Ministerial appointments in the Indigenous Australians portfolio: time for reform

 

There is a law in each well-order'd nation
To curb those raging appetites that are
Most disobedient and refractory.

Troilus and Cressida Act 2, scene 2

 

This post is assesses the recent Ministerial appointments in the Indigenous affairs portfolio, and makes a series of reform recommendations.

 

Appointments to Board positions in the Indigenous Australians portfolio generally fly under the radar. Yet, they involve the management and oversight of billions of dollars in Indigenous-directed assets, and bestow considerable power and influence, not least the power to appoint Individuals to the Boards of myriad subsidiaries of statutory corporations, which themselves control substantial financial resources. These appointments, and the actions of Boards, receive far less media attention than Ministers and senior bureaucrats. Accordingly, the appointments of Directors to government owned corporations, and the actions of those corporations, deserve far more attention than they normally receive both by the media and (dare I say) academia.

 

Perhaps the most consequential recent appointment was that of Ms Jodi Broun as CEO of the NIAA. She has a term of five years, which took effect on 14 February. The Minister’s 12 January 2022 media release provides some biographical background (link here). Broun is an experienced public servant and I expect her to make a positive and well informed contribution to the administration of NIAA and the Indigenous Australians portfolio.

 

In relation to the Indigenous Land and Sea Corporation (ILSC), the Minister has made a number of new appointments (link here, link here). Following the expiry of the term of the former Chair, Mr Eddie Fry, Mr Ian Hamm has been appointed. A Yorta Yorta man and experienced public servant, Mr Hamm’s three year term began on 1 December 2021. Also appointed were Ms Gail Reynolds-Adamson, Ms Kate Healy and Mr Nigel Browne. On 15 February, the Minister announced that Ms Kristy Masella would join the ILSC board for a three year term beginning 16 March 2022. On 7 April 2022, the Minister announced the reappointment of Mr Roy Ah-See, but did not mention the term.

 

In relation to Indigenous Business Australia (IBA), the Minister announced on 21 December 2021 the appointment of Mr Richard Callaghan from South Australia, and the reappointment of three Directors, Mr Eddie Fry (chair), Mr Rick Allert, and Ms Shirley Macpherson. The Ministers media release made no mention of the terms of appointment (link here).

 

Shortly after the Minister’s December announcement, on 21 December 2021, I published a post regarding these reappointments (link here) based on the absence of any information regarding the terms of the reappointments. Information in the Government Business Directory at the time indicated that the reappointments would expire in February 2022. In that post I focussed on a number of unanswered questions regarding serious governance issues within the ILSC Board and the Minister’s own acknowledgement of his loss of confidence in Mr Fry as Chair. It now transpires that the Government Directory entry for the IBA Board has been updated to show that the terms of appointment for the reappointed IBA Directors are not three months, but three years, ending on 17 December 2024 (link here). With regard to that eventuality, my previous post made this comment:

A more worrying possibility is that the Ministers recent announcement applies to the post February terms of the three Directors. If so, this would lock in a serious failure of good governance principles.

For the full context of this comment, I recommend readers consult my earlier post (link here) and the links included there.

 

More recently, the Minister announced the appointment of Mr Joshua Gilbert to the IBA Board (link here). While the media release makes no mention of the term, the Government Directory indicates it is a three year term.

 

The Minister has also made a number of other recent statutory appointments. Ms Vonda Malone has been appointed as CEO of the Torres Strait Regional Authority (link here), Ms Tricia Stroud has been appointed as Registrar of Indigenous Corporations (link here), perhaps the key regulatory appointment in the Indigenous Australians portfolio. The Minister also announced the appointment of Mrs Suzanne Hullick and Mr Justin Ryan to the Interim Board of the Northern Territory Aboriginal Investment Corporation on 6 April 2022 (link here). For a discussion of some of the risks facing this new corporations, see my earlier November 2021 post (link here).

 

Other recent non-statutory appointments made include Ms Fiona Cornforth and Ms Catherine Liddle as co-chairs of the Indigenous Expert Group guiding the implementation of Supporting Healing for Families (link here) and the reappointment of Mr Daniel Bourchier to the Board of Outback Stores (link here).  The Government also announced the appointments of Ms Gina Castelaine and Ms Cara Peek, two new members of the revamped Indigenous Reference Group on Northern Australia, on 24 December 2021 (link here). This body has recently been renewed by Minister Littleproud after it was effectively sidelined by Minister Pitt. To date, there has been no critical assessment of the success or otherwise of the IRG in advancing the interests of Indigenous Australians within the Government’s Northern Australia policies. The processes for the appointment of members of the IRG are particularly opaque, it not even being clear which Minister makes the appointments, and which portfolio is responsible for taking any policy recommendations forward.

 

Discussion

 

Given the number of Ministerial appointments, the significance of the bodies they are charged with managing, and the powers bestowed on Boards to appoint Directors to subsidiaries of Commonwealth corporations, the information provided by governments should be much more extensive and accessible than it is.

 

There is no requirement for a Minister to announce appointments, and as is apparent from a close reading of Minister Wyatt’s announcements, there is no requirement for the Minister to identify the term of the appointments, nor the basis of appointments (merit based selection process or ministerial selection). Nor is there any requirement for the Minister (or appointees) to publicly identify potential conflicts of interest nor to explain how they are to be managed. The quality of transparency in relation to the management of portfolio bodies is underwhelming, and contributes to the creation of an environment where the public interest can be set aside in favour of political agendas and machinations.

 

Issues that I would point to as potential or actual issues of concern in the Indigenous Australians portfolio include:

·         attempts to co-opt Boards to ensure that they will give favourable consideration to Ministers’ views and wishes;

·         attempts to stymie future governments’ capacity to bring new expertise or skills onto Boards; or to build in a level of internal conflict beyond a Ministers term of office to ensure a continuity of policy;

·         the use of appointments as rewards; and

·         making appointments that assist in moderating the capacity of key intermediary organisations to exercise truly independent judgment on issues that may come before the intermediary in the future. 

 

I have necessarily articulated these issues at an abstract level, and note that they often involve what might be termed preparatory moves by a minister akin to a general positioning troops on high ground in advance of a possible battle. In other words, they involve strategic political management and do not necessarily involve inappropriate action. Nonetheless, to the extent that they occur, they are highly likely to be inconsistent with the public interest.

 

A particular issue of more serious concern is the reappointment of Mr Fry to the IBA without any explanation from the Minister in regard to his previous loss of confidence in him at the ILSC, and without any formal response being published to the recommendations of the Thom report. This report commissioned by the Minister only came to light as a result of an FOI request. The previous ILSC Board had also lost confidence in Mr Fry (expressing a formal lack of confidence in his leadership on a number of occasions). Adding to the aberrant sense of distorted reality around the Minister’s decisions regarding the ILSC and Mr Fry was the Minister’s decision to reappoint Mr Ah See, — one of those ILSC Board members who had expressed deep concern with Mr Fry’s governance approach — to the ILSC Board. Mr Ah-See is widely respected in Government circles and was a former co-chair of the Prime Minister’s Advisory Council under the current Government (link here). Rather than setting a benchmark for standards of governance in the portfolio, the Minister seems to be having a bet each way. The real issue here is this: is the Minister focussing on the wider public interest, or has he cobbled together a shabby compromise due to pressure from deeper political forces in play protecting Mr Fry? My money is on the latter. 

 

Other issues raised by these appointments include the overlap between government activities in general and the appointments of some individuals. For example, Mr Bourchier is an ABC journalist, and Ms Kate Healy is a partner in PwC’s Indigenous consulting arm. Both of these organisations can be expected to have dealings of one sort or another with the Minister and his portfolio. While both individuals appear eminently qualified for their appointed roles and it seems unlikely that either individual would place themselves in a position of actual or potential conflict of interest, there is a risk that the Government is attempting to exercise a more nuanced form of influence directed to subtly encouraging a pro-government attitude in matters of a general nature within both the ABC and PwC Indigenous Consulting.

 

At a more systemic level, the lack of diversity in appointments suggests the risk of governance failures is built into the present selection processes.  The current Government appears to have made many appointment decisions that suggest a process of churn has been underway from within a small group of appointees, By 2025, Mr Fry and Mr Allert will each have had in excess of ten years as remunerated appointees on the IBA, ILSC, and various Commonwealth subsidiaries such as Voyages Pty Ltd. Ms Reynolds-Adamson was previously a Director of IBA for eight years from 2006 to 2014. Mr Joseph Elu who (understandably in my view) resigned from the ILSC in the middle of its governance issues (clear evidence of the cost of the dysfunction) had previously been Chair of the IBA for 11 years. Mr Ah-See had been a Director on the IBA before being appointed to the ILSC. Ms Shirley Macpherson was previously a longstanding Chair of the Aboriginal Development Commission (forerunner of IBA), a longstanding Chair of the ILC (forerunner of the ILSC), and is now a member of the IBA Board. By 2025, she will likely have accumulated around thirty years on key Boards in the Indigenous portfolio. Taken together, this accumulation of repeated appointments suggests an extremely serious level of insularity and resistance to bringing in fresh talent. It is no wonder that the ILSC experienced the internal crisis of governance discussed above.

 

To be clear, I am not suggesting that the individuals appointed are necessarily unqualified, nor that this is an issue limited to the present Government. Lax selection processes have an inbuilt tendency to encourage Ministers to re-appoint from within a small select group of potential appointees. I am suggesting, however, that this is a real issue, and that it is unacknowledged and under-recognised. To the extent that poor governance is the result, Indigenous Australians are the losers.

 

So what are the solutions?

 

Listed below are some high level ideas that would in my view improve the systemic quality of corporate governance within the portfolio bodies across the Indigenous Australians portfolio. While I am under no illusions that governments of any stripe will be attracted to reforms of this kind, I do consider that these are issues that the Coalition of Peaks, and the yet to be established Indigenous Voice might take up and prosecute.

 

First, there is a need for the establishment of a legislated multi-partisan/independent selection committees that proposes a merit based short list to the minister for each vacancy on the Board of a portfolio body. The process used for the ABC (link here), and largely ignored by recent Prime Ministers, is one potential model.

 

Second, I would go further and propose that any legislation should provide that where Ministers ignore an independent selection committee shortlist in making an appointment, the nominee should be required to stand down with a change of government.

 

Third, there should be a legislated requirement in the First Nations portfolio for the NIAA to maintain a current, comprehensive and publicly available register in one location on its web site of all Ministerial appointments and re-appointments to portfolio bodies over the previous twenty years. Further, when Directors are listed, a footnote should list all prior appointments within the portfolio (and in related portfolios e.g. Indigenous health). A separate register of short Director biographies should be linked to the main register.

 

Fourth, there is an urgent need for much greater transparency over the appointments of Directors to subsidiaries of Commonwealth statutory corporations, their terms and remuneration, and any identified potential conflicts of interest. Indeed, these appointees should be included within the register recommended above. Further, there is a need for much greater financial transparency over these entities. To mention just one example, they are Commonwealth owned bodies, yet access to their accounts is only available from ASIC upon the payment of a fee. Indigenous Australians in particular deserve to have full access to this information without a fee. This could be achieved by a requirement that all documents with ASIC should also be made available on the relevant websites.

 

Fifth, an independent body such as the Law Reform Commission should be tasked to undertake a short and sharp inquiry with public submissions to draw out any other reforms that might be required to appointments processes for portfolio bodies in the Indigenous Australians portfolio.

 

Finally, I would note that one of the reasons for improving the quality of governance in key portfolio bodies such as the ILSC and IBA in particular is that it is clear to me that their shelf life as statutory corporations within the Australian government system is within one or two decades of coming to an end. In a chapter in a recent book on Self Determination (link here), I argued the case for transitioning these bodies into a form of First Nations ownership and control. Amongst the key preconditions for such a process is to ensure that they have been governed effectively in the periods leading up to such a transition, and that their Boards are truly governing these corporations in the interests of First Nations rather than facilitating the political machinations of Governments. Any such transition will be complex and will require careful planning from within the existing corporations. In turn, this will require Boards that are prepared to think long term, and undertake the hard work of persuading governments of the potential benefits of giving up control of these key institutions.

 

Unfortunately, I have very little confidence that Australian governments, present and future, or the current Boards in the Indigenous Australians portfolio would bring the level of vision required to even start this process, let alone bring it to a constructive conclusion. This is why Board selection processes are strategically important for First Nations interests, and why the Coalition of Peaks and the future Voice should work together to persuade the Australian Government to change these processes for the better.

 

IBA appointments: More questions than answers

 

The Minister for Indigenous Australians has this week announced new appointments to the Board of Indigenous Business Australia (IBA) (link here). There is only a single new appointment, Mr Rick Callaghan (link here). On its face, this appears to be a sensible appointment of a qualified and experienced Director.

 

The Minister has announced the reappointment of the Chair Mr Eddie Fry and two other existing Directors. The Minister’s media release omits mention of the terms of the new appointments, but notes that each of the three re-appointees have been on the IBA Board sine 2014.

 

There are a number of intriguing issues at play here. Good governance principles would normally dictate that after seven years, there would be significant  rejuvenation of the Board. This might particularly apply to the Chair, not least as the Minister previously expressed a lack of confidence in him in relation to his chairmanship at the ILSC (link here). Mr Fry was recently replaced as Chair of the ILSC (link here). The Minister has never explained how it was that Mr Fry lost his confidence as the ILSC Chair, but was able to stay on for the best part of a year as Chair of ILSC and has now been reappointed as IBA Chair.

 

Second, the IBA page on the Government’s online directory (directory.gov.au) lists IBA’s Directors and their terms. In relation to the three reappointments, the Directory includes start dates of 1 December 2021 and end dates of 28 February 2022. The page indicates that it was last updated on 25 October, but that may be an error. In any case, it appears that the three reappointments are for only three months.

 

So what might be the explanation for this ?

 

Perhaps the Minister’s reluctance to mention the appointment terms stems from a concern that by announcing what are clearly interim arrangements, it might suggest that he has been unable to obtain Cabinet approval for his preferred choices, and thus lacks influence within the Government.

 

An alternative , and more cynical, explanation might be that the Government is determined to make new appointments before the election that extend through the term of a potential new Labor Government.

 

A third explanation might be that the Minister just didn’t get his act together in time to make new appointments and was forced into making interim appointments.

 

None of these explanations reflect well on the Minister and has administration of the portfolio. It would have been better if the Minister took interested citizens into his confidence and provided a fuller explanation for his decisions.

 

A more worrying possibility is that the Ministers recent announcement applies to the post February terms of the three Directors. If so, this would lock in a serious failure of good governance principles.

 

Finally, the fact that the Minister has left us unclear as to what he has actually done, while purporting to keep us informed of his actions, reflects poorly on his commitment to open government and the highest quality of public administration.

 

The deeper issue that underlies the process of appointments to statutory offices within the Indigenous Australians portfolio (and no doubt beyond) is the increasing levels of politicisation of appointments.

 

It is time that the Parliament stepped up and legislate for much more transparency around the basis for appointments. The fiasco within the Board of the ILSC over the past two years (link here and link here) demonstrates unequivocally that the present system is broken. These most recent interim appointments confirm that conclusion. In particular, while there is a case for Ministerial decision making, there is a need for the establishment of multi-partisan/independent selection committees that propose a merit based short list to the minister for each vacancy. The process used for the ABC (link here) and largely ignored by recent Prime Ministers is one potential model. I would go further and propose that where Ministers ignore an independent selection committee shortlist, their nominees should stand down with a change of government.

 

Statutory corporations such as IBA are given independent remits for a reason. Governments should not be able to control their activities by default through informal influence over appointments.

 

 

 

 

The future of the Ayers Rock Resort: a soothsayer’s prognostications

 

How oft the sight of means to do ill deeds

Makes deeds ill done

King John Act 4, scene 2.

 

The ILSC Annual Report 2020-21 released on 27 October 2021 (link here) includes some interesting information on the state of play with the Ayers Rock Resort (ARR), owned and managed by ILSC subsidiary Voyages Indigenous Tourism Australia Pty Ltd.

 

ARR was purchased by the ILC in 2010/2011 for $300 million in contentious circumstances. According to the RBA inflation calculator (link here), $300m in 2010 equates to $360m in 2020. The then Board’s vision in pursuing the purchase was ostensibly to provide Indigenous interests with an iconic business asset at the symbolic heart of the continent. The ARR and its associated town infrastructure of Yulara had been established some decades before with substantial financial assistance from the then NT Government. The ARR’s location, control of the Yulara airstrip, and effective control over development activities within Yulara provide ARR with monopolistic commercial leverage over tourist access to Uluru.

 

While the strategic insight had merit, the issues in contention revolved around whether the substantial price paid by the ILC was excessive, and whether the ILC had the financial capacity to undertake the acquisition. There were also questions of alignment between the ILC’s objectives and the actual aspirations of the Anangu traditional owners (TOs) of the Yulara land. At a more fundamental level, there is an as yet unresolved question over whether a single purpose large scale commercial enterprise located remote from developed infrastructure and significant surrounding economic activity will ever have the robustness and resilience to develop into a long term sustainable and commercially viable enterprise. This is the question that has been at the heart of the aspirations for ‘northern development’ for well over a century.

 

My own view is that the price paid was excessive and the ILC did not have the financial capacity to fund the purchase. Over the decade since, the financial commitments arising from the purchase have imposed a significant constraint on the ILC’s ability to undertake its core statutory remit. That is, to acquire land for dispossessed Indigenous groups, and to provide assistance in land management for those with access to land through the multiple land rights and native title mechanisms in place across the nation. On the question of TO aspirations, it is a complex and evolving issue that I am not in a position to ascertain. My intuition however is that TOs have mixed feelings, appreciating the jobs and commercial opportunities arising from the influx of tourists, while not valuing the social and cultural impacts of tourists on their country. As for the fundamental question related to northern development, the answer so far has been that without substantial government subsidies, sustainable commercial survival is most often a chimera.

 

In 2010, the then ILC Board decided to proceed with the purchase of ARR against the wishes of the two Ministers responsible for the ILC legislation, the then Ministers for Finance Penny Wong and Indigenous Affairs Jenny Macklin. At the time, the ARR had been on the market for some time, and the former owners had allowed it to run down. The ILC funded the purchase through substantial borrowings. The purchase also involved a commitment by the ILC to offer 7 percent equity in the ARR to a local Aboriginal corporation, Wunu Unkatja (WU) after ten years. WU are currently considering whether to take up the offer. The ILC’s purchase was strongly supported by the then Opposition Shadow Minister Nigel Scullion (he was a Senator for the NT), and once he became Minister in 2013, he strongly resisted the attempts of the new ILC Board to review and address the implications of the previous Board’s decision to acquire ARR. Since the ILSC is a statutory corporation, the Commonwealth Government’s status as the ARR’s effective owner and ‘funder of last resort’ along with its ‘head in the sand’ approach since 2013 means it cannot avoid responsibility for future outcomes.

 

Ten years on and the ILSC’s ownership of ARR has been demanding on a number of fronts, most recently arising from the impact of Covid 19. The 2020-21 financial statements for the ILSC value the ARR at $390 million although the ANAO auditor went out of his way to point out that this valuation is highly sensitive to the assumption of a return to pre-covid occupancy levels and room rates within two years. Over the past decade, the ILSC has invested at least $100m and probably closer to $150m in capital upgrades to the airport and all of the individual hotels that comprise ARR (see list below). The most recent Annual Report notes the completion of a number of major refurbishments (page 88). The size and age of the ARR’s infrastructure makes it inevitable that a process of ongoing and significant capital investment will be required for as long as the asset operates. The ILSC continues to carry $102.5m in debt related to the original purchase, and some $27m from the NAIF (link here) ostensibly related to the upgrade of the Connellan airport. Last financial year the ARR operated at an underlying loss, offset by Covid related subsidies. Voyages net loss for  2020-21 was $7.6m (page 87).

 

In real terms, and using conservative estimates, over the past decade the ILSC has spent at least $460m and still owes a further $127m on ARR, an asset worth $390m today. In round figures, the ILSC is at least $200m out of pocket (albeit this is a loss that remains uncrystallised). Moreover, it is quite clear that the ARR will continue to be a challenging and expensive asset to manage going forward.

 

These challenges are complicated by the statutory requirement in section 191D of the ILSC’s legislation (link here) that limits its acquisition functions to purchasing land for granting to Aboriginal corporations, and where circumstance require the ILSC to acquire the land directly, it is required to divest the land within a reasonable period. So, as the ILSC annual report (page 90) notes:

The ILSC’s commitment to its mandate of divesting acquired and improved land will see continued efforts to rebuild the value and financial sustainability of Voyages’ assets in readiness for future granting. The subsidiary will continue to focus on infrastructure improvements, operational efficiencies and Indigenous benefits.

 

The frank admission that the ‘value and financial sustainability’ of ARR requires rebuilding is significant and worth contemplating. Having now held direct title over the ARR for ten years, the question arises whether continued delay in divestment of the asset (which looks more like a liability) accords with the statutory requirement to divest within a reasonable period. There have been calls for early divestment for a number of years. See for example this 2015 Guardian article citing calls by Mick Dodson, and confirming that the ILC and the Central Land Council had been in discussion over the issue (link here).

 

While the genesis of this problem can be traced back to the original flawed decision-making by the ILC Board in 2010, finding a solution falls squarely on the current Directors, as well as the responsible Ministers. As explained below, the pressures to find a solution are likely to grow over the coming years.

 

The recent ILSC Annual Report contains (to my knowledge) the first formal indication that the ILSC Board is now focussed on the divestment issue. The Annual Report notes rather flatly (page 107) that the Board had established the ‘Project Aurora Steering Committee’:

The Project Aurora Steering Committee supports the ILSC in developing a pathway to divestment for the Ayers Rock Resort, land and business assets, including providing guidance on engagement with traditional owners. The Committee was established by resolution of the ILSC Board on 14 April 2021.

 

One very real constraint going forward – beyond Covid – will be the impact of Australia’s cooling strategic relations with China and the resulting likely fall off in the previously significant and growing Chinese tourism market, where over 50 percent of all Chinese tourist to the NT visited ARR. (link here).

 

Another constraint, perhaps the most significant, is finding a potential Aboriginal corporation with the skills, capability and financial resources to take over the ARR. At the moment, the only potential recipient would be Centrecorp, a development corporation closely associated with the CLC (link here). The risk for Centrecorp would be the uncertain, but potentially significant ongoing capital costs associated with running the ARR whether or not it is making a profit or a loss.

 

The ILSC Annual Reports and other corporate documents provide very little information on the strategic options being considered. Accordingly, it might be of use if I – in my role as an experienced soothsayer –  have a go at listing the options.

 

Options for solving the ARR divestment issue

 

Option one: sell the ARR asset. The advantage would be to cut the ILSC’s losses, which are likely to take many years to recover, and in some potential scenarios may worsen. The political reality however is that there would be strident opposition from a range of sources to relinquishing the Indigenous branded asset in such an iconic location. No Minister will want to oversee its sale to non-Indigenous owners.

 

Option two: reduce the ILSC equity exposure. This is similar to option one, with the added complication of adding complexity to future management, but without reducing the likely political reactions.

 

Option three: move to divest the ARR to an Aboriginal and Torres Strait Islander corporation. The challenge is to find a corporation with access to the financial resources and management capabilities to take on what is an extremely complex business, subject to multiple risks, and revenue variability. Most importantly, given the ARR’s ANZ loan (with an outstanding balance of $100m) will fall due in 2025, and on current projections will need to be rolled over. Any recipient Aboriginal Corporation will need to be prepared to take on what is a very significant liability along with a highly risky asset, as well as having the capacity to manage relations with the local TOs who will expect to be involved as co-owners and co-managers.

 

The soothsayer’s prognostications

 

Clearly, there is no good option available. Ideally, the ILSC would paydown the outstanding loan before divestment. However, doing so would likely require the best part of another decade of ILSC ownership, financial uncertainty, and serious financial impact on ILSC core activities. As I pointed out in a recent academic article, (Unmet

Potential, esp. pages 113-4 in Rademaker & Rowse (eds) Indigenous Self-Determination in Australia, ANU Press, link here), the ILSC has funded much of its ongoing operations through selling down its previously substantial cattle herd. This is a strategy that is both short-sighted and which will not be available forever. Without pre-emptive action, the day is drawing close when the ILSC and importantly the Commonwealth Government will confront the reality that retaining ARR within the ILSC will drastically cut back its capacity to fulfill the ILSC’s core statutory remit.

 

Given this background, it seems more than a coincidence that the Commonwealth has recently introduced legislation to establish a Northern Territory Aboriginal Investment Corporation (NTAIC) as the key part of a suite of amendments to the NT Aboriginal Land Rights Act. The amendments have been codesigned with the NT land councils, and are, in my view, conceptually flawed. In a separate post, I will link to key submissions to the Senate Committee when they become available.

 

While it is unclear whether the land councils have been appraised of, or have considered, the possibility that the NTAIC will be asked to take over the ARR, it is inconceivable to me that the Commonwealth has not given this option serious consideration. The advantage for the Commonwealth would be to shift the ownership to a subsidiary of the NTAIC comprised potentially of an assemblage of smaller TO corporations with minority holdings. Importantly, while technically it would remain under Commonwealth control and ultimate ownership, any future financial recourse required to ensure the ongoing viability of the ARR would be made from pre-existing appropriations made to the ABA rather than from new appropriations. This would reduce the Commonwealth’s overall contingent liability. Conceivably, the Minister could also use ABA funds to pay off the ANZ loan either before or as part of the divestment transaction.  

 

The apparent advantage to NTAIC (and the land councils) would be that at face value, the NTAIC would increase its capital base by around $400m, with the potential to grow significantly over the coming decade. On the downside, that potential comes with very substantial commercial uncertainties and risk, and may well diminish further the funds available to NTAIC for distribution to thousands of potential beneficiaries across the NT. And it may also come with a net reduction in ABA funds available for distribution ot Aboriginal Territorians into the future.

 

If correct, these prognostications suggest a reason for the secrecy and haste surrounding the current legislative process. They also add weight to the case for much more rigorous scrutiny of the Government’s NTAIC proposals.

 

Appendix: Incomplete list of selected capital costs since 2011

$43m  2012 Refurbishment of Sails in the Desert and Uluru Meeting Place (link here).

$7m    2017 Tjintu solar field: (link here);

$27m 2019 Connellan airport upgrade (link here);

$?       2021 completion Sails in the Desert bathroom refurbishment (228 rooms) Ann. Rpt. p.88

$?       2021 final refurbishment and upgrade of five campground amenity blocks Ann. Rpt. p.88

$?       2021 refurb Connellan airport amenities; expansion security screening area Ann. Rpt. p.88

This list is the basis for my assessment that at least $100m has been spent on capital upgrades at ARR since its acquisition by the ILSC in 2010/11.

The native title briar patch

 

O how full of briars is this working-day world

As You Like It, Act 1, Scene 3

 

A recent procedural decision by Justice Mortimer of the Federal Court shines a light on some of the more difficult issues which continue to challenge the ‘on the ground’ operations of the Native Title Act.

 

The case name is Sturt on behalf of the Jaru People v State of Western Australia [2021] FCA (link here). The decision deals with a number of recent determinations and claims in the Halls Creek region of Western Australia, and in particular, the failure of claimants to reach agreement on the establishment of relevant Prescribed Bodies Corporate (PBCs), and in particular, agreement on their membership. PBCs are the corporate entities established in accordance with the NTA to hold title to areas that are the subject of successfully determined native title claims.

 

For those interested in the legal technicalities, I refer you to the judgment which is admirably concise and succinct. The focus of this post is on the ancillary policy issues that support and underpin the implementation of the processes outlined in the Native Title Act. While this judgment relates to only a handful of claims, the policy issues that flow form these cases apply more generally across Australia, and affect scores if not hundreds of native title determinations and claims.

 

The fundamental issue that the Court is grappling with is the inability of the native title holders and claimants to agree amongst themselves in relation to the translation of traditional rights and responsibilities for country into modern legal forms stipulated by the NTA and its subsequent interpretation by the courts. Or to state it most bluntly, which individuals are members of the PBC, and thus entitled to participate in decisions relating to hte relevant country. These are fundamentally anthropological issues, shaped by internal community politics, the history of colonisation and the advent of modernity in all its forms. I do not suggest that there are easy answers, and indeed, as a non-legal reader, I was impressed by the Courts sensible, sensitive and yet robust approach to handling the reality of these disagreements. My own view is that over and above the exigencies of local politics, the reality and ongoing impacts of colonisation and the avalanche of modernisation in technology and communications, social mores, global perspectives, and rapid mainstream culture change inevitably creates serious challenges for today’s native title holders in working simultaneously within a system of traditional rights and responsibilities regulated by a mainstream statute and legal system.

 

Where I am most critical is in the failure of governments over decades to establish the robust and effective support systems that would facilitate building Indigenous capabilities to begin solving these inevitable challenges. These are systemic policy failures, and receive very little attention in public discourse and debate.

 

The present case points to a number — but not all — of these systemic issues, albeit without highlighting them; indeed, it is almost as if the Court sees these policy constraints as part of the furniture, to be accepted as a reality and worked around.

 

Issue one: The ILSC as a default PBC

The Court addressed the fact that in relation to two determined claims (Ngarrawanji #1 and Ngarrawanji #2 determined in May 2019 and July 2020 respectively) there was as yet no PBC nominated. The Judge noted:

16    There was no sign that a PBC was likely to be nominated because of the conflicts in the group. So the Court asked Judicial Registrar McGregor to contact the Indigenous Land and Sea Corporation (ILSC) to give the Court an affidavit about whether the ILSC could be nominated under the Native Title Act 1993 (Cth), as the PBC. Everyone accepts, including the ISLC, that the law gives the ILSC this job – to be a PBC where native title holders do not nominate one themselves. But in the 10 years since it has had this job, the ILSC has never been appointed as a PBC.

 

17    The Court held a case management hearing on 16 February 2021. Some of the members of the Ngarrawanji #1 and #2 applicant spoke at that hearing. The ILSC briefed a barrister to appear and he spoke on behalf of the ILSC. He told the Court the ILSC felt it needed more time to prepare to perform its role as a PBC, but it was willing to do so if the Court decided that was what should happen.

 

As a former CEO of the ILSC, I am incredulous that a Commonwealth statutory corporation briefed a barrister to request more time to prepare to undertake a role that has been within their remit for close on a decade. Of course, the ILSC is currently facing a crisis of governance as documented in this post (link here) and the Minister appears incapable of resolving the issues that have clearly bedevilled the organisation for at least ten months (link here). These issues may have played a role in the ILSC’s apparent reticence. So too may the more practical issues of finding qualified staff with the skills to engage on the ground, funding the required administrative processes including convening meetings, consulting geographically disparate members, and preparing agenda papers and implementing PBC decisions. Standing up a PBC from scratch is expensive!

 

Issue Two: funding for Native Title Representative Bodies.

The Court noted (without commenting one way or another) on the fact that many Aboriginal people in the region were not happy with the Kimberley Land Council (KLC), the Native Title Representative Body for the Kimberley region. Its functions in relation to native title are listed on its web site (link here). The KLC works in the liminal space between traditional conceptions of land ownership, rights and responsibilities on the one hand, and the mainstream system of native title on the other. It inevitably has to span and ultimately make decisions regarding competing contentions of claimants for title. It is thus not surprising that it is the subject of criticism by people on the ground.

 

The Court made a number of comments regarding the resources available to the KLC. In relation to the option of mediation over establishing a PBC, the Court stated:

24    The mediation may not happen until June 2021 because of limits on the funding available to the Kimberley Land Council to support native title holders participating in the mediation (and also using the services of Dr Redmond [an anthropologist]).

 

In its conclusion, the Court stated:

44    The Kimberley Land Council has attempted to assist in a number of ways, but it is clear that many people in the East Kimberley are frustrated with the Kimberley Land Council’s role in native title applications. Again, the Court accepts those frustrations exist, but reminds people it is not its job to take sides about that issue. The challenges the Kimberley Land Council faces with its native title funding are real obstacles, and the annual funding cycles from the Commonwealth are responsible at least in part for the delays and restrictions on funding. To change that requires political action, not legal action. [emphasis added]

 

Clearly, there is an issue here. It is one thing when an interest group makes an argument for increased funding from Government. It is quite another thing when the Courts are identifying funding shortfalls as contributing to poor policy outcomes.

 

It is my view that there is systemic underfunding of native title processes by the Commonwealth. NTRBs are asked to work in an incredibly complex cross-cultural environment, to standards that require them to meet both governance and accountability standards expected in mainstream corporations, while simultaneously meeting the cultural expectations of constituents whose daily lives are embedded in a very different cultural milieu, with different expectations of their leaders and representatives. Yet the Australian Government in both its funding arrangements nd its policy approaches appears to make little provision for these challenges, and indeed turns a blind eye to the on the ground realities. Not least of the flaws in Commonwealth policy is the split responsibility between funding of Indigenous groups (NIAA) and broader policy and funding of third parties (Attorney Generals Department).

 

The NIAA website includes the following text:

Native title

Native Title includes rights and interests that relate to land and waters held by Indigenous people under traditional laws and customs, recognised by the common law in accordance with the Native Title Act 1993 (Cth).

We fund a network of Native Title Representative Bodies and Service Providers to assist native title groups across Australia. Further information and contact details are available on the Native Title Representative Bodies and Service Providers page.

Native title corporations (known as ‘Prescribed Bodies Corporates’) hold, manage and protect native title on behalf of traditional owners. The Australian Government assists these bodies through grant funding (see Grants below).

The Attorney-General’s Department is responsible for legal and legal-policy advice on the sections of the Native Title Act 1993 (Cth) which are the responsibility of the Attorney-General and assistance to respondents involved in native title claims. More information is available at the Attorney-General's Department website.

 

In relation to PBC funding, the Grants section of the web page states:

PBC capacity building funding

The Department is now inviting eligible applicants to apply for PBC capacity building grant funding under the Indigenous Advancement Strategy.

 

PBCs are eligible for ‘capacity building’ grants, but not core funding. This in itself is a major structural hole in the system. It is way beyond time that the Commonwealth stepped up and provided core funding for the corporate entities that in effect have taken over from the Crown the management of at least fifty percent of the Australian land mass. See these two academic papers on the native title system for further analysis on these issues (link here and link here).

 

There is no information provided on the level of funding to the NTRBs or PBCs. It is beyond the scope of this post to identify each of the NTRBs funded by Government, and track their funding through the Government’s grants web page. The fact that the Government does not list this funding on its web page in an accessible form is deliberate opacity and prima facie an indicator that it does not wish to even defend its funding allocations and decisions in relation to financial support for the system established under the NTA. It is worth remembering that this system was a response to the High Court decision in Mabo that determined that Indigenous property rights survived the imposition of British sovereignty. In a very real sense, the current administration of the NTA continues and refreshes the stain of colonisation.

 

The reluctance and ill-preparedness of the ILSC — a Commonwealth statutory corporation — to take on the role of a default PBC in large measure because of the logistical cost and complexity of doing so contrasts with the expectation, yes, the expectation, by the Commonwealth that either the underfunded NTRB or the native title holders themselves can somehow pull themselves up by their bootstraps and stand up a fully functioning PBC able to manage the full suite of legally enforceable land management responsibilities and the associated decisions facing any Australian landowner. The irony is palpable; the more one thinks about it, the more disgraceful it is.

 

Conclusion

The recent Federal Court decision in Sturt v WA by Mortimer J in relation to the management and progression of native title determinations provides a window into the intricacies and systemic challenges facing native title holders across Australia generally. From a policy perspective, I have been impressed with the way the Federal Court has sought to progress these issues, step by step, case by case, decision by decision.

 

The executive arm of our governmental system has been far less impressive. Indeed, it has set up and operates an administrative and funding system that one would be forgiven for characterising as designed to fail.

 

One of the downsides with the wall to wall focus on important and essential big picture issues such as constitutional recognition, Closing the Gap, an Indigenous Voice, treaties, and a Makarrata is that the ongoing everyday challenges of Indigenous citizens on the ground obtain less attention and virtually zero policy traction. The traditional owners and custodians of the Ngarrawanji native title determinations are certainly victims of our incapacity as a nation to see, let alone address, the challenges they face.

 

The Commonwealth Government seems content to leave the native title system in the briars. It is fearful to step in. Close inspection is discouraged. Indigenous aspirations are thwarted and ignored. As a nation, we can and should do better.

 

ILSC governance issues: broader implications

 

                              Not a mouse

Shall disturb this hallowed house:

I am sent with broom before,

To sweep the dust behind the door.

A Midsummer Night’s Dream, Act 5, Scene 1.

 

On 5 January 2021, I published two posts based on FOI documents released by the Indigenous Land and Sea Corporation (ILSC) last year. The first on conflict within the ILSC Board (link here) and the second post (link here) outlining the secret and unacknowledged use of the NAIF by the Government to fund the repayment of previous ILSC borrowings from the Government itself. These arrangements breached the NAIF legislation, undermined the independence and legitimacy of the NAIF Board, and misled the Parliament and the Australian public.

 

Adele Ferguson and Deborah Snow at The Sydney Morning Herald and The Age have now published two articles relating to the governance issues at the ILSC. The first dated 15 February (link here) deals with the internal conflict within the Board, and reports new information beyond that released by the ILSC in response to an FOI request last year. In particular, the SMH/Age article provides a redacted copy of a letter from the Minister to the ILSC Chair Mr Fry dated 7 December 2020, where the Minister stated:

I have lost confidence in your ability to lead the ILSC as the Chairperson. In the circumstances I ask that give reasons as to why I should not ask for your resignation… 

 

The article also includes a redacted copy of Mr Fry’s response dated 18 December 2020 where Mr Fry asserts (inter alia):

The Thom Report determined no misconduct under s192H of the ATSI Act by me as Chair, or breach of general duties according to the PGPA Act…

Mr Fry’s selective quotation relates primarily to Ms Thom’s assessment of his actions at a single meeting. He omits her conclusion that he appeared to have breached the ILSC Code of Conduct (but this could only be determined by the ILSC Board). And he ignores the broader conclusions in the Thom report on corporate governance, for which the Board of which he is chair is primarily responsible. That said, it is the case that the Minister appears to have formed the view that specific grounds for termination of Mr Fry do not exist.

 

The second SMH/Age article dated 17 February (link here) deals with appointment of the ILSC CEO against the explicit wishes and formally expressed views of the Minister. This difference of views led to the exchange of correspondence attached to the first SMH/Age article. The article includes a number of direct quotations from within the redacted sections.

 

It thus seems that at least some of the redactions were made by the SMH/Age, probably to facilitate the sequential release of key information and/or remove irrelevant or potentially defamatory material. The SMH/Age access to these letters and the report in the second article that:

Mr Wyatt reconfirmed his lack of confidence in Mr Fry as chairman of the corporation in a statement to the Herald and The Age last Friday...

suggest that the likely source of the more recent correspondence published by the SMH/Age is the Minister or his Office. This is worth considering, because the narrative arc of the SMH/Age articles focusses on the issues within the ILSC. This is an important and legitimate focus, but just as important is the need to focus on what the responsible minister has done to address and resolve the issues in a key statutory body within his portfolio. This latter issue is the focus of the present post.

 

While the ILSC has the statutory responsibility for appointing the CEO, there is a convention across the executive arm of government that Ministers are consulted and significant appointments are taken to Cabinet by portfolio Ministers. A decision to ignore a Minister’s considered views is a serious step for any statutory board.

 

On 15 February, Minister Wyatt gave an interview to Patricia Karvelas on ABC TV (link here). This included a short exchange relating to the ILSC issues:

Patricia Karvelas:  Minister, changing the topic again, can you explain why you've lost confidence in Eddie Fry as the chairman of the Indigenous Land and Sea Corporation?

Minister Wyatt:  Well, there are some matters. There was a report by a consultant in Thom's report was provided to me [sic]. There have been other matters, but we've had discussions and the board have raised issues and I've provided it provided the organisation with the opportunity to deal with its governance arrangements and focus on the investments that are absolutely critical for the development of the land assets that Aboriginal communities and people hold. And the government remains committed to looking at job opportunities and economic development from those assets so that we realise a better outcome for future generations.

Patricia Karvelas:  What can you do about this, given Mr Fry hasn't reached the threshold for termination?

Minister Wyatt:  Well, I would hope that we continue having discussions and that the board and Mr Fry work together to ensure that the task that they have been charged with are met with due diligence and in the manner that you would expect of a government, a governing body.

 

So on Friday 12 February, the Minister’s spokesperson confirmed to the SMH/Age that the Minister continued to lack confidence in the Chair of the ILSC. On Monday 15 February, the Minister didn’t disagree with Ms Karvelas’ proposition that he had lost confidence in the Chair, yet went on to state that he had provided the ILSC ‘with the opportunity to deal with its governance arrangements and focus on the investments that are absolutely critical…’ We still do not know whether the Minister has formally requested Mr Fry to resign.

 

The information in the FOI documents released last year and in the SMH/Age material this week raises serious questions regarding the capability of the ILSC to meet its legislated remit under the currently constituted Board. While the ILSC Board and Chair are responsible for delivering on that remit, the Minister has an oversight or regulatory responsibility for ensuring that the ILSC is in fact meeting its responsibilities and a political responsibility for reassuring all citizens, but particularly Indigenous citizens, that he is meeting those regulatory and oversight responsibilities.

 

On the basis of the information available to date, it would seem that the Minister has dropped the ball in relation to his regulatory and oversight role on a key statutory agency in his portfolio. Let me list ten issues or loose ends that are so far unaddressed and require attention by the Minister.

 

In no particular order, the Minister:

• ·        made no public statement between May 2020 and 15 February 2021 when the matters regarding the governance problems being experienced by the ILSC were reported in the national media. The implication is that he was prepared to leave the situation unresolved and unexplained, presumably hoping there would be no public revelation prior to the expiry of the Chair’s term in November 2021;

 

• ·         has provided no indication publicly of the ILSC’s response to the Thom report (which he requested by 4 November), nor his actions and decisions in response to the as yet unpublished ILSC response apart from his indirect indication that he had in fact lost confidence in the ILSC Chair. In particular, notwithstanding his apparent inability to terminate the Chair, has the Minister requested Mr Fry to resign?;

 

 

• ·         has provided no indication of his intention with regard to Recommendation 8 of the Thom Review — the only recommendation directed to the Minister — dealing with improving the quality of Board selection processes. In this context, it is worth noting that the Minister has had five months to consider his response to this recommendation;

 

• ·         failed to appoint or re-appoint four Directors when their terms expired and/or they resigned thus creating further uncertainty and potentially risk aversion within the Board. This is particularly relevant to the position of Deputy Chair;

 

• ·         has given no indication of his actions in response to a Commonwealth Ombudsman’s Public Interest Disclosure investigation report dated January 2020.The Minister cited it as a reason for his loss of confidence in the Chair, and described it as containing  ‘adverse findings and concerns’ regarding the ILSC. [The ILSC 2019-20 Annual Report notes at page 89: The ILSC is aware that the Commonwealth Ombudsman has produced one report in relation to the ILSC in this period. The report has not been made public or provided to the ILSC];

 

• ·         approved and tabled in Parliament an Annual Report from the ILSC in October 2020 (link here) that made no mention whatsoever of the serious governance issues it faced. The ILSC Chair and the Board approved a report that is clearly misleading through omission. In the circumstances of the serious internal Board conflict, the Chair’s Foreword, particularly his final paragraph thanking his fellow directors for their strategic leadership, reeks of legerdemain. Arguably, the provision of an incomplete and misleading Annual Report breaches s.38 of the PGPA Act 2013, which provides inter alia that ‘the accountable authority of a Commonwealth entity must measure and assess the performance of the entity in achieving its purposes’. Yet the Minister took no action to ensure the report did not effectively mislead the Parliament, and approved it to be tabled in Parliament.

  

• ·         has failed to lay out and execute a strategy to ensure that the ILSC will be in a position to deliver on its statutory remit notwithstanding that the Minister continues to lack confidence in the Chair and thus by definition must fear that he will act in ways that place the achievement of that remit at risk. Such a failure would create adverse consequences for hundreds if not thousands of the ILSC’s Indigenous clients. In this context, it is worth remembering that the Thom Review headline finding on corporate governance: “The review concludes that there is a high risk that the Board cannot currently fulfil the functions as set out in the ATSI Act and its Charter. Unless urgent action is taken this will also place at risk the proper and efficient performance of the ILSC as well as potentially its longer term viability” [emphasis added].

 

• ·         has remained silent in relation to the substance and merits of Mr Fry’s proposed ILSC transformation strategy which was the trigger for the Board conflict, and appears to propose the creation of a parallel board or entity within the ILSC that effectively diminishes or sidelines the ministerially appointed ILSC Board. This silence is particularly significant given Minister Wyatt’s comments to ABC journalist Patricia Karvelas quoted above to the effect that he has given the ILSC Board the opportunity to reform itself.

 

• ·         has remained silent in relation to Mr Fry’s role as Chair of Indigenous Business Australia (IBA), the other key statutory corporation in the Indigenous Affairs portfolio. It would stretch credulity were the Minister to argue that he continues to have confidence in Mr Fry’s role as IBA Chair while lacking confidence in his role as ILSC Chair. Moreover, it begs the questions: what are the current governance standards within the IBA? Has the NIAA been monitoring IBA governance performance, and keeping the Minister informed?

 

• ·         has remained silent on the legality and appropriateness of the Commonwealth conditions in relation to the NAIF loan to Voyages/ILSC (see the previous post on this issue: link here). In December 2019, the ILSC Chair wrote to Minister Wyatt regarding the fulfillment of the problematic conditions imposed by his predecessor (FOI document 41). While it is not clear if Minister Wyatt was briefed or was aware of the irregular nature of this arrangement, it points to a potentially significant ongoing governance failure within his agency and for which he is accountable as the responsible Minister.

 

At a broader level, the events that have occurred in relation to the ILSC (and NAIF) point to gaps and shortcomings in the regulatory oversight of Commonwealth commercial entities, and their subsidiaries. In particular, these responsibilities fall to an assemblage of Ministers, the Department of Finance, internal audit committees, and the ANAO, all operating under the PGPA Act and agency specific legislation.

 

Given the expanding operations of the Commonwealth in commercial contexts, there is increasing evidence that the absence of an independent regulator akin to ASIC creates regulatory risks and gaps that are not in the public interest. It is increasingly apparent that the dominance of the Executive over the Parliament, and the widely recognised trend towards greater politicisation of the APS is inconsistent with the requirement for independent regulatory oversight of Commonwealth commercial entities. One option would be to create a new independent corporate regulator for Commonwealth commercial entities; another would be to place Commonwealth entities under ASIC’s purview, a third would be to give the ANAO a new regulatory role (akin to ASIC) in relation to Commonwealth commercial entities. Any of these three options would be an improvement on the status quo.

 

Finally, the Minister has broader responsibilities to keep the Australian community, and particularly the Indigenous community, informed regarding the actions and policies of the Government. Minister Wyatt should step up and deliver a public statement in Parliament laying out in detail the issues he is dealing with at the ILSC, the remedial action he has taken or intends to take, and his strategy for moving forward.

 

It is patently untenable for the Minister for Indigenous Australians to say he is leaving it to the ILSC to deal with its governance arrangements in the face of a serious governance crisis that the Government has been complicit in creating through its previous Board appointments and ‘hands off’ regulatory oversight.

 

The Thom Review would not have recommended a process to ensure that Board appointments are drawn from ‘the best possible field of appointments’ if Ms Thom had reached the conclusion that the current and former ILSC Board membership met this standard.

 

To put it more pithily, as the Thom Review stated five months ago:  Unless urgent action is taken this will also place at risk the proper and efficient performance of the ILSC as well as potentially its longer term viability. Given the considered advice from an independent reviewer, what action does the Government propose? Or is the Government determined to sweep the dust behind the door?...

 

 

 

Disclosure: Given the topic of this post, I should disclose that I served as CEO of the Indigenous Land Corporation (ILC) from 2013 to 2015, and while working in the Prime Minister’s Department was involved in developing the legislation for the ILC in the mid-1990s.