support (a legislative constraint that makes good policy sense in my view given that ASIC incorporation is looser and is less intensively regulated).

The ALC distributes its section 35 funds to a range of corporations located on Groote Eylandt, many focussed on clan affiliations. Increasingly however, the ALC appears to have been directing section 35 funding to corporations focussed on social and economic development opportunities linked to the proposed Winchelsea mine; see my earlier post outlining the ALC strategy (link here).

In April 2016, a new corporation was registered with the Office of the Registrar of Aboriginal Corporation (ORIC). Its name is Anindilyakwa Royalties Aboriginal Corporation (ARAC), and it is unique insofar as the members of ARAC must be Aboriginal Trustees of the AMT. While the list of documents related to ARAC on the ORIC web page is incomplete, a revised Rule Book issued in December 2023 (link here) requires that all members of ARAC be members of the AMT. Directors of ARAC must be either members (ie Aboriginal trustees of AMT) or a responsible person (ie a non-Indigenous Trustee of AMT).

Moreover, all the Indigenous members of the AMT, and therefore ARAC, are members of the ALC. ARAC has four independent Directors Adam Simpson, Rodney Tidey, Russell Barnett, and Simon Longstaff. Of these, Adam Simpson and Simon Longstaff are also Trustees of AMT. Rodney Tidey is a former staff member of the ALC, and Russell Barnett runs a consulting firm that appears to have done work for the ALC. To be clear, I am not suggesting any wrongdoing on the part of these individuals, merely pointing to the tangled web of connections that has been constructed by the ALC during the term of its CEO Mark Hewitt.

The ALC thus effectively exercises influence over both the AMT and ARAC by virtue of its control of the AMT membership. This aligns with my observations in previous posts that the ALC exercises a degree of influence over corporations receiving s.35 payments that aligns with the definition of ‘effective control’ under the Corporations Act. If the ALC CEO and former Chair exercise disproportionate influence over the ALC Board, as was identified by the ANAO in its May 2023 performance audit, and explicitly alleged by sources consulted by The Saturday Paper for its recent exposé (link here), then that influence will likely permeate the decision-making of both the AMT and ARAC.

Given this background, I wanted to explore two issues that arise from these entwined sets of responsibilities and issues.

The first is a series of financial commitments and subsequent transactions reported in the AMT financial statements from 2016. The second relates to funding by ARAC of ALC employee costs.

The AMT/ARAC financial transactions

The notes to the 2016 Financial statements for the AMT which are available on the on the ACNC website (link here) include the following text:

12 Commitments During the year ended 30 June 2016, Anindilyakwa Mining Trust committed to contributing $3,500,000 to the Economic Development Unit (which has been established by the Anindilyakwa Land Council) on or prior to 30 June 2018. The first instalment of $500,000 was made during the 2016 financial year. 

The notes to the 2017 AMT Financial Statements state that the first instalment of $500,000 was made during the 2016 financial year and the second instalment for the first year of $500,000 and the first instalment for the second year of $750,000 was made during the 2017 year.

The notes to the AMT 2018 financial statements comment:

12 Commitments During the year ended 30 June 2016, Anindilyakwa Mining Trust committed to contributing $3,500,000 to the Economic Development Unit (which had been established by the Anindilyakwa Land Council) of which $1,000,000 was paid during the 2016 financial year and $750,000 was paid during the 2017 financial year. During the 2018 financial year, an instalment was made for $1,250,000. Therefore, as of 30 June 2018, the Trust has a $500,000 outstanding commitment.

During the year ended 30 June 2017, Anindilyakwa Mining Trust committed to contributing $51,122,311 to Anindilyakwa Royalties Aboriginal Corporation (ARAC) for costs associated with the purchase of infrastructure and funding of the operational budget. During the year, $6,000,000 was paid to ARAC. Therefore, as of 30 June 2018, the Trust has a $45,122,311 outstanding commitment.

The 2019 AMT financial report included a note indicating in relation to the 2016 commitment, a further instalment of $500,000 had been paid thus meeting that initial commitment. The note also states that in relation to the 2017 commitment, the AMT had paid an instalment in the 2019 FY of $5,975,000, thus leaving an outstanding balance to be paid of $39,147,311.

The 2020 and 2021`AMT financial reports note that no payments had been made and the outstanding commitment remained at $39,147,311. The Notes to the 2021 AMT financial report note that the outstanding amount was paid in FY 2022; this suggests the payment was made in the first half of the financial year. The 2022 AMT financial report lists under the heading Grants a payment to ARAC of $41,324,957. No rationale is provided for why the amount has increased from $39m to $41m.

There are no further payments reported in the 2023 AMT financial report.

The 2022 financial statement for ARAC is available on the Registrar of Aboriginal Corporations website (link here). Under revenue, it records a s.64(4) grant from the ABA of $9.6million (which would have been approved by the Minister) and a grant of $14.3m in s.35 payments from the ALC (the equivalent amount in 2021 was $34.8m). Total net revenue is listed as $23.0m. There is no record of any grant being received from the AMT. Nor is there any record of such a grant being banked in the following financial year.

That a payment of $41m appears to have disappeared is somewhat strange. It is even stranger when one considers that the AMT has no staff and its administration appears to be undertaken by the ALC, that ARAC has no staff (see the 2022 ARAC General Report) and its office is at 58-62 Macleod Street Cairns, the same address where the Commonwealth transparency portal lists ALC’s Finance and Royalty Development Unit (RDU) employees being located. Thus while the AMT and ARAC have different auditors and accountants, the staff servicing Board meetings and probably implementing Board decisions (including managing income and payments) are likely part of a small team in Cairns. Clearly a forensic audit is required to determine the reason for the apparent disappearance of these funds. I should acknowledge that I was alerted to the issues around the missing $41m by the recent story in the Saturday Paper (link here).

 

ARAC funding of ALC employee costs

The ARAC 2023 financial report includes under expenses a line item for ALC employee costs of $7.2m in 2021 and $8.0m in 2022. This strikes me as potentially problematic as it appears to suggest that the ALC is making payments to ARAC which are then used to pay ALC employee costs. In effect, this can be characterised as the ALC using funds that are required to be allocated towards corporations representing Traditional owners diverting the funds to financing its own activities.

The rationale that the ALC will use in its defence is that section 23(ea) of the ALRA allows land councils to assist Aboriginals in the area of the land council to carry out commercial activities. The ALC CEO has relied on this provision on a number of occasions in Estimates Hearings. However, the provision reads as follows (emphasis added):

The functions of a Land Council are (inter alia)

(ea)  to assist Aboriginals in the area of the Land Council to carry out commercial activities (including resource development, the provision of tourist facilities and agricultural activities), in any manner that will not cause the Land Council to incur financial liability or enable it to receive financial benefit;…

It is clear that the engagement of staff by the land council incurs a financial liability, and also that the payment of employee costs by ARAC can be characterised as receiving a financial benefit. While section 33A and B allow a land council to charge fees for services, this likely is limited to services which a land council is allowed to provide. Accordingly, it seems clear to this bush lawyer that the arrangements adopted since 2016 have breached that provision of the legislation. The appropriate way to have provided the assistance envisaged in my views would have been for the Minister to approve estimates of expenditure of the Land Council under section 64(1) of the Act. Why this was not done is unclear.

Similar issues arise in relation to the ALC economic development unit which the AMT funded in 2016, 2017 and 2018.

In relation to the arrangements which were adopted, it seems that there are two possibilities: either the arrangements have been undertaken with the approval and knowledge of the Minister and NIAA, in which case it places an additional onus on them to monitor and mitigate the risks of fraud or misappropriation, or even just poor management. Or alternatively, the arrangement has not been approved in which case it appears to breach the financial management provisions of the ALRA and probably the PGPA Act. Which is it?

 

Policy implications

The two issues outlined above raise numerous policy issues.

In the short term, both issues are serious enough to require a detailed forensic audit. These are both issues that fall within the regulatory oversight responsibility of the Minister and her agency, the NIAA. If they are to handball them off to an alternative ‘appropriate authority’, then they must identify the issues explicitly and directly. Otherwise there is a risk that the issues involved will be overlooked in the tangled web allegations that are currently in play (see my previous post link here).

Beyond the issues involving the ALC, NIAA should in my view undertake an immediate internal review of its approach to the regulatory oversight of portfolio bodies, the extent to which its Audit and Risk processes and fraud control processes are fit for purpose in relation to portfolio bodies for which the NIAA has an oversight responsibility.

In the medium term, these issues raise questions regarding the level of due diligence applied by the Registrar of Aboriginal Corporations when she approves the registration of corporations that are intended or likely to receive section 35 payments from a land council in the NT. The ALRA requires these payments to be directed to CATSI corporations, but this requirement can be undermined if the land council exercises effective control over the corporation. The Registrar should in my view initiate an internal review to identify what actions might be taken to ensure existing and yet to be established corporations likely to receive section 35 payments are properly independent of the land council making the grant.

The issues raise questions regarding the adequacy of the ANAO’s financial audits of statutory corporations, in circumstances where there are subsidiaries (such as with IBA and ILSC) or as in this case, with corporations where there is no formal ownership, but effective control is exercised by other means. Similarly, while the ANAO performance audits of the NT land councils has been perhaps the watershed in allowing greater scrutiny to be undertaken in relation to the ALC, in retrospect, it is clear that they should have adopted a much wider frame of reference once they realised that an intricate web of interconnected financial transactions was involved. In the light of the revelations that have emerged since the ANAO performance audit was published, its recommendations appear increasingly inadequate and short-sighted. In my view, there would be merit in the ANAO undertaking an internal review of its performance in relation to the ALC and associated entities aimed at identifying any shortcomings or ways to improve its effectiveness. Further (and to reiterate a point I have made previously), it is time that the ANAO conducted a detailed performance audit of the implementations of the financial provisions of ALRA.

Finally, the ongoing imbroglio on Groote points to two further general points with broad policy significance.

First, the NIAA apparently has no permanent presence on Groote Eylandt despite the extraordinary complexity of the policy issues that shape and confront the local population. This was not always the case and reflects a much broader pull back by the Commonwealth of on the ground staff across regional and remote Australia. Without eyes and ears on the ground, Ministers cannot hope to obtain the quality information and advice required in a rapidly modernising and changing demographic, social and economic environment. Th incoming minister for Indigenous Australians would be well advised to immediately place staff on the ground in Groote Eylandt, and to commission a review of NIAA staffing aimed at reshaping its staffing profile to better reflect the locus of the major policy challenges it faces.

Second, I cannot resist noting, indeed emphasising, that the Groote imbroglio has only surfaced because of the serendipity of the ANAO audit and the persistent delving of the media. The trend towards ever less transparency by government in general and the Indigenous Australians portfolio in particular, is in my view of deep concern for its implications for democracy, but just as important, because it allows First Nations peoples aspirations and interests to be ignored. So much of what has occurred on Groote can be traced back to failures of Ministers to uphold their responsibilities, failures that are facilitated and arguably encouraged by the endemic lack of transparency across the public sector. How is it that we only learn this year that in 2018 a minister of the Crown approved a mining agreement on Aboriginal land (whose terms have never been made public) where the Chair and CEO of the land council were sitting on both sides of the negotiations leading to the agreement. They had a conflict of interest, but in my view, it is the former Minister who approved the agreement who should be held to account. The consequences of that decision are playing out today and the outcomes are as yet unclear; but may well lead to ongoing economic and social losses for the Aboriginal residents of Groote Eylandt.

 

26 July 2024

Addendum 280724

It has been brought to my attentin that the AMT was originally assisted in its administration by the Myer Family Company which in 2017 merged with Mutual Trust (MT) (link here). It may be that MT continues to provide adminstrative assistance to the AMT, and not the ALC Royalty Management Unit in Cairns as was surmised in my original post. I have not been able to confirm this either way. Even so it does not change the broader underlying point that was being made.

 

Imbroglio on Groote Eylandt: a high-level roadmap

                                                            I see, as in a map, the end of all.

Richard III, Act two, Scene four

 

Over the past 14 months, there has been a steady torrent of public complaints, reports and media analyses raising concerns related to the governance of the Anindilyakwa Land Council (ALC), and its then Chair and current CEO.

 

Given the complexity of the institutional environment, let alone the myriad problematic activities that have been aired, I thought it might be useful to try to lay out a very high level roadmap of how the oversight of the issues on Groote emerged, what is currently being done, and where it might go into the future. This post is not aiming for comprehensive detail, but rather aims to set out the context. For more detail, readers are referred to the reports listed below, along with the analysis of some eleven previous posts on this blog which can be accessed in the recent post, Eleven posts foretelling calamity and tribulation on Groote Eylandt (link here).

 

Key events

 

In May 2023, the ANAO issued a performance audit report (link here) into the operations of the Anindilyakwa Land Council, a Commonwealth statutory Corporation established under the Aboriginal Land Rights (Northern Territory) Act 1976 (ALRA). The content of the audit was highly critical of governance standards within the ALC, identifying numerous potential conflicts of interest involving the Chair, the CEO and his spouse, amongst numerous other issues of concern. The remit of the audit was limited to the ALC and not to the network of corporations in receipt of royalty equivalent payments, thus limiting the focus of the recommendations to the ALC’s operations. It is worth noting that the ALC and the NIAA would have been provided with a draft report in March or April 2024.

 

On February 2024, a petition signed by 235 residents of Groote Eylandt was tabled in the Federal Parliament raising a range of concerns regarding the operations of the ALC and in particular its CEO. In response, Minister Burney (who is responsible for the operation of the ALRA told a media outlet that she would ask the NIAA Integrity Unit to investigate the concerns raised. Five months later, that investigation (whose terms of reference were limited to the ANAO recommendations) has yet to be released.

 

On 11 May 2024, the SMH published an article (‘CEO’s plan for personal millions form Indigenous mine deal exposed’) by investigative reporter Nick McKenzie (link here) which revealed that in September / October 2023, the ALC CEO had sought approval from the AAAC (the formal owners of 70 percent equity in Winchelsea Mining Pty Ltd) to grant him and his wife (Ms Sophy Liu) a ten percent stake in Winchelsea Mining. Following concerns expressed by an ALC legal officer, and the provision of a second legal opinion, the CEO deferred finalising the transaction

 

On 7 June 2024, during a Senate Estimates hearing, Senator Pocock raised serious concerns with the ALC CEO regarding the negotiation of the terms of the mining agreement between the ALC and Winchelsea Mining. The ALC Chair and CEO had statutory responsibilities to protect the interests of the TOs on Groote Eylandt, yet they were also both the Chair and co-CEO of Winchelsea Mining where they had responsibilities to protect the interests of their shareholders. The terms of the Agreement are not in the public domain, however the ALC CEO claimed that he had briefed the then Minister Nigel Scullion, who had approved the agreement. None of this was made public at the time. At the same Estimates Committee Hearing, the NIAA Integrity Unit indicated that they had received a draft of the investigation and expected the report to be finalised by July.

 

In early July 2024, the Minister’s Office or the NIAA advised the media that the NIAA had referred allegations against either the CEO or the ALC to the National Anti-Corruption Commission (NACC). The Minister would have approved this referral. The referral likely pertains to the proposal to grant the CEO and his spouse a ten percent share in Winchelsea Mining. The NACC had already received a number of referrals related to the actions of the ALC and its CEO from private citizens prior to the NIAA referral; it is unclear if it intends to conduct an investigation, and the extent of its inquiries if such an investigation proceeds.

 

On 20 July 2024, freelance journalists Ben Abbatangelo and Rachel Hoffman published a detailed account in The Saturday Paper (link here) of numerous new allegations of problematic activities on Groote centred around the roles, activities and influence of the ALC CEO and the recently deceased Chair. Key revelations in this article include the following: the role of the ALC royalty development unit in implementing the development the Royalty Shoppa debit card which quarantined significant levels of funds to expenditures in the Royalty Shoppa Warehouse; the apparent inconsistencies in relation to advice to Minister Scullion in relation to cuts to the CEO’s salary to offset his salary from Winchelsea Mining and the actual salary paid by the ALC over subsequent years; allegations that action to mitigate and address conflicts of interest by the former Chair and the current CEO had not been implemented in relation to key ALC decisions; and that concerned TOs had complained to the Minister regarding lack of accountability for a substantial payment by the Anindilyakwa Mining Trust to the Anindilyakwa Royalties Aboriginal Corporation, but had not received a reply.

 

Ways of interpreting the current imbroglio

 

There are at least five legitimate ways to evaluate and assess the ongoing developments on Groote Eylandt, and their interaction with the accelerating momentum of accountability focussed investigation.

 

First, one might assess past, present and future developments through the narrow focus of whether or not there has been fraudulent or illegal behaviour by any of the actors involved in managing the ALC and its associated royalty distributions. Important as this is, I would argue that a focus solely on fraud and accountability is too narrow and will not address wider issues of fundamental importance to the wider community on Groote.

 

Second, one might assess the policy effectiveness of the ALC’s strategic vision and plan for the residents and TOs of the Groote archipelago. The ALC strategy as promulgated on its website is sophisticated and polished. I discussed in in some detail in my earlier post The proposed Winchelsea mine on Groote Eylandt: a strategic opportunity? (link here) where I concluded:

The high level aspirations articulated by the ALC have real merit. I support them if they can be afforded. The strategies being adopted are however deeply flawed, and in my view will likely lead to a disastrous financial meltdown on Groote at some point in the next five years. If this occurs, the socio-economic ramifications will entrench further disadvantage and possibly lead to the unravelling of social cohesion on the island.

I outlined the reasons for that conclusion in the following post (link here). That conclusion has not been refuted by the ALC or the NIAA. Time will tell.

 

If I am right, the current inaction by governments will mean that they share direct responsibility for the outcomes.

 

Third, one might assess the effectiveness of the current regulatory oversight of the activities on Groote since late 2018 when the ALC CEO wrote twice to Minister Scullion advising him of the proposals to establish Winchelsea Mining and purchase the mining tenements on Winchelsea Island. The ALC is a Commonwealth statutory corporation. Unlike private sector corporations, it is not regulated by ASIC and the ACCC, but by the provisions of the ALRA which is administered by the Minister for Indigenous Australians and the Public Governance, Performance and Accountability Act (2013) (PGPA Act) which is administered by the Minister for Finance.

 

See this flipchart for a listing of all PGPA Act entities (link here). Sections 25 to 29 of the PGPA Act impose the following duties on all officials: a duty of care and diligence • a duty to act in honesty, good faith and for a proper purpose • a duty in relation to use of position • a duty in relation to use of information • a duty to disclose interests.

 

Since 1976 when the ALRA was enacted, those two Ministers and their agencies have shared the bulk of the responsibility for regulatory oversight of the actions of the NT Land Councils, with the Indigenous Australians Minister in the lead. Some other accountability agencies have specific roles, for example, the ANAO which undertakes financial audits of NT land councils’ financial affairs and can undertake performance audits (such as the performance audit published in May 2023). The indigenous Australians Minister approves budget estimates for each land council and is required to approve various arrangements set out in the ALRA (eg mining agreements negotiated by a Land Council with a mining corporation).

 

Given this background, the inability of the NIAA at the Estimates Hearing of 7 June 2024 (link here: page 29) to satisfactorily respond to questions from Senator Pocock as to whether the Minister or the NIAA had been advised of Mr Hewitt’s potential conflicts of interest appeared to evoke a level of astonishment. In seeking to deflect the Senator’s apparent incredulity, the NIAA CEO explained that the ANAO Report was directed to the ALC itself. The statement and concomitant inference that the NIAA was not responsible for knowing these matters reflects a deep-seated hands-off approach that is not consistent with the statutory responsibilities of the Minister and her agency. 

 

I am not aware of any detailed analysis of the quality of the Ministerial and NIAA regulatory oversight in relation to Groote, yet the more egregious the situation being uncovered is ultimately found to be, the more we can be confident that it has been facilitated (either consciously or unconsciously) by regulatory failure. The key issue then becomes whether that regulatory failure is a one off, or systemic. Prima facie, the quality of regulatory oversight of the ALC over the past eight years appears to be seriously deficient. In my view, the NACC and the Parliament should make the assessment of this issue a primary focus on their ongoing oversight and investigations.

 

For any sceptics that question my assessment of the existence of regulatory failure, let me provide one personal anecdotal example. I wrote a considered and detailed letter to Minister Burney on 1 March 2024, copied to the Minister for Finance and the ANAO, attaching a detailed analysis of compliance with the legislative requirements for distribution of royalties and the evidence revealed in my own examination of the publicly available financial statements of the key recipient corporations. I framed my analysis as provisional and recommended a detailed forensic audit be commissioned. There are three possible acceptable answers to such a letter: one, I have considered your points and agree and am taking action; two, I have considered your points and disagree for the following reasons and am thus not taking action; three, I am considering the matters raised and will respond when I have reached a conclusion.

 

I received no acknowledgement or reply from the Minister for Finance nor from the ANAO. On 11 June (over three months later) I received a response from the NIAA CEO noting that a review into the implementation of the ANAO recommendations had been commissioned, and explicitly acknowledging that the scope of that review does not address the concerns I had raised. The CEO went on to state that it is worth noting that it is standard practice for the NIAA to refer matters to the appropriate authorities when there are identified concerns regarding the conduct of organisations or individuals that are better managed by those authorities. The letter did not indicate whether any matters had been referred to ‘appropriate authorities’.   Yet the matters I had raised related directly to the regulatory responsibilities of the NIAA and the Minister. I concluded that I had been advised, in the politest terms, to go jump in the lake.

 

Fourth, one might assess the developments on Groote in terms of their implications and consequences for macro-policy issues. These include issues such as the more general effectiveness of the policy and accountability oversight of the land councils in the NT, whether the operation of the ABA which includes funding of Land councils, distribution of royalty and royalty equivalent payments under ALRA;  wider issues related to whether mining related payments more generally are being managed effectively; whether it is time to review the operation of ALRA to assess whether it is still meeting its objectives; and whether the policy capabilities of the NIAA and other agencies (such as The Office of the Registrar of Aboriginal Corporations) have been hollowed out over the past decade leading to loss of corporate memory and policy capability.

 

Again, I am not aware of any considered research or writing, nor any reviews or parliamentary committee focus on these issues in the past decade. My recent post on the draft ANAO work program (link here) discusses some of these issues in more detail. My core point is that the imbroglio unfolding on Groote ought to be seen as an opportunity to proactively finetune and improve the broader institutional frameworks which play an important part in supporting the aspirations and interests of First Nations citizens in northern Australia.

 

Fifth and finally, one might assess the ongoing Groote imbroglio in terms of what it says about the state of our political system. Neither of the major parties appears to have covered themselves in glory so far, and the longer these issues remain unresolved, the greater the likelihood that trust in our political system and democracy will be further diminished. I have commented previously on the disenchantment of remote communities with the current state of politics in the NT (link here: data point three) and I have previously pointed to the deep-seated disinterest of both CLP and ALP Senators in pursuing these issues in the three Estimated Hearings since the ANAO report was tabled. The fact that the NT election is imminent is clearly a salient factor in both sides seeking to keep the lid on these issues.

 

My own take on this is to suggest that the dominance of the Executive over the Parliament is a fundamental issue that requires more critical analysis and attention. Notwithstanding the ubiquitous rhetoric about the importance of democracy, our major parties appear prepared to set aside the public interest (of citizens and voters) in favour of their own political self-interest. The lack of motivation and timely action to date in addressing and disentangling the complex imbroglio on Groote is in my view just one further example of this dynamic. The structural and systemic exclusion of Indigenous interests continues.

 

To sum up, the imbroglio on Groote is cascading out of control. Where it will land, and its wider ramifications, are as yet uncertain. The core argument of this post is that adopting an analytic lens focussed on identifying the existence or not of villains and villainy is crucially important. However, limiting our analytical lenses to this is both overly simplistic and short-sighted. The effectiveness of the ALCs broader strategic policies is also crucial, and so too is the quality of regulatory oversight and the fitness for purpose of broader Commonwealth (and Territory Government) policy objectives and frameworks. Finally, understanding the political drivers in play is also important, as is assessing the longer-term implications of the major political parties continuing to prioritise political self interest over the public interest.

 

 

 22 July 2024

Eleven posts foretelling calamity and tribulation on Groote Eylandt

 `                                         As thick as hail

Came post with post…

Macbeth, Act one Scene three

 

 Set out below are links to eleven previously published posts on this blog dealing with policy issues on Groote. It seems clear that concern regarding the issues on Groote is becoming more widespread, though where it will all land is as yet unknown. IN any case, I thought readers might find it useful to revisit some of my earlier analyses, so I have collected them below, starting with the most recent, and ending with a 2016 post on police infrastructure upgrades.

Groote developments: NACC referral by NIAA

Discusses the referral of unspecified issues related to the ALC to the NACC by Minister Burney.

10 July 2024.

 

“Don’t you worry about that”: a further Groote issues update

 Discusses the Senate Estimates Hearing on 7 June 2024, including Senator Pocock’s robust cross examination of the ALC CEO.

21 June 2024

 

Groote Eylandt recent developments

This post discusses a number of issues including the impact of the recent cyclone on royalty flows to Groote, the decision of the former ALC Chair to step down from the ALC, governance issues related to Groote, including the silence of the Minister in relation to these. 4 June 2024

 

Slow walking towards disaster: new revelations regarding the proposed Winchelsea mine on Groote Eylandt.

This post discusses the 11 May article in the SMH by Nick McKenzie which revealed that the CEO of the ALC had sought to be granted a ten percent equity in Winchelsea Mining. THe post also discusses the slow pace of the Ministers actions in response to the various allegations that are in play related to the operations of the ALC.

13 May 2024

 

ANAO 2024/25 draft work program

While primarily about the ANAO draft work program, this post argues that the ANAO should focus attention on the Aboriginals Benefit Account since it is well past time that an independent oversight body undertook a close look at the distribution of royalties and royalty equivalents.

4 April 2024

 

The proposed Winchelsea mine on Groote: the commercial and policy risks are pervasive

This post discusses the substantial risks inherent in the ALC’s publicly released strategic policy framework, including a critical analysis of the commercial feasibility of the Winchelsea manganese deposit.

16 March 2024

 

The proposed Winchelsea mine on Groote Eylandt: a strategic opportunity?

This post outlines the ALC strategic plan and policy framework, based on using the development of the Winchelsea mine to build a sustainable capital fund into the future.

16 March 2024

 

Silent dissemblance: discussion of the ANAO report on the ALC in Estimates

This post discusses the unsatisfactory discussions related to the ANAO audit reports of the NT Land Councils including the ALC in the November 2023 Estimates Hearing, and suggests the Minister take proactive action to investigate what is actually happening on Groote, and identifies a need for a wider review of the Indigenous commercial sector.

15 November 2023

 

 Typographical errors: ANAO audits of the Tiwi and Anindilyakwa Land Councils

This post reviews the ANAO audits of the TLC and ALC and suggests that a forensic audit is required as well as a wider review of the regulatory framework within which the NT Land Councils operate.

1 June 2023

 

 Dodge dip and dive: eight ‘data points’ on remote policy

Data point two summarises the results of an ANU study into the socioeconomic conditions n Groote Eylandt.

1 May 2023

 

Moral hazard and police services on Groote Eylandt

This post discusses the deeper implications of a pre-election funding announcement by the NTG and the Commonwealth to upgrade the police presence on Groote.

1 July 2016

  

12 July 2024

 

 

Groote developments: NACC referral by NIAA

                                                Here in [Australia]

Where I have seen corruption boil and bubble

Till it o'errun the stew

Measure for Measure, Act five, Scene one

 

The ABC is reporting (link here) that the ALC CEO has been referred to the National Anti Corruption Commission (NACC) by the National Indigenous Australians Agency (NIAA).

 

The article quotes a spokesperson from the NACC as stating:

The Commission can confirm that it has received a referral from the NIAA. The Commission is assessing the referral, as it does with all referrals, and will not make further comment at this stage.

 

Notwithstanding the headline and various statements throughout the article, the focus and basis for the referral is not clear from the statements of the NACC and NIAA spokespersons quoted in the article.

 

In my view, the ABC article over simplifies the situation in a number of ways. It fails to critically examine the nature of the current NIAA review, and implicitly suggests that it is aimed at the issues related to the CEO’s relationship with Winchelsea. In fact, its terms of reference are much more limited, linked to assessing the state of progress in implementing the recommendations of the ANAO Audit of May 2023, which was itself focussed on the ALC, and not the operations of the various corporations which are directly linked to funding Winchelsea. It appears to accept the NIAA claim that the review is ‘independent’, whereas its remit is limited and the NIAA has admitted that it was provided with a draft on 6 June, almost five weeks ago. An independent review would not provide a draft.

 

Most importantly, the NIAA has failed to make clear in its evidence to the Estimates Committee, nor in its description of the terms of reference of the review, that the Commonwealth itself has previously provided significant funding towards logistical support for the proposed Winchelsea mine, and that former Ministers apparently waved through advice of the CEO’s conflicts of interest and approved the mining agreement that necessarily involved the then ALC Chair and the current CEO negotiating with themselves over the terms of the mining agreement. Given this background, not only is the notion of an independent review oversighted by NIAA a contradiction in terms, but it opens the possibility that the NACC investigation, if it proceeds, may well end up focussing as well on the actions of former Ministers and NIAA staff.

 

A second assertion in the ABC report that appears entirely unwarranted is that the ALC stands to receive millions of dollars in mining royalties from Winchelsea. Statements to this effect may well be circulating on Groote but the limited size of the Winchelsea deposit and the significant costs involved in standing up a new mine in a remote locations make the economic feasibility fo the deposit unlikely. I discussed this matter in detail in an earlier post (link here).

 

The bottom line then is that the issues in play are extraordinarily complex, and indeed are much more significant than whether or not any ALC officeholders or employees are benefitting inappropriately. Of course, if they are, they should be held to account, but the ABC would do well to invest some more investigative resources in coming to understand an issue which has been running now for over 14 months with almost zero attention from the ABC.

 

To be clear, it is significant that the NACC is now assessing whether to investigate issues related to the ALC and Winchelsea Mining, and the ABC has broken new ground in reporting this revelation.

 

The questions that now need to be asked of the Minister for Indigenous Australians include:

 

What in particular led her to instruct her agency to make such a referral, and when did this occur?

 

Why has it taken so long to finalise the so-called independent review given that she was reported in the media in February saying that she had asked the Integrity Unit in NIAA to undertake an investigation?

 

If there is an adequate basis for referring issues to the NACC, what action has been taken by the Minister to ensure that individuals involved are not in a position to cover their tracks in the meantime? For example, if the referral relates in any way to the ALC CEO or former Chair, why did she not request them to stand aside pending the resolution of the matters subject to the referral?

 

Given that there is an election due next month in the NT, can the Minister give an assurance that she has not been deliberately seeking to keep the lid on these issues until the election is over?

 

Can she provide an assurance that there have been no requests from the ALP Government in the NT to delay action on assessing these issues until after the election?

 

To sum up, in my view, the policy issues involved which have the potential to constrain and limit the future economic prosperity of the whole population on Groote are such as to demand a public statement by the Minister explaining what she knew, when she knew it, what action she took and why it has taken so long to get nowhere in particular. The ALC is, after all, a Commonwealth statutory corporation which exists within the portfolio of the Prime Minister and Cabinet.

The fact that we haven’t seen such a statement to date is to my mind a reflection of the extraordinary regression in our standards of governance generally, and reflects poorly both on the Government and the Parliament in general. At some point, the cauldron of shady dodginess on Groote is going to boil over. The only unanswered question is who will be scalded and how much mess will be left behind.

 

Regional governance on Groote: financial and governance risks

 

And blind oblivion swallowed cities up…

Troilus and Cressida Act three, Scene two.

There is no doubt that the Anindilyakwa Land Council (ALC) is at the apex of the complex organisational structure that underpins and shapes Anandilyakwa community life on Groote Eylandt. The ALC is not without its competitors: GEMCO the operator of one of the world’s largest manganese mines dominates the local economy (link here); the Commonwealth and NT governments are the source of significant funding for infrastructure and services across the Archipelago, but neither government has a substantial presence.

If we were to map the institutional framework on Groote utilising the economists definition: institutions are the systems and structures that  comprise  the ‘rules of the game’, then the key nodes in that map would be the NT’s mining legislation; the Commonwealth’s Aboriginal Land Rights (Northern Territory) Act 1976 (ALRA) which establishes the ALC and governs royalty and royalty equivalent distributions; the Commonwealth’s Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act) which provides incorporation status to the various corporations in receipt of royalty equivalent payments from the ALC; the NT Local Government Act; and of course the swathe of civil and criminal legislation that applies to all Australian citizens wherever they reside.

What sets Groote Eylandt apart from the rest of Australia is its remoteness; the existence of the mine and its concomitant economic, social and environmental implications; the existence of a synergistic swathe of economic, social and health challenges (link here); the ubiquity and strength of Anindilyakwa language and culture (link here); and the existence of a concentrated cohort of people suffering from or at risk of developing a neuro-degenerative disease known as Machado Joseph disease (link here).

In contrast to many remote communities, local government and its associated services is not a high-profile player on the Groote Eylandt archipelago. However, there are processes in place which may change that. This post is aimed at documenting these processes given the ongoing and perhaps expanding focus on local governance on Groote over the past year or so.

For a high-level summary of what is happening, it is difficult to go past the ‘Future Groote’ tab on the ALC website. The following text has been taken from that web page which links to detailed underlying documents:

Future Groote Strategic Plan: The purpose of the ALC 15-year Strategic Plan (2012 – 2027) is to allow the Anindilyakwa people to take the future into their own hands. It is a culmination of the thoughts, vision and articulation of the Anindilyakwa people (link here).

6 Local Decision Making Agreements: On 14 November 2018, the ALC and NT Government entered into a Local Decision Making Agreement (LDMA). Under the LDMA, the Anindilyakwa people of the Groote Archipelago now determine the service delivery models that work best for their communities and region (link here).

Anindilyakwa Treaty: The ALC sees the Local Decision Making agreement as a pre-curser to a treaty agreement. Under the Local Decision Making, the Northern Territory Government has agreed in principle to the creation of a new Anindilyakwa Local Government Council. The ALC sees this as an important step towards self-governance on the Groote Archipelago (link here).

One of the six Local Decision Making Agreements related to local government. In July 2023, the NTG and the ALC finalised a Local Government Implementation Plan, with the title: Groote archipelago local decision making agreement schedule 3.6 – Local Government Implementation Plan (link here).

The implementation plan provides for the existing East Arnhem Regional Council (EARC) to be split in two to allow the creation of a new Groote Archipelago Regional Council (GARC). 

The Minutes of the meeting of the Angurugu Regional Authority of 28 May 2024 (link here) confirm, in the report of the AERC CEO, that the planned de-amalgamation of the EARC to create the GARC is proceeding, and that NT officials have advised the EARC that GARC will be formally gazetted on 1 September, under the control of an appointed ‘Constituting Member’, and that elections will be held to elect Councillors on 26 October. The minutes discuss various administrative matters, including a planned phasing in of CARC service delivery, and arrangements for a cost sharing agreement with EARC over this transition period. The minutes also document concerns, arising from a Financial Assessment Report dated February 2022, that there would be a funding shortfall arising form the de-amalgamation, and canvasses various correspondence seeking commitments from the NT to fund this shortfall. The minutes not that the 2024 NT Budget allocated only $3m to fund the de-amalgamation and to support other local governments, whereas the shortfall totalled around $6m.

The minutes note that the EARC CEO had written to the NT Local Government Minister in April regarding this issue and was yet to receive a response. The EARC also wrote to the Commonwealth Minister for Indigenous Australians, Linda Burney expressing concern at the prospect that ALC may be directing royalty funds to meet the funding shortfalls from the NTG. IN this context, they also expressed concern regarding the media coverage of wide-ranging concerns related to the allocation of royalty funds on Groote. In a similar vein, the President of the Local Government Association of the NT, Kon Vatskalis  a former Minister in the Martin Labor Government) wrote to the NT Local Government Minister expressing concern that the ALC was involved in the proposed local government Council given that the Federal Minister had referred concerns to the NIAA Integrity Unit. The Minutes attached the relevant correspondence and press reports.

Finally the Minutes include (on page 33) the following text:

Current ALC Payment of $1.5 Million of Anindilyakwan Royalties

This deep concern on the appropriateness of payments, includes an ALC commitment to provide 1.5 million dollars in royalty derived money requested by the Anindilyakwa Land Council and approved by the Anindilyakwa Royalty Aboriginal Corporation (ARAC), that GARC confirmed has actually been paid in the last two to three weeks, when we met to assist planning on 10 March.  I asked a joint GARC/EARC/NT CM&C collaboration meeting on 8 May: “What is the $1.5 million is for.” The Northern Territory Government senior representative stated “that NTG is committed to provide necessary funds” and the Constituting Member stated “…it was based on the principle that it’s not to substitute for required NTG funds”.  The GARC Constituting Member went on to state that: “There’s no limitations on it. It’s for us to utilise as we see fit. But there is a view down the track that it may fund transitions of ALC businesses to the Council, but there’s no plans for that now. It was given by ARAC as a sign of support for the new Council. I can’t recall in detail. There is nothing that confines us to anything.” The GARC Transition Manager (Interim CEO) Brooke Darmanin then stated that: “It’s very much a gesture. It recognises that there will be far more a cost in creating the Council than even recognised in the FAR report (Financial Assessment Report)” There was no comment on the $1.5 million royalty funding by the NT senior representative after that.

 

Conclusion

The concern being expressed by the EARC CEO is that the funding from ARAC will mitigate against the provision of adequate funding by the NT Government to both AERC and GARC. While there appears to be nothing illegal in such a payment by ARAC, the inherent and admitted vagueness of the purpose of the funding, when combined with the risk that ARAC is effectively controlled by the ALC, raises the clear potential for the grant to be some sort of quid pro quo. At the very least, it establishes a relationship of dependency between the ALC/ARAC and the GARC.

While it is clearly in the interests of everyone on Groote Eylandt that the various corporate entities operating on Groote co-operate and coordinate, it is not in the interest of the Groote population, nor is it consistent with normal principles of good governance, for a local government entity charged with delivering services to be beholden to and in debt to more powerful interests. There is a reason that local governments in the NT are based on democratic elections. Governance failures are a recipe for inequitable service delivery into the future.

The concerns expressed by the EARC CEO are serious and deserve appropriate consideration —not blind oblivion — by both the NT Local Government Minister and the Commonwealth Minister.  Unfortunately, deliberate blindness is endemic in public policy in modern Australia.