Jenny Macklin taps $400m Aboriginal fund for running costs

by: Paul Cleary From: The Australian January 10, 2012 12:00AM

INDIGENOUS Affairs Minister Jenny Macklin is increasingly using a burgeoning $400 million indigenous fund to pay for running costs and short-term financial fixes - actions that have attracted a warning from the Auditor-General.

The mining boom has given Ms Macklin growing financial clout as she presides over the little-known Aboriginals Benefit Account, which last year collected $155m in mining-related income and has quadrupled in size since 2004 to $412m in equity.

While the minister has been calling on Aboriginal groups to safeguard their future and build financial assets, documents obtained by The Australian under Freedom of Information laws show that for the past three years, Ms Macklin has either ignored or rejected her department's advice to develop a long-term investment plan for the fund - although her office now says she has recently done so. The ABA was named last month by the Auditor-General as one of a number of federal agencies that had made payments that "do not accord with conditions included in relevant legislation". As a result, the ABA risked non-compliance with section 83 of the Constitution, which states that all monies paid by the commonwealth must be lawfully appropriated.

...The Northern Territory's opposition indigenous affairs spokesman, Adam Giles, said the federal government had spent "hundreds of millions" from the fund on services and capital costs that it should have been providing anyway. He said the ABA should be used exclusively for "economic infrastructure" in the Territory's Aboriginal communities.

The ABA was created in 1976 to promote Aboriginal economic development in the Territory and has in the past provided capital grants to remote communities and seed funding for emerging enterprises.

The federal government uses consolidated revenue to pay the ABA an annual amount equivalent to the royalties that mining companies pay to the NT government for mining on Aboriginal land.

But Ms Macklin's department recently removed any reference to the ABA's purpose being specifically for the benefit of Aborigines, contrary to what is stated in the Aboriginal Land Rights Act.

The department's latest annual report now says the ABA "is structured to meet one outcome: to support the provision of engagement and support for individuals, families and communities to improve wellbeing and capability". The department declined to comment on the change.

The ABA had until recently a balance of $100m, but its annual income has in recent years ranged from $150m to $200m.

The ABA's funds are used in three ways. A fixed 30 per cent share is paid to areas directly affected by mining. It funds the operations of four territory land councils, which cost $82m in 2010-11. And a third element, known as "beneficial grants", is paid to indigenous communities and organisations that make specific requests.

It is this third tranche that is subject to the greatest ministerial discretion. These grants totalled $70m in 2010-11, three times the previous year.

Accusations that the ABA has been used to fund discretionary or short-term items date back at least to 2007, when then Coalition indigenous affairs minister Mal Brough defended a $20m drawdown for Aboriginal housing.

The ABA's 2010-11 annual report shows that total grants paid out of the fund nearly trebled from $24m to $70m, a rise that largely reflected the $50m cost of a community stores program that Ms Macklin chose to draw from the account. Payments to land councils for administrative purposes more than doubled to $47m.

The increased cash burn meant overall equity rose by just $14m to $412m, despite income of $155m.

Last financial year, Ms Macklin drew $9.5m from the ABA to pay for township leases in two NT communities, while the account provided $4.75m to the Office of Township Leasing, which included running costs.

Last month, Ms Macklin used the ABA to bail out an indigenous organisation that provides services to remote communities.

The Laynhapuy Homeland Association faced a shortfall of about $1m, but Ms Macklin's department cancelled 14 capital works projects worth about $6.5m in order to fund the bailout. The surplus monies went back into the account.

The axed capital projects included women's hygiene facilities and a mud-brick operation aimed at reducing the exorbitant cost of home building in the territory.

The government's much vaunted Indigenous Economic Development Strategy, launched by Ms Macklin in October, emphasises the accrual of trust funds. Ms Macklin said when launching the strategy that Aborigines "need to build financial independence", while she has been urging communities that have signed royalty agreements with mining companies to save a substantial share of their income in trust funds.

But Aborigines in the NT have no such independence with the ABA, which has grown substantially in recent years as a result of the mining boom. While an advisory committee of Aboriginal representatives gives advice to the minister, Ms Macklin has final say on how much money is spent.

FOI documents show that Ms Macklin has been reluctant to raise the ABA's own financial management standards. From late 2008 onwards, she ignored or rejected her department's advice to appoint a financial analyst to put the ABA on a sustainable financial footing, though she has done so very recently after The Australian obtained documents proving these facts.

The spokeswoman said Ms Macklin had now approved a financial consultant to produce a 10-year outlook for the fund. While work will begin early this year, this is three years after the department first urged the minister to appoint such a consultant.

Following a 2008 audit by the Office of Evaluation and Audit, the department told Ms Macklin the report had been "critical of the transparency, accountability and operation of the ABA". It urged her to appoint a financial analyst because it lacked "in-house expertise", according to a December 2008 minute obtained under FOI.

The minute shows the department asked the minister to approve $50,000 to pay for a consultant to advise on a "minimum investment amount", but it appears to have had no response.

Two years later, it repeated the request, but in March last year Ms Macklin rejected the proposal.

Mr Giles, a member of the opposition Country Liberal Party for the Alice Springs seat of Braitling, said he feared the federal government's control of the ABA and its use of funds acted as a disincentive for Aboriginal communities to approve mining developments.

Indigenous leaders have been reluctant to speak out about the fund's management.

Mick Gooda, the Aboriginal Social Justice Commissioner, criticised Ms Macklin's use of the ABA to pay for township leases earlier this year. He said it was "outrageous" the government negotiated just compensation and then paid for it with "Aboriginal money".

A spokeswoman for Mr Gooda said he subsequently received a "briefing" and as a result would not be making any further comment.

The Central Land Council's chief executive, David Ross, declined to comment. The Northern Land Council did not return calls. The land councils in the NT rely on their funding from the ABA.