And how his audit stands who
knows save heaven?
Hamlet Act three, Scene three.
The ANAO has released its draft work program for next
financial year’s performance audits (link here). Dan Holmes
from the Mandarin provides a succinct whole of government overview (link
here).
This post focusses on the Indigenous policy related
performance audits, which fall under the Prime Minister and Cabinet (PMC) portfolio.
OF course, many of the proposed mainstream performance audits will have a
bearing on services delivered to Indigenous citizens. These include (to a
greater or lesser extent) proposed performance audits of DSS’s programs
Assisting the Long term Unemployed; a follow-on performance audit of the Management
of funding of projects by the Northern Australia Infrastructure Facility (NAIF)
in the Infrastructure, Transport, Regional Development, Communications and the
Arts portfolio; and perhaps even Board Governance at the National Disability
Insurance Agency.
For ease of access, I have included slightly edited summary
extracts of proposed Indigenous specific performance audits from the PMC
portfolio below:
Delivery of
community-led justice reinvestment initiatives
This audit would assess the
design and governance underpinning the National Indigenous Australians Agency
and the Attorney-General’s Department’s joint establishment of an independent
National Justice Reinvestment Unit and examine the effectiveness of the early
delivery of up to 30 community-led justice reinvestment initiatives.
Around $100m was announced for
investments in community-led justice reinvestment initiatives and First
Nations-led legal assistance services in the October 2022 budget…
Indigenous Land and Sea
Corporation’s management of non-financial assets
This audit would assess the
effectiveness of the Indigenous Land and Sea Corporation’s (ILSC’s) management
of non-financial assets.
The ILSC is a corporate
Commonwealth entity established under the Aboriginal and Torres Strait Islander
Act 2005 (the Act). One function of the ILSC is to acquire land to grant to
Indigenous corporations. Under section 191D of the Act, the ILSC must make a
grant for an interest in land acquired for that purpose within a reasonable
time after its acquisition. At 30 June 2023, the ILSC and subsidiary
corporations held the Ayers Rock Resort valued at $435 million, other
properties valued at $66 million, and livestock on properties valued at $6
million. While the ILSC holds properties, it is responsible for maintenance,
statutory costs and the operation of related businesses. The audit would
examine the ILSC’s asset management strategy and practices, including those
related to the divestment of properties…
Management of the
regional network - Follow on
The audit would assess the effectiveness
of the National Indigenous Australians Agency’s (NIAA’s) management of the
regional network, including whether the regional network is achieving its
objectives…
…Auditor-General Report No. 7
of 2018-19 Management of the Regional Network found that management of the
regional network was mixed, with the full potential of the network to
facilitate the design and delivery of local solutions to local problems not
being maximized.
Office of the Registrar
of Indigenous Corporations’ management of non-compliance
This audit would assess the
effectiveness of the Office of the Registrar of Indigenous Corporations’
(ORIC’s) management of non-compliance with the Corporations (Aboriginal and
Torres Strait Islander) Act 2006 (CATSI Act)…
…In 2021, the NIAA released a
final report of a review into the CATSI Act that recommended enhancements to
the regulatory powers available to the Registrar under the Act. An amendment
bill to the CATSI Act passed the House of Representatives in 2021 but lapsed at
the end of the 46th Parliament. This audit would examine the use of the
Registrar’s powers and functions to manage non-compliance with the CATSI Act.
The effectiveness of
coordination of Closing the Gap target implementation
The audit would examine the
effectiveness of the National Indigenous Australians Agency (NIAA’s)
coordination activities.
The 2020 National Agreement on
Closing the Gap (National Agreement) is a strategy that aims to improve the
life outcomes of Aboriginal and Torres Strait Islander people. The National
Agreement marks a shift in the approach to the Closing the Gap Strategy, with
Aboriginal and Torres Strait Islander people determining what is important to
them. The Closing the Gap Implementation Plan includes actions, the responsible
minister and the delivery timeframe. The NIAA is responsible for leading and
coordinating the development and implementation of Australia’s Closing the Gap
targets in partnership with Indigenous Australians.
The Northern Territory
Aboriginal Investment Corporation (NTAIC)’s administration of grants
This audit would assess the
effectiveness of the governance of the NT Aboriginal Investment Corporation
(NTAIC) and its governance and decision-making processes for allocating grants
funding.
NTAIC was established as a
corporate Commonwealth entity in November 2022. NTAIC’s purpose is to work with
Aboriginal Territorians to achieve economic, social and cultural impact through
innovative approaches to investments, beneficial payments and other financial
assistance. It has initial grant funding of $180 million and an investment
corpus of $500 million. Its Aboriginal-controlled board makes decisions to
invest Aboriginals Benefit Account (ABA) funding, which was previously
administered through the National Indigenous Australians Agency. The ABA
receives monies from the Commonwealth based on the value of royalties generated
from mining on Aboriginal land in the Northern Territory…
Commentary
The ANAO is an important, and in my view under-rated
element in the array of checks and balances that comprise the architecture for
government initiatives and actions. It is the financial auditor for all major
government agencies, certifying that agencies financial accounts are compliant
with the applicable accounting standards and fairly present the financial
position of the entity at the audit date. Its performance audits are separate
to its financial audits and in effect focus on the performance of agencies in
delivering specific initiatives and programs. The span of performance audits is
not comprehensive, and thus the selection of audit subjects is inherently a
strategic choice.
In 1985, I published an article (link
here) arguing that the shift to embracing what were then termed ‘efficiency
audits’ — the equivalent of the ANAO’s
performance audits — should be extended
to embrace effectiveness audits. ‘Efficiency’ refers to the ability to
accomplish something competently with the minimum level of resources and effort.
‘Effectiveness’ refers to the degree to which desired or positive outcomes are
achieved. In my view the argument I made then still has merit.
In its wisdom, the ANAO has preferred the safe harbour of
focussing on efficiency (effectiveness risks straying into the realm of
politics) leaving issues of effectiveness to ad hoc evaluations. For their
part, successive governments have avoided reforms that would ensure evaluations
are undertaken independently, are always published, and are pitched at a level
that ensures they are strategically relevant. Proposals for an evaluator
general (link
here and link
here) have been studiously ignored. The point of this brief foray into history
is to highlight that notwithstanding their considerable usefulness and benefits
in opening a window onto the activities of government, ANAO performance audits
are invariably limited and focussed more on process than outcomes. Perhaps it
is time that that the ANAO commissioned an independent evaluation of its own
operations!
Turning to the proposed audits listed above, I
propose to make a series of brief comments aimed at highlighting specific
issues of potential significance or salience. Due to limitations on length, I
don’t propose to comment on the proposed performance audit of the NIAA regional
network, nor the proposed audit of the Office of the Registrar of Aboriginal
Corporations. I note however that both organisational units are crucial
elements in the architecture of Indigenous policy and deserve constructive
scrutiny.
Delivery of community-led justice reinvestment
initiatives: While this program is jointly shared between
NIAA and the Attorney Generals Department, there is no information on the NIAA
website. The AG’s website lists a basic description of the program (link here)
and includes a program design document drafted by Jumbunna Institute ‘to inform
the design of the grants process and grant opportunity guidelines’ (link
here). The design document is well constructed but is itself strongly
focussed on process (particularly community control) rather than providing a
targeted conceptual framework for reducing incarceration and interactions with
the justice system. While this is
deliberate, the very flexibility of the program is likely to lead to questions
regarding its efficacy and purpose, especially in the context of outbreaks of public
violence such as recently occurred in Alise Springs.
At a more strategic level, the Commonwealth is essentially
investing in a slogan as there appears to be no mechanism for operationalising
the ‘reinvestment’ element of the program. To do this would necessarily involve
robust engagement with the states and territories to shift resources away from
activist policing, aggressive prosecutorial strategies and carceral options,
something the Commonwealth is loathe to undertake. Of course, notwithstanding
an extra $10m being allocated to Central Australia under this program in the
2023 budget, the reality is that governments’ actions (such as those announced
after recent riots in Alice including a curfew and a decision to appoint 200
more police) are not in fact aligned with the justice reinvestment ethos, and
they appear unwilling to advocate for such a strategy to the wider population.
The bottom line is that even if the investments involved were effective, the
investment of $100m nationally is unlikely to be adequate to turn around the
worsening incarceration status of First Nations (link
here). The fundamental question then for the ANAO is not whether individual
grants are making a positive impact, but whether governments are merely engaged
in an exercise of signalling concern (and buying political support) rather than
aiming to address the substantive issues involved.
Indigenous Land and Sea Corporation’s
management of non-financial assets: this proposed performance
audit is timely and will no doubt raise several important issues. The elephant
in the room is the ILSC’s ownership of the Ayers Rock Resort and the
implications for its balance sheet of the current efforts (link
here) to divest the resort to a new owner. I published a post on this issue
some years ago (link
here) and note that the issue has been raised in each of the last two
estimates hearings. There was a sustained discussion at the February 2024
Hearings (pages 57 to 60) of the significant contingent liability carried by
the ILSC in relation to ARR, and the actions being taken by the ILSC to divest
the land to an Indigenous corporation and the operation of the resort to a
commercial operator. I was particularly struck by Senator Liddle’s statement in
the most recent Estimates hearing that ‘we all know that there was far too much
paid for that investment at that particular time’ given that this proposition
was vehemently rejected by Minister Scullion when the subsequent Dawn Casey led
Board sought to unpack what had transpired and have the decision reviewed (link
here).
The effectiveness of coordination of Closing
the Gap target implementation: this proposed performance
audit addresses issues that are crucial to the future effectiveness of the closing
the gap process. This element of NIAA’s management of the process is in dire
need of reform. There are two elements to coordination of the implementation
task. The first is across the Commonwealth: my informal understanding is that
the NIAA does not see itself as taking the primary role in leading the
implementation of the Priority Reforms under the National Agreement, but rather
sees itself as a policy influencer. Of course, NIAA requires ministerial
support to engage forthrightly, but it is painfully clear that the NIAA is
effectively mute on many if not most of the issues that will make a difference
to the ultimate success or failure of closing the gap.
The second essential element of successful coordination is
for the Commonwealth to step up and provide a much greater degree of policy and
even administrative leadership vis a vis the states and territories. The
previous Government hid behind the convenient fig leaf that the Commonwealth
was merely an equal partner in the intergovernmental National Agreement on Closing
the Gap, but there was no necessity for the Labor Government to meekly and supinely
follow suit. The Minister for Indigenous Australians must bear ultimate
responsibility for this positioning, but NIAA and its leadership could have
done much more to persuade the Minister to adopt a more robust and proactive
stance.
I published a post on this and related issues in early
March (link
here) which I strongly recommend to readers.
The Northern Territory Aboriginal Investment
Corporation (NTAIC)’s administration of grants: while
this would be a marginally useful exercise given that NTAIC has been operating
for less than two years, it strikes me that this proposed performance audit
misses a much more strategically important issue, namely the efficacy (and
ideally effectiveness) of the overall allocation of royalty equivalents to the Aboriginals
Benefit Account (ABA), of which NTAIC grants are just one comparatively minor
part. I was a critic of the NTAIC proposal as being a sleight of hand: it
professed to shift control to Aboriginal interests in the NT, but in fact
ensured that the Minister retained unilateral control over a significant
element of royalty equivalents (managed by NIAA) without any Aboriginal
oversight and with much less transparency that previously obtained (link here). Of
course, the NTAIC is now a reality; I am not suggesting it be unwound. I am
merely pointing to the fact that there is much more to the ABA than the slice
that the NTAIC controls.
The most recent NIAA Annual Report (link
here) incorporates the financial statements for the ABA which disclose that
in 2023 it held financial assets totalling $1.47 billion, offset by liabilities
(including provisions for establishment funds to transfer to NTAIC) of $625
million leaving net assets of $845 million. Annual appropriations to the ABA
totalled $378 million. These funds are then allocated in a range of ways, including
to fund the operations of the four land councils in the NT ($109 million in
2023), to fund the distribution of payments to corporations representing
traditional owners affected by mining ($113 million), to fund the NTAIC (at the
discretion of the Minister) and to make grants (usually approved by the
Minister) for community purposes to residents of the NT ($62 million).
In my view there is a much stronger case for assessing the
performance of the whole ABA system including the grants that are not made by
the NTAIC from a performance (and I would argue effectiveness) perspective than
for assessing the comparatively small grants program currently operated by
NTAIC. My recent posts in relation to Groote (link
here and link
here) are infused with a swirling whirlwind
of ABA funds. It is well past time that an independent oversight body
undertook a close look at the operations of the ABA with the aim of ensuring the
funding it distributes is meeting the statutory remit laid down in the Aboriginal
Land Rights (Northern Territory) Act 1976.
Concluding Comment
The ANAO is to be commended for seeking comment on its
proposed work program though I suspect that it may not attract much attention. In
thinking about why and how these proposed performance audits were chosen, it
struck me that there is no indication of the decision criteria, nor the process
involved in setting the program. Further, given the interaction between
efficiency (performance) and effectiveness, an ideal decision process would also
consider the proposed evaluation program in each portfolio. These decisions are
important because they fill a crucial gap in transparency and accountability in
the current approach to public sector accountability.
Finally, one would have to
assume that the ANAO (and perhaps also the Parliament) is beginning to consider
how the developments in Artificial Intelligence (AI) might best be applied to assisting
the development of more comprehensive and useful performance audit work
program. As agencies increasingly adopt AI algorithms to drive their
operations, it will be necessary for the ANAO to keep pace. A request to Chat
GPT provided ten existing AI driven capabilities that could assist in improving
the efficiency effectiveness of the ANAO’s performance audit system including Predictive
Analytics for Risk Assessment; Automated Data Extraction and Analysis; Natural
Language Processing (NLP) for Document Analysis; and Dynamic Audit Planning and
Resource Allocation. It seems like the time is approaching when the ANAO will
need to look very hard at how and why it does what it does. More importantly, Governments
too will also need to begin consideration of how they might use these new
capabilities to improve levels of transparency and accountability across the entire
span of public policy.
4 April 2024
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