Here
are a few of the unpleasant’st words
That ever blotted paper.
Merchant
of Venice Act 3, scene 2.
There are four land councils established in the NT under
the Aboriginal Land Rights (Northern Territory)
Act 1976 (ALRA): the Tiwi Land Council (TLC), the Northern Land Council (NLC),
the Central Land Council (CLC), and the Anindilyakwa Land Council (ALC).
In the last fortnight, the ANAO has published two important
audit reports on the smaller two land councils, the TLC (link
here) and the ALC (link
here). Land Councils are Commonwealth statutory corporations albeit with a
range of unique elements relating to the appointment of members, their funding,
and their linkages with other Indigenous institutions in the Northern
Territory. They are also native title representative bodies under the NTA. Over
and above their narrow legislative roles, they have developed into important Indigenous
institutions in both the NT and nationally.
The ANAO notes that the rationale for these audits is provide
independent assurance to Parliament that the Land Councils’ governance
arrangements are effective in meeting legislative obligations under the ALRA,
the Native Title Act 1993 (NTA) and the
Public Governance, Performance and
Accountability Act 2013 (PGPA Act). The ANAO has indicated that an audit of
the CLC will shortly be published and an audit of the NLC is expected to be
published in a couple of months.
I don’t have the space here to provide a comprehensive
summary of each of these reports, and will instead cherry pick a small number
of issues that appear to me to have significant governance implications both
for the individual land councils and the broader institutional framework they operate
under.
The ANAO is to be congratulated on the quality and
accessibility of its analysis given the innate complexity of these institutions,
including their cross cultural responsibilities. Nevertheless, as I have previously
noted on this blog, the ANAO has a propensity to cloak its findings in heavily
qualified bureaucratic prose and extreme understatement. The result is that an
ANAO report reads like a novel written in a foreign language. Those proficient
in bureaucratese know exactly what is being said while those unfamiliar with
the language (eg in the media and the general public) are left largely untroubled
and unaware of the significance of what has been said.
Tiwi
Land Council Audit
The ANAO headline findings for the TLC were:
The
Tiwi Land Council's (TLC) governance arrangements under the ALRA and the PGPA
Act are partly effective….The TLC’s arrangements to promote the proper use and
management of resources under the PGPA Act are largely inappropriate. (page
5).
The ANAO notes that in 2021-22the TLC budget was $4.3m, and
it distributed $5.9m in land use payments to Traditional owners (TOs). These
are not particularly large amounts, but will add to around $100m over the span
of a decade.
In para 2.9, the ANAO noted that its analysis of Management
Committee and Council meeting minutes identified multiple instances where the
Management Committee made decisions without delegation between 2008 and 2020.
A core statutory function
of the land councils is to consult Traditional owners and ascertain their
consent to proposed activities on their land. The ANAO identified significant
shortfalls in the TLC’s approach to exercising this function:
3.64
The ALRA determines that, in carrying out its functions, a Land Council shall
have regard to the interests of, and shall consult with, the Traditional
Aboriginal Owners of the land in its area and any other Aboriginal people
interested in the land. The ALRA further specifies that a Land Council shall
not take any action unless it is satisfied that: •the Traditional Owners of
that land understand the nature and purpose of the proposed action and, as a
group, consent to it; and •any Aboriginal community or group that may be
affected by the proposed action has been consulted and has had adequate
opportunity to express its view to the Land Council…
…3.66
The TLC subcontracts the organisation
and conduct of the clan meetings to Tiwi Resources, an Aboriginal corporation
owned by the eight clans. The TLC presents at these meetings, however does not
take minutes, and does not request the minutes from Tiwi Resources. The TLC was
unable to provide information to the ANAO about the discussions or decisions
made at clan meetings and cannot demonstrate it has conducted effective clan
consultations.
In the summary at the start of Chapter Four, the ANAO note
(page 51):
The
TLC’s arrangements to promote the proper use and management of resources are
largely inappropriate. The TLC’s policy framework and
arrangements for risk management, fraud control and managing conflicts of
interest are incomplete, not appropriately established, and inconsistently
implemented. The TLC’s corporate plan and annual report, including performance
statements, are not fully consistent with legislative requirements.
Finally, in what I took to be a damning indictment of the
level of engagement of the National Indigenous Australians Agency, the ANAO
laid out the functions of the NIAA set out in the formal order which established
it (see para.2.26), which includes roles ‘to lead and coordinate policy Commonwealth
policy development’ and to ‘build and maintain effective partnerships…’, and then
noted (in para 2.27) the NIAA’s advice of its perception of its role in
relation to the NT Land Councils which adopted a much more passive approach. Then
to ram home the point, in para 2.28, the ANAO stated without further comment:
2.28
As part of this audit, the ANAO approached the NIAA regarding a potential
recommendation to the NIAA to support the Tiwi Land Council to develop
appropriate delegation instruments. The NIAA responded that ‘This is a matter
for the Tiwi Land Council’.
Anindilyakwa
Land Council Audit
The ANAO headline findings for the ALC were:
The
ALC’s governance arrangements under the ALRA and PGPA Act are partly effective ….
The ALC’s arrangements to promote the proper use and management of resources under
the PGPA Act are partly appropriate (page 6).
The ANAO notes that in 2021-22 the ALC budget was $7.4m,
and it distributed $70.2m in land use payments to traditional owners (TOs).
These are substantial amounts appropriated for Aboriginal benefit, and will add
to around $770m over the span of a decade.
Notwithstanding this rather anodyne description, I was quite
astonished to read the detailed analysis contained in the ANAO audit. While the
audit focusses on a single organisation, the ALC, it necessarily describes a
network of parallel organisations with interlocked directors, and senior staff,
and a complex web of financial flows between them. Yet the financial books of
the parallel organisations (and their commercial subsidiaries) are beyond the ANAO
remit, leaving the readers to ponder the implications of a series of questionable
arrangements and decisions taken within the ALC.
The high level conclusions of the ANAO are outlined at
pages 8 to 10, followed by a series of technical recommendations. The following
extracts pick out some of the more salient high level conclusions:
17.
…. Key interests held by the CEO and Council members (including the Chair) in
corporations that receive funding based on decisions of the Council, are not consistently declared and are
ineffectively managed. (See paragraphs 4.19 to 4.51)…
18….The
2021-22 Annual Report was not published as at March 2023. Although the draft
2021–22 Annual Report mostly complies with PGPA Act and Rule and ALRA
requirements, it lacks transparency in relation to operations.
19.
The Audit Committee does not provide
adequate oversight and scrutiny of the ALC’s operations. The Audit
Committee is not independent from management and is not effective in the
delivery of some of its key mandatory functions under the PGPA Act. It does not
appropriately review the ALC’s performance reporting; system of risk oversight
and management; and system of internal control. The Audit Committee secretariat
is not effective. (See paragraphs 4.64 to 4.85)
The issue of conflicts of interest is at the core of this
audit. In plain English, a conflict of interest opens the way for those
conflicted to accrue inappropriate financial benefits. The ANAO has identified
no instances where that has occurred, however its remit is limited to the ALC
and it has not examined the financial affairs of the various parallel and
subsidiary organisations. Figure 4.1 on page 68 provides a useful summary of
the complex relationships involved. The key must read paragraphs are 4.45 to
4.50.
Some extracts:
4.32
The CEO’s declaration identified an interest arising from the ALC’s employment
of his spouse (who was first employed by the ALC in 2014). The ‘notes’ section
of the declaration was left blank, and no management plan was included in the
register or elsewhere. The CEO had not made a written declaration of the
interest prior to 2022...
4.47
The involvement of the ALC Chair, CEO and CEO’s spouse in organisations that,
in 2021–22, received the majority of royalty equivalents and that, in 2020–21
and 2021–22, received the majority of NT Indigenous Economic Stimulus Package
funds, creates a risk of conflicted
interests….
4.48
In Council funding decisions, the ANAO observed disproportionate benefit to the entities with which the CEO is
associated. During the two 2022 Finance Committee meetings (at which the ALC
CEO was present), 112 requests for funding valued at $109.1 million were
reviewed… In summary, requests submitted by the ALC CEO represented 24 per cent
of funding applied for, and 36 per cent of approved funding; and the success
rate for requests submitted by the ALC CEO was 99 per cent by value, compared
to a success rate for the other applicants of 53 per cent by value.
4.50
Given the influence of the Chair and CEO over the ALC’s funding and management
decisions; the financial benefit that AAAC, GHAC and consequently Winchelsea
Mining obtain from the ALC; and the ALC Chair’s, CEO’s and CEO’s spouse’s
positions in GHAC and Winchelsea Mining; the
risk of conflicts of interest is high. The current management strategies
applied to this risk are either insufficient or not implemented.
The ANAO analysis of the ALC Audit Committee is also eye
watering. The ANAO identifies that the ‘independent chair’ costs nine times more
than other land councils expend on their audit committee chairs (para. 4.73),
and is engaged by the parallel organisations that are also effectively
controlled by the CEO and ALC Directors.
The ANAO identified several significant issues in relation
to the independence of the Audit Committee Chair (para. 4.70):
•
The Chair of the Audit Committee is the founding director of Enmark Pty Ltd
(Enmark). Between 2014–15 and 2021–22 the ALC paid $896,056 in fees to Enmark
for services. Between 2017–18 and 2021–22 Enmark was one of the top three
consultants by value engaged by the ALC.
•
Enmark provides consultancy and other services to several Aboriginal
corporations receiving royalty equivalent funding from the ALC. This includes
GHAC and AAAC. The ANAO identified
numerous deficiencies in the approach of the Audit Committee to its responsibilities.
One further issue that I won’t explore in detail relates to
the ALC’s use of royalty payments to third party organisations which were then effectively
reallocated to the land council for the payment of salaries (see paras 3.51 and
3.52). The ANAO correctly identifies this mechanism as a potential source of
fraud, but fails to note that it effectively undermines one of the Minister’s tools
available to ensure the land council is appropriately focussed on its
legislated remit. Under the ALRA, the Minister approves the budgets of the land
councils, but the ALC has effectively been redirecting royalty equivalent
funding away from community benefit and towards its own operations, thus undermining
the fiscal constraints that incentivises good priority setting.
Finally, the ALC Board and CEO provided a ten page response
to the Audit report, which needs to be read in full. The response focusses on
the undoubted achievements of the ALC and its associated organisations in a
range of areas. It documents a massive increase in staff of the ALC, many from
the local communities. It also notes that the former Minister for Indigenous Australians
Ken Wyatt was kept fully informed of development on Groote Eylandt, and that
the CEO of NIAA has been briefed. It points to the ALC’s involvement with the
ANU in documenting the social indicators on Groote; a matter I commented on in
an earlier post (link
here).
Clearly whatever its other deficiencies, the capability of
the ALC Board to write entertaining prose far exceeds that of the ANAO. The ALC
response provided my favourite line from the whole report in a comment on the
ANAO’s conclusions on conflict of interest:
The
ALC has effectively managed conflicts of interest in the context of this operating
environment and accepts that we have not always properly documented these practices.
Therefore, instances of typographical
errors have given the auditors a negative overall impression.
Conclusion
These two audits raise important issues regarding the
quality of governance in two of the four NT land councils. The TLC appears to
have taken a series of remedial actions and should hopefully make good
progress. The ALC faces more deep-seated issues and notwithstanding its
response, I for one am unconvinced that it is yet on the right path.
The existence of these issues however is not just an issue
for the Land Council directors and management. It seems to me that the relevant
Ministers over the past decade have allowed the quality of regulatory oversight
of the NT land councils to significantly weaken and in some cases to perhaps
disappear. Not only has this laissez faire approach opened up the opportunities
for conflicts of interest to emerge (and thus to opportunities for fraud against
local communities and the Commonwealth), but it has also undermined the overall
effectiveness of the land councils in fulfilling their statutory obligations
and remit.
To address the issues raised in these audits, it strikes me
that there are two essential actions required.
First, to
provide an assurance to the ordinary members of the Groote community, there
appears to be an overwhelming case for an
independent forensic investigation into the financial affairs of the ALC,
its associated organisations, and its key staff and Directors. It seems to me
imperative that Minister Burney should both initiate such an investigation immediately,
and initiate a short sharp review of the way in which NIAA oversights portfolio
bodies.
Second, given
that it is now almost fifty years since land councils were established, and
that there has been no overarching review for two decades or so, there is a
strong case for a high level independent
review of the appropriate regulatory framework for the operations of the NT
land councils. Such a review should reconsider their statutory remit, their funding
arrangements, and importantly, how land councils relate to associated Indigenous
entities that have responsibilities for utilising the royalties, royalty equivalents,
and other land use payments that accrue to landowners and affected communities.
Such a review should not have any overt political agenda apart from considering
the best way to meet the future needs and aspirations of Aboriginal landowners
and native title holders in the NT into the future.
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