The Missing $41m payment from AMT to ARAC: a trust deficit

 

Round and round the cauldron go;

In the poisoned entrails throw….

Sweltered venom, sleeping got,

Boil thou first i’th’ charmed pot.

Macbeth, Act four, Scene one.

 

In my previous post (link here), I provided commentary on a number of the Questions on Notice asked by Senator David Pocock. I mentioned in that post that I would deal with this question in a separate post. Unfortunately, it involves both a convoluted narrative of events and some accounting issues. The bottom line however is much simpler: a Senator asked a question in good faith based on allegations made in correspondence from residents of Groote Eylandt, and received a dismissive, misleading and probably substantively incorrect response from the NIAA which we must presume had the endorsement of the Minister which raises more questions than answers.

Here is the question and answer provided:

Senator David Pocock’s Question #8

In an article dated 20 July 2024, The Saturday Paper referred to correspondence to your predecessor signed by dozens of Groote residents which alleged that an amount of $41m was paid from the Anindilyakwa Mining Trust (AMT) to the Anindilyakwa Royalties Aboriginal Corporation (ARAC) but which has not been accounted for. A recent review of the relevant publicly available financial statements pertaining to ARAC appears to confirm this. There is also explicit evidence that the ALC effectively controls ARAC and has a direct role in managing ARAC finances. Is the Minister/NIAA aware of the $41m payment and if so has the matter been investigated? If not, will the Minister instruct the NIAA or ORIC to advise her regarding the $41m payment and the circumstances of its payment by the AMT and receipt/utilisation by ARAC?

NIAA Answer #8

The NIAA has made enquiries regarding the recognition of payments made from the Anindilyakwa Mining Trust (AMT) to the Anindilyakwa Royalties Aboriginal Corporation (ARAC) and has been informed that reporting differences arose because of the entities recognising these transactions in different financial years. The NIAA notes that the accounting records of both entities are subject to independent audit. Detailed questions regarding the recognition of financial transactions of the ALC and associated entities should be directed to the ALC.

Below I set out my detailed commentary on the answers to the question and various related issues:

Comment mcd #8

I have previously posted contextual comments on this issue in three posts. The posts were titled Royalties, flawed governance and non-transparency: a potent brew (link here) dated 26 July 2024; The Anindilyakwa Royalties Aboriginal Corporation: micro accountabilities; macro policy implications (link here) dated 3 August 2024; and Annual Reports on Groote: an unconventional assessment (link here) dated 18 January 2025. I strongly recommend that readers keen to understand the context within which the AMT, ARAC and the ALC operate read these posts, especially the first two.

In the light of the NIAA answer provided above I sought to revisit the financial statements for the relevant periods. I was surprised to find that the 2022 Audited Financial statements for ARAC had been removed from the ORIC website without explanation. I find this somewhat strange especially given its relevance to the issues raised by the correspondents form Groote referred to in the Saturday Paper article. I requested a copy and was provided one, but as of 24 February 2025 it has not been published on the website. Financial statements for the previous years which I had obtained from ORIC in 2024 have still not been published on the ORIC website. Given that section 35(2) of the Aboriginal Land Rights (Northern Territory) Act 1976 requires land councils to distribute section 64(3) royalty equivalent payments on to CATSI corporations, there would seem to be substantial merit in the Registrar ensuring that the financial statements of CATSI corporations in receipt of such payments are published on the ORIC website. In any case, should readers wish to read the relevant financial statements I cite below, I suggest you contact ORIC direct.  

The basic facts are as follows.

The 2022 AMT financial report lists under the heading Grants a payment to ARAC of $41,324,957.

The 2022 audited financial statement for ARAC under the heading Revenue 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 income is listed as $23.0m. There is no record of any grant being received from the AMT.

The 2023 audited financial statements for ARAC identify a series of grants and other revenue, including $31.9m in section 64(3) payments from the ALC.  Total income for 2023 is $40.2m. In addition, an amount of $8.1m in investment income is recorded. There is no record of a grant or payment for $41.3m being banked in the 2023 year.

In neither ARAC financial report is there a line item showing a payment of $41,324,957. The explanation provided to the Senate by NIAA that the payment was recognised in a different financial year is thus prima facie incorrect. Moreover, it has the effect of misleading the Senate and the wider community. That is not to say there may not be a perfectly appropriate explanation, but without a forensic audit that identifies the bank account(s) into which the AMT payment was deposited, we will never know.

The comment in the NIAA answer about the financial affairs of the relevant entities being independently audited reeks of either naïveté or an attempt at gaslighting. Auditors can make errors or be provided with incorrect information.

As pointed out in my previous post on ARAC (link here) and extracted in the Appendix below, the ARAC 2022 financial statements identify the cancellation of an infrastructure debt commitment (for $39m) from AMT to ARAC. Whether the auditor was misinformed or failed to follow up the issue, it is clear that the $41m was not deposited in the 2022 year (and not in a later year) and that this is reflected in black and white text in the 2022 financial statement. This reinforces the conclusion that the unidentified person who the NIAA consulted regarding the transaction has misled them; they in turn have misled the Minister and she in turn has misled the Senate (given that Ministers approve or are responsible for answers to Questions on Notice).

Rather than focussing on the independence of auditors while providing incorrect information, NIAA should perhaps focus on the persons who do have the requisite knowledge, namely, the Directors of ARAC. The Directors of AMT and of ARAC were identical and apart from independent Directors were also ALC Board members (see the discussion in my earlier post ‘a potent brew’ (link here). Both the AMT and ARAC Boards considered and formally resolved to approve and certify as true and correct the financial statements for the respective entities in the 2022 year. Prima facie (even on a hypothetical assumption that the NIAA explanation is correct) there appears to have been a failure of the ARAC Board to identify the absence of the $41m grant in ARAC’s revenue for 2022 and 2023. Has the Minister or NIAA requested the Registrar of Aboriginal Corporations to investigate this prima facie error? In this context, see the comments in my recent post on annual reports (link here) related to the ARAC Board’s decision to purchase at considerable cost (sourced from funds notionally provided for the benefits of traditional owners) personal liability insurance for the Directors. Did this decision raise any concerns with the Registrar or the NIAA when it was reported in the ARAC financial statements? And if not, why not?

The assumption that in the face of allegations of a missing $41m, that NIAA, the ALC’s regulator, would ask a person they fail to identify for an explanation and then accept that explanation without being taken through the detailed figures that would allow the allegation to be put to rest, seems at best naïve and incompetent. The fact that this explanation is confidently provided to the Senate as if there is nothing to see here is extraordinary. It reeks in my view of indifference, deliberate disregard, obfuscation and disrespect.

The whole purpose of the Estimates process is to allow Senators to obtain an explanation from the Executive arm of the activities of agencies and corporations within a legislative framework that is entirely the responsibility of the Minister. If the NIAA can’t provide the assurance the Senate seeks, they should themselves take the action necessary to obtain it for Senate. ARAC is not an entity that appears before the Estimates Committee and is incorporated under the CATSI Act that comes within the Minister’s portfolio. The ALC which appears to exercise effective control over ARAC and assists with its bookkeeping and preparation of financial statements is within the Minister’s portfolio. The former CEO oversighting ARAC’s bookkeeping has been dismissed by the ALC at a meeting attended by the NIAA on grounds which the Minister has seen fit not to make public. The former CEO’s spouse (who has not been mentioned in any of the public statements related to the termination the CEO by the ALC and the Minister) was at various times an employee of the ALC working in the Royalty Development Unit that assisted corporations such as ARAC with their finances and operations.

Conclusion

Given the complex web of potential and actual conflicts of interest in play, and the fact that there is a missing $41m also in play, the Minister and the NIAA have an obligation in my view to do much better than they have with this answer and the others discussed in my previous post.

Indeed, given the extraordinary refusal to agree to commission an independent forensic investigation (bearing in mind that not all malfeasance will necessarily be corrupt or criminally illegal), it is difficult to avoid the conclusion that the Minister and NIAA are, through their inaction and deliberate obfuscation, contributing to the social and economic harm that will inevitably emerge once the full ramifications of the maladministration on Groote becomes apparent.

The Minister and her agency are accruing a substantial trust deficit through her unwillingness to be transparent on what has transpired within the ALC and its associated entities. Given the standard of answers provided to the Senate in response to Senator Pocock’s questions, that trust deficit will inevitably continue to grow unless decisive action is taken. My recommendation is that the Minister should immediately request the ANAO to undertake or commission a comprehensive and independent forensic audit of the operations of the ALC and its associated entities over the past seven years.

Without such decisive action, the levels of distrust will at some point reach a tipping point where wider political consequences will take hold and potentially destroy the current institutional framework of land rights as we know it. In the meantime, the fallout will inevitably have adverse impact not just on the constituents of the NT land councils, but on those nominal servants of the public interest who have been prepared to look away while the cauldron of distrust boils over.

 

Appendix

The following text is taken from my previous posts and provides more contextual detail on the information above. It has been lightly edited.

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

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. [mcd comment 24 Feb 2025: it is worth noting that the payment of $6m from AMT to ARAC was transparently listed in ARAC’s revenue for the 2018 FY. A clear contrast with 2022 and 2023.]

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 was previously available on the Registrar of Aboriginal Corporations website. It has been taken down (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 income 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 Mutual Trust, an established and highly experienced financial services firm, 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. The staff servicing ARAC Board meetings and probably implementing Board decisions (including managing income and payments) are likely part of the ALC’s Royalty Development Unit, 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).

 

Extract from The Anandilyakwa Royalties Aboriginal Corporation: micro accountabilities; macro policy implications

Each of the six ARAC financial reports from 2017 to 2022 inclusive include a statement, signed by two Directors and resolved by the Board, outlining the corporation’s purpose as follows:

The Corporation's operations purpose [in its first year] has been, to hold assets and manage statutory royalty equivalents and negotiated royalties in such manners as determined by the Anindilyakwa Land Council, consistent with its goals for effective, responsible and sustainable use of such royalty flows [emphasis added].

This statement appears to make plain that the ALC exercises direct control over the operations of ARAC….

… In my previous post I noted that the payment of $41m from the AMT to ARAC did not appear to be accounted for in the ARAC 2022 financial statements. With the availability of the previous year’s reports, it was possible to track the recording of an amount of $39,147,311 as an ‘AMT infrastructure debtor’ in the ARAC 2020 and 2021 financial reports. In 2022, the year that the AMT paid ARAC $41,324,957, there was no record in ARAC’s Financial statements of any such grant being received. However, there was a line item now called Payment in Advance (whereas it was previously termed AMT Infrastructure Debtor) which showed an outstanding debt of $39,147,311 in the previous year, but nil in the current 2022 FY. Rather than resolving the problem, this treatment of the outstanding commitment, whether intentional or not, obscures the recipient of the payment while acknowledging that the commitment no longer applies. [The discrepancy between the amount of $39m and $41m appears to be related to differing CPI treatments of the original commitment by the AMT and the ALC].

 

24 February 2025

Annual Reports on Groote: an unconventional assessment

Why! all delights are vain, but that most vain
Which, with pain purchas'd, doth inherit pain:
As, painfully to pore upon a book
To seek the light of truth, while truth the while
Doth falsely blind the eyesight of his look.

Love’s Labor’s Lost, Act one, Scene one.

 

The 2023/2024 annual reports across the Indigenous Australians Portfolio were mostly finalised by November or December 2024. It struck me that there might be merit to consider a selection of those reports through the lens of the developments on Groote Eylandt over 2023/24. Given the almost complete absence of any attempt by Minister McCarthy and her portfolio to keep the Parliament and the public informed, it seemed worth considering the more formal reporting in relation to Groote to see what might be gleaned not only for the insights into developments on Groote, but as a window into the wider approach of the Minister and her portfolio to transparency and accountability.

The extracts and commentary below are not presented in any particular order, nor do they focus in every instance on important policy issues. They inevitably reflect a personal perspective that has limited profile in current policy discussions. I would argue however that this in itself is a strength insofar as it opens up a window into the deeper values that guide the Government’s approach to transparency and accountability. Apart from presenting an alternative framing and perspective, my hope in compiling commentary on extracts from disparate reports into a single post is to demonstrate how the minimalist and simplistic narrative in relation to Groote and the ALC promulgated by the Minister and her agency is entirely inadequate.

 

National Indigenous Australians Agency

The NIAA Annual Report (link here) was  signed off by the CEO on 15 October 2024. Itis an impressively designed document, great photographs of country, concise, clear and well written. It spans 234 pages and seeks to address the numerous requirements for annual reports set down in the PGPA legislation and Finance Department regulations (see the list of requirements at pp 226-234).

The CEO in her Year in Review assessment mentions that the agency has offices in 50 locations across Australia, but the report does not appear to indicate where those offices are located, nor the numbers and seniority of their staffing. For example, I understand that the agency has an office on Groote, but as far as I know, it is visited intermittently by an officer from East Arnhem. The underlying issues here is that a regional presence was once the backbone of the Aboriginal Affairs portfolio, but this has been significantly degraded over the past decade.

The Anindilyakwa Land Council (ALC) is one of five statutory corporations established under the Aboriginal Land Rights (Northern Territory) Act 1976 (ALRA). The Minister and her agency, the NIAA, are the regulators of these corporate entities (along with the Department of Finance in respect of compliance with the PGPA legislation). The NIAA Annual Report acknowledges in an appendix discussing the Aboriginals Benefit Account (ABA) which allocates funding to the land councils and other smaller entities such as NAIC and EDTL that ‘The NIAA is responsible for advising the Minister on the overall policy and financial management of the ABA’.

The ALC was the subject of an adverse ANAO performance audit published in May 2023, as well as a series of robust media reports and ongoing discussions in Senate Estimates during 2023 and right through calendar year 2024. A petition critical of the ALC’s operations and signed by 235 residents of Groote Eylandt was tabled in Parliament in February 2024. During the 2023/24 financial year, Minister Burney requested the agency’s Integrity Unit to initiate a review of the implementation status of the ANAO performance audit’s formal recommendations — but not the detailed findings, nor broader issues raised in various allegations — which was undertaken by consulting firm BellchambersBarrett. The Bellchambers report was not finalised until August 2024. At some unknown date during 2024, the NIAA (presumably with the Minister’s consent) referred unspecified matters related to the ALC to the National Anti-Corruption Commission.

None of these developments rated a mention in the NIAA Annual Report for 2023/24.

According to the index, the NIAA Annual Report mentioned the ALC only four times, in passing on page 24, and on pages 200, 203 and 206, the last three in the appendixes dealing with the Aboriginals Benefit Account. The most interesting information was on page 206, which reported that the ALC received royalty equivalent payments of $59.1m in 2022/23 and $35.7m in 2023/24 for on-payment to Aboriginal corporations on Groote Eylandt in accordance with sections 64(3) and 35 of ALRA. The Annual Report did list, at page 62, the receipt by the Barrett Family Trust No 2 & Others of $305k in consultancy payments during the financial year, although it is not clear if any of this related to BellchambersBarrett, nor whether it related to the ALC review.

I did examine the Annual Report’s explanation of the various audit and risk, and integrity functions. My takeout is that while they are designed to focus on the “appropriateness of the NIAA’s financial and performance reporting responsibilities, risk oversight and management, and system of internal controls”, they do not extend to oversight of the implementation of the NIAA’s regulatory responsibilities for statutory and other Commonwealth controlled entities within the portfolio. This in my view is a serious and significant gap. 

What is striking about the NIAA Annual Report then is not so much what it includes and discusses, but what is missing and absent. An assiduous reader interested in finding our what is happening in relation to the NIAA’s oversight responsibilities in relation to the ALC is effectively guided to an unequivocal conclusion: nothing to see here!

Executive Director of Township Leasing (EDTL)

The EDTL normally presents a stand-alone annual report. Unfortunately, the 2023/24 EDTL Annual Report has not yet been published. Its staff are public servants within NIAA, yet the NIAA Annual report barely mentions the Office of the EDTL. There is a mention on page 206 that the Office receives administrative funding of $4.9m.

The 2022/23 EDTL Annual Report (link here) is concise and clear, and well presented. In relation to the Groote Eylandt, a Statement by the Executive Director reports on the transition of the Groote Eylandt Township Lease to the community controlled Anindilyakwa Royalties Aboriginal Corporation (ARAC):

… This is the first time a Township Lease held in partnership by the Executive Director (on behalf of the Commonwealth) has been transferred to Traditional Owners, and represents an important achievement for all involved. .… Importantly, our partnership with the Warnindilyakwa Traditional Owners has not ended despite this transfer of responsibilities. The Office continues to partner with and support ARAC as required. This is largely technical support in the form of access to our specialised land tenure management system, to assist in the consistent, accurate and transparent management of documentation and decision making on land tenure matters.

The 2022/23 Annual Report also noted that on 1 October 2023 [unusually reporting on events outside the time frame of the report], the Groote Eylandt Township Lease transitioned to ‘a community controlled entity’ and gave an account of the handover event attended by both the Minister Linda Burney and Assistant Minister Malarndirri McCarthy.

The takeout from this report in my view is three-fold: First, NIAA have had a detailed involvement with the intricacies of land tenure and leasing on Groote over the past decade and have been happy to sign off on the transfer of the township lease to an entity that comprised five ALC Board members and five external Directors. Second, the technical support being provided to ARAC is in fact being provided to the ALC (see the discussion below on the ALC Annual Report). Third, the independence of the five external Directors thus becomes an important factor (see the discussion below on ARAC). It is uncertain whether the ALC is driving ARAC’s priorities, or ARAC is acting independently.  Either way, given the formal legal responsibility of the ARAC Directors, it raises the question whether it is accurate to describe ARAC, and its decisions on the grant of leases within the township, as ‘community controlled’. In other words, one cannot merely assume that the leasing decisions of ARAC in relation to the granting of s.19A leases will in every instance be in the wider Groote community’s interest; instead the facts of each sub-lease transaction require assessment. However, there appears to be no public reporting of these lease granting decisions.

ALC Annual Report

The ALC 2023/24 Annual Report was finalised on 14 October 2024 and tabled soon after (link here). As usual, it is a comprehensive and well produced document with a clear narrative running through it laying out a vision of the future of Groote and the ALC’s role in achieving that. There is little in that narrative vision that I would disagree with per se. Nevertheless, I have serious concerns regarding the governance of the ALC, and the complex web of overlapping roles, responsibilities and activities which emanate form the ALC. While the stated aspirations are largely commendable, whether the reality aligns with those aspirations is in my view questionable. The extracts I have selected to highlight below are in large measure direct or indirect reflections of, or contributors to, that scepticism.

The (former) CEO’s report notes, inter alia:

Significant progress has been achieved in the past year in the development of the Winchelsea Island (Akwamburrkba) resource… A key industry standard report indicating the size of the resource was achieved…  The environmental approvals process for the Winchelsea resource development is now at an advanced stage.

This reflects the rhetoric that the development of the mine is central to Groote’s future and in addition makes clear that the proposed mine is considered to be one of the ALC’s core priorities.

In relation to the ANAO issues, he noted, inter alia:

The ALC has welcomed the NIAA commissioning an independent review on ALC’s implementation of the ANAO report recommendations, which was nearing completion at the end of this reporting period. The ALC will be receptive to the insights provided by the independent review on our efforts to date and on further improvement opportunities.

On page 19, a section outlining the experience of the (former) CEO Mark Hewitt notes:

 During the reporting period Mark held positions as the Co-CEO of Winchelsea Mining and as the Executive Director of Groote Holdings Aboriginal Corporation. Mark is a Director of Aboriginal Sea Company.

In a section on organisational structure (page 29), there is an extremely important description of the ALC’s modus operandi:

Funding and Program Arrangements

The ALC receives its operational funding under ALRA section 64(1) in line with the approved budget estimates submitted to the NIAA for the respective financial years. The ALC also receives grants to run programs, carry out research, purchase equipment and employ people. A major funding source, for the ALC’s Land and Sea Department, comes from the NIAA Indigenous Advancement Strategy Jobs, Land and Economy program. The employees in the Land and Sea Department referred to in the ALC’s Organisation Chart on page 25 are predominantly funded by the NIAA grants.

The ALC has entered into general service deeds with Aboriginal Corporations on the Groote Archipelago to provide operational support services in line with ALRA section 27(1A). These services include human resources, payroll and accounting services, and support to Aboriginal Corporations to meet their compliance obligations such as annual returns to the Office of the Registrar of Indigenous Corporations. During the reporting period the ALC provided services to 13 Aboriginal controlled entities. One of the 13 Aboriginal entities is ARAC, to which the ALC provides human resources, payroll and accounting services, and program delivery. Employee costs are charged to ARAC in accordance with the general service deed between ALC and ARAC.

As part of the ARAC general service deed, the ALC provides administrative and other assistance which includes the employment of staff to deliver programs that include Community Support, Preserving Culture, Infrastructure Development and the Royalty Development Unit. The employees in the respective Departments referred to in the ALC’s Organisation Charts on pages 23-28 are predominantly funded by ARAC. [emphasis added].

In relation to the NIAA grant funding of staff of the ALC Land and Sea Department, one might ask how that is consistent with the NIAA’s regulatory responsibilities, and what actions have been taken to ensure that there are no perceived or actual conflicts.

In relation to the ALC’s services agreements with Aboriginal Corporations, ALRA section 27(1A) states:

A Land Council may, on the request of an Aboriginal and Torres Strait Islander corporation that has received an amount of money from the Council under this Act, provide administrative or other assistance to the corporation.

Of course, the meaning of this provision must be read within the context of the legislation as a whole, and in particular in relation to provisions such as s.23(1)(ea) and section 23AA(3), section 35, and section 35C. These provisions require the land council to act in the interests of traditional owners and not just in its own interest.

The limits of such assistance are to my knowledge untested at law; however it seems fair to suggest that the ‘assistance’ would not extend to controlling the activities of the entity. Issues raised by these arrangements (for example in relation to ARAC) include the extent of the roles and responsibilities of the ARAC Directors, whether individuals within the ALC are operating as shadow Directors of the assisted corporations, and whether the ALC’s financial statements are in fact a true and complete reflection of the ALC’s activities in the event that these corporations are ‘controlled entities’. The ALC has used the existence of these provisions to expand the footprint of ALC activities well beyond its formal remit. A key contributing factor in doing so is the ALC’s role in selecting the Directors of the key corporations which it is both funding and assisting. Indeed, in the case of Groote Holdings Aboriginal Corporation (GHAC), the former ALC CEO was appointed as one of the Directors. Following his termination by the ALC, he no longer remains in that role.

The ALC appears to have discovered a magic pudding which allows it to access s64(3) royalty equivalent payments to fund its organisational empire and priorities well beyond what the Minister has approved under section 64(1) and to establish a framework which would allow the ALC to avoid the normal oversight provisions that apply to the ALC. Whether this expanded remit has led to problematic outcomes would require a forensic audit; neither the minister, the NIAA nor the public has any way of knowing if this is indeed the case. Of course, the corollary of switching s.64(3) funds to s.64(1) uses is that there is less funding available to assist the legitimate aspirations of local corporations.

A crucial protection against the sorts of outcomes described above would be for the assisted corporations to have Directors who are independent of the ALC. In fact, this is not the case. Many ALC Directors are also assisted corporation directors. Even the independent directors of some assisted corporations appear to have potential conflicts.

The consultants list on pages 84/85 includes several engagements of interest. Rod Tidey Consulting was engaged to review and assess ALRA s.64(3) distributions, while Australian Venture Consultants [principal Russell Barnett] was engaged to review the AMT. Rod Tidey is a former employee of the ALC. Tidey and Barnett have received consultancy payments over the past four and two years (Tidey to review section 64(3) payments; Barnett to review the AMT) and both are Directors of ARAC and AMT. Finally, ARAC has itself been engaged as a consultant to the ALC to provide ‘operational services’ and most recently ‘governance and data unit services’ at a total cost of $564k over the past three years. This is intriguing as ARAC’s operations are conducted by the ALC, and it does not appear to have the capabilities to deliver consulting services. It is conceivable that ARAC might sub-contract the engagement, but this begs the question: why avoid a direct engagement?

Anindilyakwa Mining Trust (AMT)

The AMT was established as a charitable trust to receive negotiated royalties paid to the ALC for the benefit of the traditional owners of Groote. The Australian Charities and Not-for-profits National Commission (ACNC) is the regulator of charities. The AMT 2024 Financial Statement, available on the ACNC website, indicates that it holds net assets totalling $311 million. It distributes comparatively small amounts of its annual revenue to the Anindilyakwa Royalties Aboriginal Corporation (ARAC). Its Trust Deed limits its capacity to distribute payments to corporations representing particular clans. The members of the Trust are James Durilla, Lionel Jaragba, Elma Yantarnagga, Simone Yantarnagga, [all of whom were on the ALC Board], Simon Longstaff, Russell Barnett, Adam Simpson, and Rodney Tidey.

Anindilyakwa Royalties Aboriginal Corporation (ARAC)

ARAC does not prepare a comprehensive Annual Report, but as a CATSI Corporation (and registered charity with Public Benevolent Institution status with FBT exemption ) it uploads regular corporate reports to the website of the Office of the Registrar of Aboriginal Corporations (ORIC).

ARAC Directors in 2023/24 were Tony Wurramarrba (ceased 30 June 2024) James Durilla, Lionel Jaragba, Elma Yantarnagga, Simone Yantarnagga, [all of whom were on the ALC Board], John Cunningham (resigned November 2023), Simon Longstaff, Russell Barnett, Adam Simpson, and Rodney Tidey. Apart from Tony Wurramarrba and John Cunningham, these Directors are also Directors of the AMT.

In the Directors’ Report provided in its 2024 Financial Statements, the Directors report that during the 2023/24 financial year, the corporation paid a premium in respect of a contract insuring the Directors against a liability ‘incurred by such Director, secretary of executive officer to the extent permitted by the Act. The contract of insurance prohibits disclosure of the nature of the liability to be insured and the amount of the premium’.

Note 6 to the financial report indicates that the insurance costs for the corporation grew from $70,751 in FY 2023 to $169, 273 in FY 2024, an amount of almost $100k.

The statement regarding insurance is somewhat intriguing as it suggests that the insurance company at least may consider that there is a vulnerability to claims against the Directors.  Apart from the normal risks that apply to a charitable corporation, I see two potential possibilities that may have been exercising the minds of the Directors.

The first is the 2022 transfer of responsibility for the township leases on Groote Eylandt arising from the notional reform to the Commonwealth township leasing scheme (I say notional because I do not see the change as an unmitigated positive). If this is the reason for the additional insurance, it represents an additional cost of the recent transfer of responsibility by the Office of Township Leasing to ARAC. (see above), which by rights ought to be sourced from the ABA and not s64(3).

The second potential issue of concern for Directors may be the allegations first raised in the Saturday Paper and which I discussed in two  earlier posts (link here and link here) regarding a 2022 payment of $41m from AMT to ARAC which does not appear to have been deposited into an ARAC bank account. A related concern may be any ramifications arising from the (yet to be specified) referral of certain unknown ALC individuals to the National Anti-Corruption Commission (NACC) (link here).

Groote Holding Aboriginal Corporation (GHAC)

Anindilyakwa Advancement Aboriginal Corporation (AAAC)

Finally, I sought to examine the financial statements for both GHAC and AAAC. GHAC is a key funder of the infrastructure which will support the proposed Winchelsea mine. AAAC is the owner of 70% of the Winchelsea Mine Joint Venture, although as I have pointed out previously, no AAAC Directors are on the Winchelsea Mining Board.

Both GHAC and AAAC failed to hold their AGMs within five months of the end of the financial year as required by the CATSI legislation and have not lodged their 2024 financial statements. They each applied to the Office of the Registrar of Indigenous Corporations for an extension of time, citing the fact that their financial statements were not yet finalised (it is unclear what the reasons for this might be). The Registrar refused each request, pointing out that the rule book for each corporation did not require the audited financial statements to be available for the AGM.

Conclusion

This overview of the 2023/24 annual reports related to Commonwealth regulated corporations involved in ongoing developments on Groote is a useful lens into the complex array of entities engaged in managing, allocating, receiving and utilising the financial payments derived from South32’s GEMCO manganese mine on Groote Eylandt, and intended to benefit the traditional owners. In 2023/24, the ALC had revenue of around $24m to fund its operations and distributed just under $36m in mining agreement payments, a total of around $60m. In 2022/23, the equivalent figure was around $75m.

While much of this expenditure underpins the Groote economy, a significant portion is being allocated to a commercial investment in the proposed Winchelsea manganese mine with significant commercial and other risks. There have clearly been accountability and governance issues arise as evidenced by the May 2023 ANAO report, and a plethora of allegations that neither the Minister, the NIAA, nor the ALC have seen fit to even try to answer. The failure of the AAAC and GHAC (whose accounts are kept by the ALC Royalty Development Unit) to lodge audited financial statements on time suggests governance challenges are ongoing.

My conclusion is that the Minister and her agency have a responsibility to step up and proactively manage the financial and social issues within the ALC and the associated corporations it is assisting. After all, they are the regulator. Their failure to do so to date has increased the risk that the social and economic stability on Groote will begin to unravel, and once that occurs, it will be disastrous for Groote’s population.

I should note for completeness that I have not examined the linkages between the ALC and the NT Government. I expect that similar systemic issues to those identified here would be found to be in play.

In relation to the systemic issues identified here, I have three high level recommendations for the Minister:

·       Undertake a forensic audit across the span of the ALC and its associated entities.

·       Appoint an independent administrator to dig the ALC out of the hole it finds itself in.

·       Initiate an independent review of the administration of the ABA and ALRA, encompassing both the NIAA and the land councils, and focussing on potential legislative reforms to strengthen regulatory oversight and financial governance.

Taken together such a three-pronged strategy would ensure that the regulatory responsibilities of the Commonwealth are fulfilled, and that the NT land councils are fit for purpose in their primary roles of protecting the interests of traditional owners of Aboriginal lands across the NT.

In relation to annual reports, I recommend less gloss and more substance; in particular, in addition to ticking of the checklist of annual report requirements, they should include a succinct and coherent narrative outlining what each entity is seeking to achieve and their assessment of their performance. There is just too much flim-flam in these reports at present, and they have an insidious and counter-productive impact of seeking to distort reality. If citizens are to trust governments, then governments must come clean and be truly transparent.

 

18 January 2025

The Anandilyakwa Royalties Aboriginal Corporation: micro accountabilities; macro policy implications

                                                Each part depriv’d of supple government

Shall stiff and stark and cold appear, like death.

Romeo & Juliet, Act four, Scene one.

 

In a recent post (link here), I wrote about the relationship between the Anindilyakwa Land Council (ALC), the Anindilyakwa Mining Trust (AMT) and the Anandilyakwa Royalties Aboriginal Corporation (ARAC). That post argued, inter alia that the rules governing the board composition of these three entities, and the direction of funding flows under the ALRA framework, operated to ensure that the ALC exercises very strong influence amounting to effective control over both the AMT and ARAC.

In this post I seek to extend that analysis by taking a closer look at ARAC, although the full story of its operations on Groote Eylandt in relation to the direction of royalty distributions towards particular retail outlets, and in relation to its support for the proposed Winchelsea mine, are yet to be revealed.

ARAC’s financial culture

The analysis here is based in part on the provision of access to ARAC’s financial reports for the years 2017 to 2021 by ORIC following a request from me. These reports are yet to be placed on the ORIC website.

Each of the six ARAC financial reports from 2017 to 2022 inclusive include a statement, signed by two Directors and resolved by the Board, outlining the corporation’s purpose as follows:

The Corporation's operations purpose [in its first year] has been, to hold assets and manage statutory royalty equivalents and negotiated royalties in such manners as determined by the Anindilyakwa Land Council, consistent with its goals for effective, responsible and sustainable use of such royalty flows [emphasis added].

This statement appears to make plain that the ALC exercises direct control over the operations of ARAC. While there is no explicit provision of the ALRA that precludes a land council from exercising effective control of a corporation, the requirement in section 35(2) of the ALRA for a land council to disburse section 64(3) funds to a CATSI corporation clearly intends that land councils should not be exercising direct control over the distribution of these funds. Section 23AA (5) which deals with how land council functions are to be performed (in short, fairly!) is also relevant.

The 2023 ARAC financial report included an amended statement that made no mention of the ALC’s role in determining ARAC priorities. This report follows the publication of the ANAO audit of the ALC which identified the influence of the ALC, and its CEO, over related corporate entities.

The extent and specific consequences of the ALC control are impossible to determine without access to ARAC’s financial accounts and board minutes. This is why I have argued, including directly to the former Minister, for a forensic audit of the ALC and its network to be undertaken, a step the Government appears not to have taken to date. But some examples of the consequences of that control can be identified, and are discussed below.

In the ARAC financial reports for FY2017, FY2018 and FY2019, a distinction is made between actual and notional s.64(3) income. While not explained in the FY2017 report, the FY2018 report, which identifies $5.8m in notional s.64(3) distributions, includes an explanation:

The distribution of 5,800,000 from ALC as Royalty distribution to TO’s was not shown in ARAC’s bank account because the transfer was made from the ALC NAB Royalty Trust to ALC’s Royalty bank account.

Prima facie, this is a direct breach of section 35 by the ALC. Of course, to the extent that the ALC determines the end use of the actual s.64(3) payments, they achieve the same outcome as the ‘notional’ payments that prima facie breach section 35. The reason we can draw such a conclusion is that such payments deprive TO’s of actual agency while extolling their ostensible involvement.  

Once the degree of ALC control is apparent, other expenditures in the financial reports begin to look intriguing at best, and ominous at worst. I mentioned the issue of the use of ARAC to subsidise ALC employment costs in my previous post, so will not go over that ground again, apart form noting that it appears irregular at best and a breach of the legislation at worst.

However, it is worth focussing on ARAC’s use of consultants. Section 37(8) of ALRA requires a land council to list the consultants it uses in the exercise of its functions and the amounts paid. The ARAC financial reports from 2017 to 2023 identify consultancy expenditures totalling in excess of $12m. To the extent that these represent ALC priorities and not TO priorities, accountability related to the consultants and their payments are obscured, and should be listed. Indeed, it might be argued that they represent a breach of s.37(8) by the ALC.

Finally, in my previous post I noted that the payment of $41m from the AMT to ARAC did not appear to be accounted for in the ARAC 2022 financial statements. With the availability of the previous year’s reports, it was possible to track the recording of an amount of $39,147,311 as an ‘AMT infrastructure debtor’ in the ARAC 2020 and 2021 financial reports. In 2022, the year that the AMT paid ARAC $41,324,957, there was no record in ARAC’s Financial statements of any such grant being received. However, there was a line item now called Payment in Advance (whereas it was previously termed AMT Infrastructure Debtor) which showed an outstanding debt of $39,147,311 in the previous year, but nil in the current 2022 FY. Rather than resolving the problem, this treatment of the outstanding commitment, whether intentional or not, obscures the recipient of the payment while acknowledging that the commitment no longer applies. [The discrepancy between the amount of $39m and $41m appears to be related to differing CPI treatments of the original commitment by the AMT and the ALC].

ARAC and the Groote Township Lease

There is one further policy issue that in my view requires consideration by the Minister and her agency given the level of influence exercised by the ALC over ARAC (and I suspect various other corporations).

The Chairman’s report in the ALC Annual Report 2022/23 provides the following update:

Another key milestone during the reporting period was the transfer of the Groote Eylandt Township Lease under ALRA S19A from the Commonwealth Executive Director of Township Leasing to the Traditional Owner (TO) led Anindilyakwa Royalties Aboriginal Corporation (ARAC) in October 2022, with the consent of the Minister for Indigenous Australians, the Hon Linda Burney MP.  The Hon Minister Burney attended the significant event held on Groote Eylandt on 14 November 2022, to commemorate the transfer of the Groote Eylandt Township Lease and for the signing of the Health and Wellbeing LDMA Implementation Plan.

The 2022/23 Annual Report of the Office of Township Leasing (OTL) (link here) includes some basic information regarding the transfer.

I have not been able to find a copy of the actual lease documentation for Groote Eylandt nor the sublease, so will confine my comments to matters of principle. In the Minister’s comments celebrating the transfer of the sublease (quoted in the OTL Annual report) she stated:

‘Township leasing in the Northern Territory is an important vehicle that drives Aboriginal decision-making in communities and provides an opportunity for whole-of-community management over economic activity on Aboriginal land. This historic transfer reminds the country of the strength of existing leadership structures in First Nations communities.’

To the extent that the ALC effectively controls ARAC, (and more worryingly, to the extent that a small set of individuals within the ALC dominate its decision-making) then the Minister’s aspiration for whole of community management over land tenure will be thwarted. It is unclear what the impacts might be, and they may well be invisible insofar as over the medium term they may be comprised of lost opportunities more than opportunities taken that fail. My fundamental point however is that given the evidence for substantial effective influence over ARAC by the ALC, and the hands-off regulatory oversight of the NT land councils by Ministers and the NIAA in recent years, there is a strong case for strengthening regulatory engagement between NIAA, ORIC, the OTL and the land councils.

Sum Up

ARAC is a significant element in the broader ALC strategy to shift the allocation of mining payments towards economic development. My previous post and this post provide clear cut evidence that the ALC exercises effective control over ARAC’s operations at least in terms of key financial flows.

These posts have identified several potential breaches of ALRA’s financial provisions, and perhaps more importantly pointed to areas where the implicit assumptions that underpin the current legislative framework applicable to land councils (and perhaps more broadly to native title bodies such as PBCs) are no longer applicable. Standards of governance and accountability oversight across the land rights policy domain, and I suspect more broadly, have in my view significantly declined over recent decades.

My core argument is that the appropriate response to accountability lapses should not be to curtail Indigenous agency. Rather, it is to point to the political reality that self-determination and Indigenous agency will always be threatened by two potential enemies: on one hand by external forces seeking to constrain and ultimately eliminate First Nations’ agency and self-determination; and on the other hand by internal actors (who may be either Indigenous or non-Indigenous, and/or malign or just weak) who seek to pursue individual advantage at the cost of a broader public or community interest. Where shortfalls in internal governance lead to accountability failures, and where the organisations involved are significant and high profile, there is a political risk that antithetical external forces will take advantage and use poor accountability to undo the hard work of those who have built up institutions to expand Indigenous inclusion.

If Indigenous interests wish to strengthen the reforms that have delivered institutional frameworks that recognise Indigenous rights, such as ALRA, the Native Title Act, or agreements such as the National Agreement on Closing the Gap, they must invest advocacy support in sustaining them. The optimal strategy for Indigenous interests is to ensure that significant organisations pay serious attention to the quality of their governance, and advocate for finetuning reforms as required. For governments interested in maintaining stable institutions and broader social cohesion, the optimal strategy is to invest in proactive regulatory engagement.

If the current Commonwealth Government does not get on top of the systemic issues causing significant internal corrosion to the NT land rights system, and particularly to the systems for royalty distribution, then it will leave the way clear for a future Government to potentially take much more drastic action that could weaken Aboriginal rights and diminish the potential for Aboriginal land owners to control their own future.

Ministers (whether state or Commonwealth) with responsibilities in the Indigenous Australians domain who allow governance and accountability standards to decline across their portfolio do their own reputations no favours, and potentially harm rather than enhance the interests of First Nations.

 

3 August 2024

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 GEAT 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 All four 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 Mutual Trust, an established and highly experienced financial services firm; 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 ARAC Board meetings and probably implementing ARAC Board decisions (including managing income and payments) are likely part of the ALC's Royalty Development Unit, 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 in principle a mining agreement on Aboriginal land, and the formal agreement was approved by his successor in March 2021 (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 attention 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.

Addendum 140125

Strike through and highlighted text represent corrections made on 25 January 2025