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
