Christmas fudge: eight ways to mislead the Senate - an update on Minister Scullion, the ILC, and the treatment of Senate Estimates Committees

‘Tis an ill cook that cannot lick his own fingers

Romeo and Juliet, Act IV, scene 2

Further to my recent post (link here) on the Minister for Indigenous Affairs’ failure to comply with his statutory obligations, the Minister has now belatedly provided his response to the question taken on notice during a recent Senate Estimates hearing.

In essence, the issue relates to the reasons for the failure of the Minister to terminate an ILC Director who missed five consecutive meetings in early 2018.

Section 192H(4) of the Aboriginal and Torres Strait Islander Act 2005 (ATSI Act) states:

If an Indigenous Land Corporation Director who holds office on a part-time basis is absent, except on leave granted under section 192C, from 3 consecutive meetings of the Indigenous Land Corporation Board, the Minister must terminate the appointment of the Director.

I recommend readers re-read my original post as I will cross reference key information therein in analysing the adequacy of this response.

Here is the question and the answer submitted on 17 December and copied verbatim from the Parliament web site (link here):

Senator the Hon Kristina Keneally: asked the Department of the Prime Minister and Cabinet on 2 November 2018

During Estimates, Senator Keneally asked:

Senator KENEALLY: I want to be clear. My concern is not so much with Mr Martin's actions. It is with the actions of the minister in accordance with the act. As you have flagged, if there are particular challenges of people being able to attend meetings or being supported to do so, could you also provide advice as to what you are doing to address that. Senator Scullion: I will take that on notice. I appreciate your comments, Senator. This is about me and this is about the board and reporting on the act. I do appreciate that that is what the questions are about. I will provide a comprehensive answer to that on notice.

Can the Minister advise what steps he has taken in this matter?

Answer — The Indigenous Land Corporation Chair wrote to the Minister for Indigenous Affairs, Senator the Hon Nigel Scullion, about the absences of Mr Martin and subsequently confirmed on 31 August 2018 that Mr Martin had been granted leave of absence from these meetings.

Perhaps the easiest way to analyse this answer is to focus on how many ways it manages to mislead the Senate.

First, the Minister promised a ‘comprehensive response’. He acknowledged that the question was about his actions (or inactions), about the Board’s involvement, and about the reporting from the ILC of relevant information.  He provided his response in one sentence of 42 words, with no explanation of his role and actions, vague reporting of the ILC Board’s role and involvement, and no information on the adequacy of the reporting of relevant information in relation to the requirements of the Act. This is patently not a comprehensive response. On the basis of this response, the Minister’s statement to the Estimates Committee that he would provide a comprehensive response was patently misleading.

Second, the ILC Chair wrote to the Minister about some but not all of the relevant absences of Director Martin (see my previous post for details). The answer provided states that the Chair wrote to the Minister about the absences, but in fact he did not mention all the absences. It is misleading in this respect.

Third, the Chair of the ILC wrote twice to the Minister (see previous post for details), once on 4 May advising that the requirements of the legislation relating to termination of the Director had been met and requesting that Director Martin be terminated in accordance with the Act, and later in July reversing his position and suggesting termination was no longer required (notwithstanding the clear intent of the legislation). The Minister’s failure to outline and explain this is misleading by omission.

Fourth, the response states that the ILC Chair had confirmed in a letter dated 31 August 2018 that Director Martin had been granted leave of absence from ‘these meetings’ (ie the incomplete set of meetings). The Minister’s response omits to mention that the granting of leave of absence was retrospective, and is thus misleading by omission.

Fifth, the response fails to mention that while the ILC Chair did confirm that leave of absence had been granted, the ILC had subsequently formed the view that the Chair’s purported actions in granting retrospective leave of absence were beyond his authority, and thus of no effect (see previous post for details). The Minister should have been advised of this discovery particularly as it meant that the 31 August letter to the Minster was substantively incorrect. By the time the Estimates questions were answered, the relevant information was available on the ILC FOI log and had been the subject of an article on 14 December in the Mandarin (link here). There seems little basis for an argument that the Minister or PMC were not aware that the 31 August letter was substantively incorrect (and if they were not, they should have been), yet the Minister went ahead and used it as the basis for his lack of action in his response to the Senate. The response was thus fundamentally misleading in relying on the ILC Chair’s 31 August letter without further explanation.

Sixth, the response omits to mention that the Minister and the Chair had discussed the issue in June (refer previous post). The response not only fails to indicate the tenor and content of those discussions, but avoids any mention of the meeting notwithstanding that it was clearly a crucial element in the Minister’s consideration of the events. Given that the question explicitly refers to ‘what steps’ the minister took, the response appears to be deliberately misleading in relation to this meeting albeit by omission.

Seventh, the response omits to deal with the issue of the delay between the third consecutive missed meeting (on 9 March 2018) and the eventual effective granting of retrospective leave of absence on 1 November, a period of almost eight months. Even were we to grant the Minister the benefit of the doubt and use the purported granting of leave of absence in August as the relevant date, the delay amounts to almost six months.

Eighth, the response provides no information or any explanation for the Minister’s failure to act in a timely way to comply with his statutory obligations under the legislation. It is clearly deliberately misleading in this respect.

What might we make of all this. I focus on two general points.

The first relates to the particular issue relating to the minister’s statutory obligations, and the analysis in my previous post. The Ministers ‘explanation’ offers no alternative explanation which might cast doubt on my earlier analysis.

It leaves major questions unanswered concerning the quality of governance within the ILC under the current Chair’s tenure, the quality and accuracy of information provided to the Minister, the processes put in place by PMC to ensure the Minister is in a positon to carry out his statutory obligations under the Act, and to oversight more generally the activities and operations of a statutory corporation within his portfolio. Further, while it implicitly lays blame and attention on the information provided by the ILC, it fails to acknowledge that that information was in many respects incorrect, misleading and inaccurate, and it fails to identify what action the Minister has taken or intends to take to rectify these deficiencies in the future.

Most importantly, the response and ‘explanation’ fails to address the likelihood that the Minister played a direct role in encouraging the Chair to change his formal advice and instead request that the Minister defer action while a retrospective leave of absence for Director Martin was put in place.  Determining what transpired in relation to this issue goes to the heart of determining what has occurred here, and has significant implications for the independence of the ILC. It also raises serious questions about the capacity and preparedness of the ILC Chair and ultimately the Board to carry out their statutory responsibilities independently of Ministerial interference. All in all, the extreme parsimony of the Minister’s response only adds to the weight of suspicion that he was involved in an inappropriate plan aimed at avoiding the necessity for him to carry out his statutory duty.

The second point relates to the apparent disdain with which this Minister treats the Senate and in particular the Senate Estimates Committee. He promised a comprehensive response and delivered what amounts to a deliberately misleading fudge. He missed the key deadlines in terms of the provision of answers. And he comprehensively failed to adequately explain why it is that he failed to act in accordance with his statutory obligations.

Of course, this is an issue which goes beyond this Minister, and appears to be part of an inexorable slide in the influence of the Parliament vis a vis the Executive. It is time that the Parliament stood up to the Executive, demanded substantive accountability from Ministers. 

In particular, it is to be hoped that the Senate will refuse to accept the self-serving fudge this Minister serves up to them and in turn, to the Australian people.

Opportunities and risks: Important developments related to Closing the Gap

Last week, on 12 December, the Council of Australians Governments (COAG) met in Adelaide. The meeting was path breaking for Indigenous affairs policy insofar as it outlined a new approach to the establishment of Closing the Gap (CTG) targets by governments at all levels.

The COAG Communique (link here) said it best. COAG is:

committed to ensuring that the finalisation of targets and implementation of the Closing the Gap framework occurs through a genuine, formal partnership between the Commonwealth, state and territory governments and Indigenous Australians through their representatives…

Today, COAG issued a statement outlining a strengths based framework, which prioritises intergenerational change and the aspirations and priorities of Aboriginal and Torres Strait Islander peoples across all Australian communities. The finalisation of this framework and associated draft targets will be agreed through a formal partnership.

Governments and Aboriginal and Torres Strait Islander representatives will share ownership of, and responsibility for, a jointly agreed framework and targets and ongoing monitoring of the Closing the Gap agenda. This will include an Aboriginal and Torres Strait Islander-led three yearly comprehensive evaluation of the framework and progress.

The arrangements of the formal partnership between COAG and Aboriginal and Torres Strait Islander representation will be settled by the end of February 2019, and will include a Ministerial Council on Closing the Gap, with Ministers nominated by jurisdictions and representation from Aboriginal and Torres Strait Islander peoples. The framework and draft targets will be finalised through this Council by mid-2019, ahead of endorsement by COAG.

The establishment of a formal partnership is extremely significant for three reasons.

First because Closing the Gap represents an overarching policy process, truly national in scope and focus, the proposed Partnership will provide a guaranteed mechanism for the inclusion of Indigenous perspectives in macro-level policy planning processes at both national and state and territory levels. Second, because once established, this Partnership will likely create an opportunity for Indigenous interests to influence other phases of the policy development process, and thus represents a new avenue or pathway for greater inclusion of Indigenous voices and perspectives in policy formulation.

Of course, the degree to which these opportunities are made concrete will depend on the design parameters of the partnership (how often the parties meet, how agendas are determined, etc.), and the relative bargaining strength of the parties in undertaking the internal negotiations within the partnership. One constraint which Indigenous interests will face is that COAG processes are generally based on the achievement of consensus amongst governments, which means that any differences of views between governments will limit the capacity of Indigenous interests to prevail in persuading COAG members to take on board indigenous views and perspectives. The inclusion of an evaluation function, presumably led by the newly appointed Indigenous Commissioner on the Productivity Commission will provide a welcome source of independent oversight and scrutiny over the effectiveness of the CTG framework, and thus by implication, of the Partnership’s effectiveness.

The third reason the establishment of such a Partnership is important is that it will likely lead to the creation of a new national ‘peak of peaks’ for the representation of indigenous interests in engagement with the executive arms of governments at national, state and territory levels. I see this as a positive development, as it reflects the reality that policy development is increasingly complex and Indigenous interests will only successfully engage with governments if they utilise the research and advocacy expertise and resources available within the various peak bodies. A potential downside which Indigenous interests will need to consider and if necessary address is that the varying structures of peak bodies may effectively filter out the direct experience and views of local and regional communities. If this were to occur, it would likely flow through to the policy formulation process.

COAG also released a related COAG Statement on the Closing the Gap Refresh (link here). This document is in my view more problematic and begins to suggest just how complex the CTG process may become. I recommend it be read in full as I cannot summarise it adequately here in the space available.

The Statement begins with a recitation of previous COAG decisions, including the proposed focus on a ‘strength based approach’. The Statement then notes:

COAG has now agreed draft targets for further consultation to ensure they align with Aboriginal and Torres Strait Islander peoples and communities’ priorities and ambition as a basis for developing action plans.

The Statement then sets out sections on partnerships, outlines a vision for the future, lists the Indigenous formulated community priorities for the next ten years, and acknowledges the existence of what it terms ‘cross system priorities’ which ‘require action across multiple targets’.

The core section for present purposes relates to ‘Refreshed Targets’. The Statement notes (emphasis added):

The Commonwealth, states and territories share accountability for the refreshed Closing the Gap agenda and are jointly accountable outcomes for Aboriginal and Torres Strait Islander peoples. COAG commits to working together to improve outcomes in every priority area of the Closing the Gap Refresh.

The refreshed Closing the Gap agenda will commit to targets that all governments will be accountable to the community for achieving. …

…While overall accountability for the framework is shared, different levels of government will have lead responsibility for specific targets. The lead jurisdiction is the level of government responsible for monitoring reports against progress and initiating further action if that target is not on track, including through relevant COAG bodies.

The refreshed framework recognises that one level of government may have a greater role in policy and program delivery in relation to a particular target while another level of government may play a greater role in funding, legislative or regulatory functions. Meeting specific targets will require the collaborative efforts of the Commonwealth, states and territories, regardless of which level of government has lead responsibility. Commonwealth, state and territory actions for each target will be set out in jurisdictional action plans, and may vary between jurisdictions. COAG acknowledges that all priority areas have interdependent social, economic and health determinants that impact the achievement of outcomes and targets.

Through a co-design approach, jurisdictional action plans will be developed in genuine partnership with Aboriginal and Torres Strait Islander communities, setting out the progress that needs to be made nationally and in each jurisdiction for the targets to be met. Action plans will clearly specify what actions each level of government is accountable for, inform jurisdictional trajectories for each target and establish how all levels of government will work together and with communities, organisations and other stakeholders to achieve the targets. Starting points, past trends and local circumstances differ, so jurisdictions’ trajectories will vary and may have different end-points…

My purpose in highlighting the text above in bold is to shine a light on the likely complexity of the arrangements currently envisaged. The greater the complexity, the more difficult it will be for governments to be held accountable, and thus for an appropriate policy response to be developed.

The Statement goes on to list out 15 draft targets, seven of which are Commonwealth-led and eight state-led. I don’t propose to undertake a detailed analysis of the targets but merely note that the proposed Commonwealth-led targets are overwhelmingly to be achieved by 2028. A detailed analysis would, inter alia, form a view as to the level of inherent policy challenge in each target. To take one at random, aiming for 60 percent of Aboriginal and Torres Strait Islander people aged between 25-64 years to be employed by 2028 appears too soft. In effect, it means that we are prepared to see 40 percent of the Indigenous work force unemployed after ten years of policy focus.

A key issue embedded within the COAG approach, which was perhaps implicit or nascent within the original 2008 CTG targets, relates to their fundamental purpose. At one end of the spectrum, they might be conceptualised as an incomplete selection of key indicators which taken together represent a proxy indicator for overall performance in addressing deep disadvantage within the Indigenous domain. At the other end of the spectrum, the targets can be conceptualised as a comprehensive selection of the most important policy areas requiring attention, and thus are accepted as the areas requiring prioritisation by governments to the exclusion of other policy issues. While there is no apparent acknowledgment of this issue in current policy documentation around CTG, the current refresh appears to have shifted perceptibly towards the ‘comprehensive list of priorities ‘ end of the spectrum, and this in turn raises important questions regarding the approach of governments to those policy issues which will not be included explicitly as targets. Accordingly, going forward, there is a case for a much clearer articulation of the COAG approach in relation to whether the targets are mere proxies, or a comprehensive listing of policy priorities.

I have four specific suggestions to make regarding the proposed targets, none of which appear to be reflected in the current draft.

First, the targets need to explicitly list the current mainstream level or baseline for each target and then propose a target level for Indigenous citizens. This ensures a level of transparency in terms of the proposed targets, and makes clear how ambitious the target is designed to be.

Second, the targets (and the mainstream comparisons) need to be broken down into two components: an urban and regional component and a remote/very remote component. Only if this is done will the CTG arrangements be effective in driving policy attention to those policy issues most in need of attention. Indeed, without such an approach, it is likely that the CTG process will actually facilitate and encourage policy aimed at ignoring remote citizens since the majority of the targets will be able to be met by focussing mainstream programs on the four fifths of the Indigenous population who reside in urban and regional Australia. Urban and regional indigenous populations have legitimate needs, but it would be a serious mistake to establish a CTG system that allowed targets to be ‘met’ while effectively ignoring the needs of remote citizens.

Third, each target needs to be separately broken down by jurisdiction so that it is clear what the current relevant mainstream, urban/regional and remote/very remote data are in each jurisdiction.

Fourth, given the imperative of designing a system which is both sophisticated, workable, and not overly influenced by political positioning between the Commonwealth and the states, I propose the Productivity Commission be tasked with developing a second set of Draft Targets, which would then form the basis for co-design discussions between Indigenous interests and COAG.

I see three enormous flaws that permeate the current CTG Refresh proposals and targets.

The first serious flaw I see with the current proposals is that the whole process will inevitably become bogged down in a complex and incomprehensible array of separate reports from eight jurisdictions, with differing formats, different action plans, and effectively no accountability. The result will be an absence of effective political accountability since when everyone shares responsibility and accountability, no jurisdiction will accept responsibility for poor progress.  While we live in a federal system with shared responsibilities and the potential for differing policy approaches, and under a constitution which provides for concurrent powers on Indigenous issues between the Commonwealth and the states, in political and policy terms, the Commonwealth is primus inter pares. The current proposals seek to avoid or fudge that reality and instead reflect the current Government’s determination to shift as much political and policy responsibility for Indigenous policy failure by government to the states and territories. This is an abdication of the Commonwealth’s longstanding role in Indigenous affairs, and is being undertaken without any open and up-front discussion of the Government’s policy intentions.

A second fundamental problem with the current proposals is that they do not address one of the core shortcomings of the original 2008 CTG targets. Namely, there is no attempt to square the circle, and ensure that Governments allocate adequate financial resources to meeting the identified targets.

A third and related flaw with the CTG process is that targets are set which are partial and lack ambition. This then becomes a circular process, where resources are not required because the targets are not ambitious. The inevitable result is that the CTG process becomes more rhetorical than substantive

We need to acknowledge the reality: this is a strategy in name only. It sets targets, it makes ‘commitments’, but it offers no guarantee that the financial and other resources required for effective implementation will be available. In fact, the emphasis on ‘sharing’ accountability with the states and the territories just magnifies this issue, as it allows the national government to lay blame for missed targets on the states and territories, and shifts any arguments about lack of financial commitment to a lower jurisdiction. If this were a serious strategy, COAG would allocate resources to implement targets directed to entirely removing the relevant gaps in socials indicators, and then decide what can be achieved with the available funds.

In my view, this refresh proposal is on a slow but inevitable road to failure. It is fundamentally dishonest because it is presented as a strategy for achieving a policy end (closing the gap) whereas it is primarily a mechanism to persuade the Australian public that governments are addressing issues of Indigenous disadvantage. This is poor policy because it raises expectations amongst Indigenous interests that are ultimately bound to be dashed, with unknown consequences for future social cohesion. In particular, it seeks to ‘partner with’, and thus implicate Indigenous interests in a process which is, on present indications, destined to fail. It suggests to the community at large that governments are actively and effectively addressing the challenges of Indigenous disadvantage when they are not, and it thus has the effect of increasing complacency in the community at large as to the nature of the challenges facing both Indigenous people and the nation as a whole (this was one theme in my submission to the CTG refresh process, published here). We deserve better from our governments.

I began by pointing to the positive developments inherent in the formal partnership proposals for Indigenous interests. Indigenous peak bodies have welcomed the new approach (link here to NACCHO’s media release). The risk that NACCHO and the other Indigenous peak bodies face is that in ten years’ time, the refreshed CTG process will not have overcome the deep-seated and informal structural exclusion of Indigenous interests in Australia and the consequential deep-seated disadvantage that permeates many Indigenous lives. The Indigenous peaks will need to step very carefully in terms of their engagement and ‘partnership’ with Australia’s governments.

The CTG process has potential, it can be made to work with the allocation of adequate financial and human resources by government, and technically proficient design of the targets, but it can also be the complex and extremely technical façade behind which governments hide as they pursue other more pressing national priorities.

The most important contribution that Indigenous interests can bring to the co-design of the CTG process is a two-fold insistence that COAG and its constituent governments focus on the underlying systemic and structural factors driving Indigenous disadvantage, and commit real financial and human resources to the complete elimination of Indigenous disadvantage. A good first step in fleshing out these fundamental pre-requisites would be for the Indigenous peak bodies and COAG to agree to an upfront Productivity Commission review outlining the scale of the challenge and the potential policy pathways which might be chosen to go forward in devising an effective policy strategy to substantively close the gap. Laying out such a policy baseline is the best strategy available to reduce the current extreme risk of failure.

Are statutory obligations optional for ministers: the Minister for Indigenous Affairs and the Indigenous Land Corporation.

                                                                        The laws are mine, not thine

                                                                        Who can arraign me for’t  ?

                                                                        King Lear, Act 5, 3.                       

Trust in our institutions, including the rule of law, is widely viewed as being in serious decline (link here). The causes are complex, and the implications for democracy and for the integrity of public policy are serious. The Indigenous affairs policy domain is not immune from these wider societal trends and forces.

As a community, we have two broad choices: to bury our heads in the sand, and watch as a slow motion disaster unfolds. Or to seek to engage when we see issues, call them out, and require our public institutions to account for their actions.

At the Senate Estimates Hearing on 26 October 2018, the issue of Minister Scullion’s compliance with his legislative responsibilities under the Aboriginal and Torres Strait Islander Act 2005 (ATSI Act) was raised by Labor Senator Keneally (link here; pages 19-20).

Section 192H(4) of the ATSI Act, states:

If an Indigenous Land Corporation Director who holds office on a part-time basis is absent, except on leave granted under section 192C, from 3 consecutive meetings of the Indigenous Land Corporation Board, the Minister must terminate the appointment of the Director.

The ILC Annual Report (link here page 57) had indicated that one Director, Mr Bruce Martin, had missed five consecutive meetings without leave of absence over a period of three months and over the course of the year had missed 8 out of 12 meetings of the Board in all. The discussion in the Estimates Committee was, as is often the case, somewhat confused and at cross-purposes. The Minister, after apologising to Senator Dodson for providing him with unspecified inaccurate information before the hearing, first suggested that the reasons for Mr Martin’s non-attendance related to ‘cultural and business responsibilities’, then shifted to arguing the exigencies of remoteness and communications were the issue. Then he shifted to a slightly different argument:

There was a short period of time in which this individual was unable to attend the meetings. These were not anticipated. At each occasion, some unanticipated things happened…

He went on to state:

It was understood that a leave of absence wasn't granted before the meeting because he wasn't able to communicate that he wasn't going to be there at the meeting. When the extenuating circumstances were provided to the chair, he understood that leave should have been granted should he have known beforehand. In any event, we'll take that on notice.

In response, the following exchange occurred:

Senator Keneally: I want to be clear. My concern is not so much with Mr Martin's actions. It is with the actions of the minister in accordance with the act. As you have flagged, if there are particular challenges of people being able to attend meetings or being supported to do so, could you also provide advice as to what you are doing to address that.

Senator Scullion: I will take that on notice. I appreciate your comments, Senator. This is about me and this is about the board and reporting on the act. I do appreciate that that is what the questions are about. I will provide a comprehensive answer to that on notice.

As of today, the Minister’s promised answer is not on the Senate Estimates Committee website, and is, along with scores of other unanswered questions, listed as overdue. In the light of the information below, it is to be hoped that the Minister’s answer is comprehensive and detailed.

Following the Senate Estimates discussion, a Freedom of Information request was lodged with the ILC for documents related to these issues, and this week a cache of relevant documents was posted on the ILC FOI log (link here). These documents raise numerous issues of concern, not all of which are dealt with here. In particular, they confirm that for an extended period of almost eight months the minister failed to comply with his legislative responsibilities under the ATSI Act. The Minister’s obligation was only resolved when the ILC Board retrospectively granted Director Martin leave of absence on 1 November 2018.The documents also raise an array of serious questions regarding the governance of the ILC.

Like Senator Keneally, I do not wish to raise concerns regarding Mr Martin’s actions, as I do not have adequate information to make an informed assessment. Notwithstanding multiple references to ‘extenuating circumstances’, nowhere do the documents which include formal advice to the ILC Board and to the Minister make clear what exactly those circumstances were.

The following discussion is based on the documents released under FOI. References to item numbers are to documents published on the ILC FOI log.

The released documents outline a rather different sequence of events to the narrative portrayed at the Estimates Committee hearing. Director Martin missed Board meetings #220 on 1 February 2018; #221 on 21 February 2018; #222 on 9 March 2018; #223 on 18 April 2018; and #224 on 11 May 2018.

On 17 March, the ILC CEO advised the Chair that Director Martin had missed three consecutive meetings [item 14]. On 18 April, the ILC Board removed Director Martin as Chair/Director of AIA, an ILC subsidiary (a remunerated position) [item 13]. On 23 April, the Chair wrote to Director Martin giving him the option of resigning to ‘avoid the Minister actually taking the step of terminating your appointment’ [item 16]. The Chair received no response.

On 4 May 2018, (seven weeks after Director Martin missed his third consecutive meeting), the Chair wrote to Minister Scullion indicating that Director Martin had been absent from three consecutive Board meetings without written leave of absence and noting ‘his appointment should now be terminated’ [item 19]. This letter was misleading in that it only mentioned three meetings whereas Martin had now missed four consecutive meetings. The letter also listed the first, second and fourth meetings (#220, #221, and #223), but referred to them as consecutive meetings.

There was no formal response from the Minister to this advice.

On 3 July 2018, unbeknown to other ILC Board members and ILC management [item 40; item 58], the ILC Chair wrote again to the Minister, but abruptly reversing his position in relation to Director Martin [item 21]. He wrote inter alia:

I wrote to you on 04 May 2018 requesting the termination of ILC Director Bruce Martin, who was absent from three consecutive Board meetings without leave granted. With consideration for the Board achieving the best possible outcomes going forward, I would like to rescind this request and I seek to retain Director Martin as a part-time Director.

As discussed when we met in Adelaide on 14 June 2018, the personal extenuating factors which led to the absence of Director Martin now allow him to return to his position and carry our his full duties on the Board…

This letter reeks of a political stitch up. It continues to refer to three missed meetings whereas by this point, Martin had missed five consecutive meetings. Its tone is one of a request from the chair of a statutory corporation for a discretionary decision from a minister, rather than reflecting the mandatory obligation on the minister. Most revealing of all is the reference to the meeting of 14 June between the Minister and the Chair where the issue was discussed. There are two possibilities.

The less likely possibility is that the Chair unilaterally, and without consultation with his Board, changed his mind. There is nothing in the documentary record which provides any rationale for such a change of mind. If this scenario was the case, the Chair could and should have convened a Board meeting and argued for a Board decision to grant Director Martin retrospective leave of absence for his missed meetings, and then advised the (very tardy – two months tardy!) Minister that termination was no longer appropriate. Instead, he secretly wrote to the Minister, and sought to have the termination process stopped. The Minister’s response (see below) acknowledging the requirements of section 192H(4) of the ATSI Act, and seeking confirmation that leave of absence had been granted, and the Chair’s further letter to the Minister were also withheld from the Board and management.

The more likely scenario, however, is that the Minister, acting either on his own, or in response to a communication from Director Martin (who the Government had previously appointed to the Prime Minister’s Advisory Council), sought to avoid terminating Director Martin as was required by section 192H(4) and instead arranged with the Chair for the provision to Director Martin of retrospective leave of absence and a letter rescinding his earlier notification of missed meetings to provide cover for the minister’s non-decision. This scenario is supported by the obsequious tone of the Chair’s 3 July letter which resorts to banality (‘I seek to retain Director Martin as a key Indigenous refreshed participant for the future success of the Board…’) and the weight put on the 14 June meeting with the Minister. Moreover, the obsequious tone continues in the subsequent 31 August letter (see below) which thanks the Minister for the opportunity to retain Mr Martin as an ILC Director, and which includes a further paragraph which only now relays a firsthand discussion between the Chair and Director Martin, and which contrasts with the vague wording of the 3 July letter which links the resolution of the ‘extenuating circumstances’ to the discussion on 14 June, and not to any firsthand discussion between the Chair and Director Martin.

Either scenario is problematic. If it was the first scenario, the Minister was misled as to the number and the dates of the relevant meetings, and the ILC Board was kept out of the loop. Hardly good governance. If it was the second, the Minister was effectively engaged in a collusive process explicitly designed to subvert his clear statutory obligation to terminate Director Martin.

On 20 August, the Minister wrote to the ILC Chair [item 25], ignoring the letter of 4 May:

Thank you for your letter of 3 July 2018 about Mr Bruce Martin continuing as a Director of the Indigenous Land Corporation.

I note your advice that Mr Martin was absent from three consecutive Board meetings due to extenuating personal factors and that he is now able to carry out his full duties as a Director. I would appreciate clarification in writing form you confirming if Mr Martin has been granted leave of absence for the period he was away due to extenuating personal circumstances. [The letter went on to mention the Board’s powers to grant leave of absence and the requirement to terminate a Director who is absent from three consecutive meetings without approved leave of absence].

On 31 August 2018, the ILC Chair replied [item 26], continuing to refer misleadingly to the three meetings, and confusing the dates (again), and stated:

I write to confirm to you, that I have written to Mr Martin, on behalf of the ILC Board, to grant him leave of absence from these Board meetings, due to extenuating personal circumstances.

On the same date, the Chair wrote to Director Martin [item 27] purporting to grant leave for the three missed meetings. Again, these letters were drafted and sent without input from ILC management. Nor was there consultation with, or provision of copies to the ILC Board.  

Following the discussion in Estimates, and an article in The Mandarin (link here), a flurry of activity broke out within ILC and PMC management. A subsidiary issue, which I have not focused on, related to the ILC Annual Report, and its accuracy. During this process, it became apparent to ILC management, following queries from PMC officers, that the Chair did not have a delegation from the Board to unilaterally grant retrospective leave of absence to Directors who did not notify him in advance [item 48]. The consequence was that the Chair’s letter of 31 August to Director Martin purporting to grant leave of absence was beyond power, and consequently the Chair’s ‘confirmation’ to the Minister that leave of absence had been granted was substantively incorrect. It was then decided to convene a Board meeting to formally grant Director Martin retrospective leave of absence, to address the uncertainties around the Annual Report, and in particular to fix the defective efforts by the Chair to grant leave of absence. The final Board paper [item 65] hedges around the defective attempt by the Chair to grant retrospective leave of absence to Director Martin, and somewhat disingenuously references a Board meeting in February 2018 where an in camera session discussed Director Martin’s poor attendance, but no outcomes were recorded. The Board paper goes on to state:

Considering the scrutiny that this has already attracted from the Senate Standing Committee [sic], it is prudent for the ILC to take a very conservative approach to the issue and obtain a clearly recorded Board decision to retrospectively approve Director Martin’s absences from the meetings.

The problem with this too clever by half formulation is that there is absolutely no evidence that the Board delegated to the Chair the power to grant leave of absence during the in camera session, and nor does it square with the Chair’s 4 May letter to the minister advising him to terminate Director Martin.

The Board paper recommended that the Board:

Retrospectively approve Director Martin’s absence from ILC Board meetings 220, 221 and 223 dated 1 February, 21 February and 18 April 2018.

The Board paper also dealt with the Annual report issue by proposing the insertion of a footnote into the 2017/18 Annual Report on the ILC website clarifying the situation. The footnote will state:

The ILC Board approved leave of absence for Director Martin (meetings 220, 221 and 223) in the 2018/19 financial year. Retrospective leave of absence was granted pursuant to s192C of the ATSI Act.

There are a range of issues with the Board Paper and the recommendations.

Nowhere does the Board paper deal with or bring to Directors’ attention the fact that the Minister was misled in various respects by the Chair’s secret correspondence, and nor does it propose any action to address or remedy that. The proposal to grant leave of absence for only three non-consecutive meetings (which reflect the original error in the Chair’s correspondence and which were then listed in the Minister’s reply does not align in any logical way with the ostensible reason for granting Director Martin the retrospective leave of absence, namely the so called ‘extenuating circumstances’. It is as if ILC management (perhaps under the direction of the Chair) are focussed solely on relieving the Minister of his statutory obligation rather than addressing Director Martin’s ‘exceptional circumstances’ (whatever they were). 

The issue with the recommendation in relation to the Annual Report is that it ignores the fact that Annual Reports are provided to the Minister for tabling in Parliament, and this has already occurred. Any change to the Annual Report (even to add a footnote) should therefore mean that the revised document is tabled in Parliament. As of today, the Annual Report does not appear to have had a footnote added to the relevant table.

The Board meeting on Thursday 1 November 2018 approved both recommendations [item 70]. The various versions of the draft minutes are edifying to read, and include a number of rather self-absorbed statements by the Board, and an apparent complete absence of appreciation that the Board has a responsibility to account for its actions. In an email from one Board member who could not attend the meeting and which was circulated to five Board members [item 58], he listed the various instances where the Chair had acted unilaterally without Board involvement, but makes no criticism of the Chair, and suggests no remedial actions. Nor do the draft minutes indicate that Board members expressed any concern at the actions of the Chair. Indeed, the response of the Board, presumably influenced by the views of the Chair, was to suggest that the Chair should have greater power to act unilaterally. One paragraph states:

The lesson learnt from this are that the 2013 resolution [on delegations relating to leave of absence] need to be changed to give greater flexibility to the Chair to deal with exceptional circumstances…

This led to two actions being identified: one to provide the Chair with greater flexibility to approve retrospective leave of absence; another to seek an amendment to the legislation to give the Minister ‘flexibility to decide not to terminate the appointment of an ILC Director if they have missed three consecutive meetings without leave in exceptional circumstances’, notwithstanding that the Minster had explicitly rejected this in his comments to the Senate Estimates Committee. It seems clear that the Board’s underlying focus was squarely on addressing the problem facing the Minister and not substantively on the issue of providing retrospective leave of absence to Director Martin on its merits.

To an outside observer, this seems extraordinary, and raises substantial questions regarding the underlying purpose of the Board’s decision making and its capability to adequately fulfill its statutory responsibilities.

To sum up, what are the implications of this sorry tale.

In relation to the Minister, the documents demonstrate that he comprehensively failed to meet his statutory obligation to terminate Director Martin. Director Martin missed his third consecutive meeting on 9 March 2018. The Minister was only advised formally on 4 May 2018. Effective retrospective leave of absence was only granted on 1 November 2018, almost 8 months later. During this whole period, the Minister took no action to fulfill his statutory responsibilities, and relied for only part of that period on the inaccurate information provided by the ILC Chair that leave of absence had been retrospectively granted as of 31 August. Second, there is strong circumstantial evidence that the Minister actively sought to engineer a situation which would allow him to avoid terminating Director Martin, as he was legally obliged to do. The secrecy surrounding the outcomes of the meeting of 14 June, his reluctance to advise the Senate that he had sought and received confirmation of the (ineffective) retrospective granting of leave of absence, his mysterious inaccurate advice to Senator Dodson prior to Senate Estimates (for which he apologised in the transcript) and his shifting explanations of the ‘exceptional circumstances’ all point to an effort to hide or disguise his involvement in this process.

In relation to the Chair and Directors of the ILC, the documents demonstrate deep-seated governance issues within the ILC. In particular, the failure to inform the Minister in a timely way in relation to Director Martin’s three consecutive absences, and the repeated failure to accurately inform the Minister, arguably in contravention of their responsibilities under section 19 of the PGPA Act 2013, as those absences accumulated. The Chair’s preparedness to act unilaterally without informing his co-Directors and management, contributed to the provision of misleading advice, which taints the reputations of all Board members.

In particular, the Chair’s secret 180 degree turn following his meeting with the Minister raises the possibility that there was some ulterior motivation involved. If such an ulterior motivation came from the Minister, the Chair’s actions in facilitating it would effectively involve the ILC in assisting the Minister in avoiding his statutory obligations. Such assistance would amount to an improper purpose, and would fundamentally infect the granting of the retrospective leave of absence on 1 November. 

In these circumstances, the apparent failure of Board members to hold the Chair to account is deeply problematic, and reflects a fundamental absence of core corporate governance capabilities. While the reticence to take action probably reflects their perception that a strong relationship exists between the Minister and the Chair, it clearly opens up the possibility of poor governance, and as in this case outcomes, which are not consistent with the expectations of the Parliament as reflected in the ATSI legislation. In a worst case circumstance, a mode of operation where the Chair operates without effective Board oversight increases substantially the potential risks of fraud or corruption. It seems highly unlikely that the ILC’s risk management plans and fraud control frameworks (as outlined on page 61 of the most recent Annual Report link here) canvass these types of risks.

Of course, the Minister appoints the Chair and the directors, and has legislated powers to oversight (but not interfere) in the operations of what is an independent statutory corporation. While the Chair and Directors may be primarily responsible for poor governance outcomes within the ILC, the Minister cannot evade responsibility either, particularly insofar as he appoints the Chair and has various regulatory oversight powers.

I began this post by pointing the loss of trust in our institutions. Citizens are normally expected to comply with the laws of the land. When a Minister of the Crown who is responsible for the operation of a particular law fails to comply with a clear statutory obligation in that law, loss of trust is magnified. And if a Minister actively seeks to influence a theoretically independent statutory corporation to retrospectively remove the conditions that require the Minister’s statutory compliance, and is not required to explain his actions, then loss of institutional trust will be even greater.

While the circumstances outlined above may appear to be quite narrow and technical, they provide a window into the mode of operation of the current Minister for Indigenous Affairs in relation to the portfolio bodies for which he is responsible. They also point to the risks which emanate from excessive politicisation of Boards of statutory entities, and the shallow regulatory oversight applied to Commonwealth statutory corporations. The issues involved are hugely significant particularly for the potential beneficiaries of the statutory bodies. In the ILC’s case, it has a highly important compensatory role emanating from the recognition that the recognition by the Parliament that the Mabo High Court decision would not address the needs of those Indigenous citizens whose native title rights had been extinguished by the Crown without compensation.

Indigenous citizens deserve an ILC which is operating according to the highest standards of corporate governance and without inappropriate interference by ministers.

Ministers need to accept that Australian laws ‘are thine, not mine’. If Ministers are not prepared to accept that they too are bound by the laws of the land, they do not deserve to remain in their privileged positions.

Declaration of interest: I was formerly the Chief Executive Officer of the ILC from 2013 to 2015

Mingled Yarn: A New Indigenous Land and Sea Future Fund

'The web of our life is of a mingled yarn, good and ill together.'

All's Well That Ends Well, Act 4, Scene 3. 

On 28 November 2018, the Parliament passed three Bills related to the remit of the Indigenous Land Corporation (ILC). In particular, the ILC’s functions were expanded to allow it to purchase interests in and over waters and seas, the funding arrangements for the Aboriginal and Torres Strait Islander Land Account were amended to provide for its funds to be managed and invested by the Future Fund Guardians under expanded investment parameters, and the names of the ILC and the Land Account were amended to reflect these changes.

The ILC Chair’s media release (link here) states, inter alia:

Mr Fry said the corporation would be renamed the Indigenous Land and Sea Corporation (ILSC), that will come into effect mid 2019…

…“Our expanded operations will now enable us to invest in water-based projects in partnership with Indigenous groups, which could include purchase of commercial fishing licences or allocations in water markets…

…Mr Fry said the three Bills passed today would also broaden the ILC’s main source of income through the establishment of the Aboriginal and Torres Strait Islander Land and Sea Future Fund, replacing the Land Account.

“In recent years returns from Land Account investments, restricted by legislation, had been insufficient to maintain its capital base while providing a fixed annual allocation to support the ILC’s land acquisition and land management functions,” Mr Fry said.

“This reform will enable the new Aboriginal and Torres Strait Islander Land and Sea Future Fund to be invested by the Future Fund Board of Guardians, increasing its returns and allowing funds held in perpetuity for Indigenous Australians to grow in line with mainstream long-term investments managed by the Future Fund.

Minister Scullion’s media release states, inter alia:

The ILC, and the Land Account which funds the ILC, hold an important place in Australia’s land rights movement. Established following the High Court’s Mabo decision, these institutions serve to enable Indigenous Australians who are unable to assert native title to regain control of their land.

Despite this, the Land Account has been plagued with low rates of return, jeopardising the financial security of the ILC and meaning lost opportunities for the Indigenous estate.

The Aboriginal and Torres Strait Islander Land and Sea Future Fund Bill 2018 replaces the Land Account with a new Land and Sea Future Fund to better support the ILC to grow the Indigenous estate over the long-term. Land Account assets will be transferred to the new Fund.

The changes are incorporated into amendments to the Aboriginal and Torres Strait Islander Act 2005, and in a new Aboriginal and Torres Strait Islander Future Fund Act 2018. The relevant Explanatory memorandums for the two substantive Bills are available on the APH website (link here and link here).

The core rationale for the changes was the narrow investment parameters included in the original 1995 legislation at the Department of Finance’s insistence. There is no doubt that Indigenous interests have been severely disadvantaged by that short-sighted and excessively risk averse policy decision. While it is commendable that the Government has agreed broaden the investment parameters, it is arguable five years too as the era of high interest rates has long gone, and the Government refused to consider a 2014 Greens Bill which addressed both these issues, and was based on a Bill prepared by the then ILC Board. Contrary to the (different) rationales provided by the Minister and the Chair, the reason there is a need to fix the funding formula is that the ILC receives all real returns above inflation, which means that the Land Account could never grow in real terms. The ILC was never in jeopardy from the formula, although it did receive less than optimal returns due to the narrow Land Fund investment parameters.

There are however a number of more fundamental criticisms which arise from the legislative changes enacted. Most fundamentally, and as I pointed out in an earlier post (link here), the changes reinforce the trend of substantially increased ministerial control over the land fund, and thus weaken its independence as a capital fund dedicated to indigenous purposes. While the legislation ostensibly provides for this, its formal status as a special account within the Commonwealth and the explicit control of ministers in approving and determining drawdowns weaken Indigenous control, and thus self-determination. As an aside, this analysis is entirely missed by the pro-forma analysis of compliance with human rights obligations included within the Explanatory Memorandums.

Secondly, despite all the rhetoric, there is no attempt to assess the adequacy of the funds in the Land Account, and consequently no effort to add to the capital base. The two arguments for doing so are first, that the Commonwealth had a fiduciary obligation to ensure that the funds invested in the Land Account earned a reasonable return, and patently failed to meet this obligation. Second, it is now much more apparent that the extent of extinguishment is much more extensive than might have been imagined in 1995 when the Native Title Act was passed, and in particular, the 1998 Wik amendments further constrained the extent of native title.

Over and above these technicalities, there is a social justice argument for adequate compensation for the extensive dispossession of indigenous people since colonisation. The adequacy of the initial allocation of $1.2bn to the Land Account has never been revised or reconsidered, and it is time that governments turned their focus to this issue. The rhetorical suggestion of the Government originally floated by then Prime Minister Turnbull and repeated more recently by the Australian Financial Review (link here) that the changed investment parameters will leave Indigenous interests $1.5bn better off over 20 years are political spin pure and simple. The Government has provided no calculations to back this claim up, and the flexibility in the legislation which allows Ministers to draw down funds means that there is no absolute guarantee that the fund will even retain its current value over the next twenty years.

While the changes legislated apparently with unanimous support of the Opposition and the Greens include some very positive elements, they also contain elements which could severely disadvantage Indigenous interests into the future. These are not ‘landmark reforms’, and nor is it a ‘new era’ and a ‘historic day for Aboriginal and Torres Strait Islander Australians’. Instead of fundamental reform, we have patchwork upon patchwork, creating a very mingled yarn indeed.

While it is important that the Aboriginal and Torres Strait Islander Land and Sea Future Fund continues to grow over the medium and long term, the crucial element in the structure is the effectiveness of the ILC in utilising and investing the funds which are drawn down. This requires high levels of governance, administrative competence and efficiency and each of these characteristics will be more likely to emerge and be sustained if there is a robust regulatory oversight framework. Under current arrangements, it is the Minister who is responsible for maintaining that framework.

At present, there are a range of issues which suggest that the ILC is operating sub-optimally in terms of its governance and administrative competence, and this raises serious questions regarding the quality of the outcomes being delivered to Indigenous Australians. This however is an issue for another day.