The objective of the audit was to assess the effectiveness of AGD's administration of grants provided under the Respondents Scheme. The audit considered the context within which the Respondents Scheme operates and focused on assessing the administration of the scheme including its financial management within AGD.
The Native Title Act 1993 (the Act) provides for the recognition and protection, within Australian common law, of the native title rights and interests of Indigenous Australians. The Act created the legal settings for the Native Title System1, which involves a range of Government and non–government parties2 in native title litigation and/or mediation to reach agreement on a consent determination and other types of agreement making.
Section 183 of the Act establishes the Native Title Respondents Funding Scheme (the Respondents Scheme) and provides for the Attorney–General to formulate Guidelines3 which set out criteria for grants of financial assistance to respondents in native title matters. Respondents to native title matters include pastoralists, miners, fishers and local government councils.
Appendix 1 of the report provides information on the participants in the Native Title System. Respondent activity is driven to a large degree by the actions of native title claimants and State and Territory Governments who act as primary respondents in native title cases.
Objects of the Native Title Act
The main purposes of the Native Title Act are to:
- recognise and protect native title;
- validate existing Commonwealth land titles where they may be invalid due to the existence of native title, and to allow States and Territories to validate their own titles;
- establish procedures for determining claims to native title; and
- establish procedures for dealing with native title land.4
The Act was substantially amended in 1998. When presenting the Native Title Amendment Bill 1997 for the second time, the Attorney–General stated:
Currently, the Act provides for an essential ‘claims driven' regime for dealing with native title issues. In the Government's view, insufficient support is given to resolving native title issues by agreement—often the speediest, lowest cost and least divisive mechanism. The Bill therefore sets out a comprehensive framework for reaching consensual arrangements between the parties.5
The Financial Impact Statement relating to the 1998 amendments noted:
Removing the ‘hardship' test for the provision of financial assistance to native title respondents under section 183 of the Act is likely to result in more grants to respondents. In particular, additional funding will be made available to put pastoral respondents on an equal footing with claimants in relation to financial assistance. There will be more demand for financial assistance as a result of the wider measures that the new Act proposes such as Indigenous Land Use Agreements and statutory access agreements.
Among the benefits of the Bill cited by the Attorney–General was: ‘much improved certainty for agricultural and pastoral lessees. Lessees will have security that their rights continue to prevail over those of native title holders. Legal aid will be more readily available to pastoralists and other persons responding to native title claims.'6
Between 1998 and 2005, the Government expressed its preference for resolving native title matters by negotiation rather than litigation, on a number of occasions.7 In September 2005, the Australian Government restated its objective for the Native Title System as a whole: 'to promote the resolution of native title issues through agreement making wherever possible, in preference to litigation.'8 To support this system–wide objective, the Attorney–General announced a package of reforms to deliver better outcomes in native title, including: ‘the Government will consider how the guidelines for Australian Government funding to respondents in native title claims can be focussed more strongly on agreement making over litigation'.
At October 2005, the Federal Court had made 45 consent determinations and the National Native Title Tribunal had 215 Indigenous Land Use Agreements (ILUAs) registered on its database, binding all native title holders in the area covered by the agreement.9 In addition, it was estimated that, at October 2005, over 6 000 unregistered agreements had been negotiated.
Administration of the Native Title System
Administration of the Native Title System is shared across a number of Government agencies including the Attorney–General's Department (AGD), with separate components of the System identified and funded within each agency's Outcomes and Outputs framework. The Respondents Scheme is an administered item within AGD's Outcome 1—‘An equitable and accessible system of federal civil justice'.
AGD's internal budget for the management of the Respondents Scheme was set at $8 million for 2005–06.
Grants to respondents
Section 183 of the Act establishes the legislative basis for the Respondents Scheme. Subsection 183 (3) of the Act provides that the Attorney–General may grant assistance if satisfied that:
- the applicant is not eligible to receive assistance from any other source;
- the provision of assistance is in accordance with the Guidelines established under subsection (4); and
- it is reasonable that the application be granted.
Subsection 183 (4) of the Act provides that the Attorney–General may determine Guidelines that are to be applied in authorising assistance under section 183. The current Guidelines—Provision of Financial Assistance by the Attorney–General in Native Title Cases Guidelines (the Guidelines)—came into effect on 30 November 1998, following amendments to the Act. Financial assistance is made available to respondent parties in accordance with these Guidelines.
Financial assistance is available for individuals, partnerships, small businesses, local government bodies, incorporated and unincorporated groups (including amateur associations) and peak industry organisations to:
- become a party to an inquiry, mediation or native title proceeding;
- negotiate an Indigenous Land Use Agreement (ILUA); and
- negotiate an agreement about rights conferred under subsection 44B (1) or resolving a dispute about rights conferred under subsection 44B (1).10
Financial assistance may cover some or all of the following: professional legal and other costs; counsel's fees; court fees; the use of expert advice such as anthropological or historical consultants; and other reasonable accommodation and travelling expenses. 11
In September 2005, the Attorney–General proposed a broad ranging package of reform measures for the Native Title System, including amending the Guidelines of the Respondents Scheme to encourage agreement making rather than litigation. When announcing the reforms the Attorney–General stated:
a wide range of non–claimant parties (e.g. pastoralist, miners, local government and peak industry bodies) participate extensively in native title claims. However, given that the fundamentals of native title are settled, it is not necessary for non–claimant parties to litigate all stages of a legal matter where the law is not in dispute or their interests are already protected under the Native Title Act.12
Audit Objective and Scope
The objective of the audit was to assess the effectiveness of AGD's administration of grants provided under the Respondents Scheme.
The audit considered the context within which the Respondents Scheme operates and focused on assessing the administration of the scheme including its financial management within AGD.
The Australian Government's objective for the Native Title System as a whole is 'to promote the resolution of native title issues through agreement making wherever possible, in preference to litigation.' The Native Title Respondents Funding Scheme is one element of the Native Title System. The grants provided through the respondents scheme support the participation of non–claimant parties in native title proceedings—litigation, mediation and agreement making. At 24 August 2005, 1 570 individual grants had been made with a total commitment of $77 million since the commencement of the Scheme.
The ANAO concluded that, overall, AGD effectively manages the administration of grants under the Native Title Respondents Funding Scheme. However, the ANAO identified key areas of AGD's administration of the Scheme that could be strengthened. In particular, clearer specification of performance measures; closer monitoring of grant commitment (individually and in total); and enhancements to AGD's Data and Workflow Grants System (DAWGS).
The development of accurate and relevant performance indicators for the Respondents Scheme would help stakeholders to gauge the success or otherwise of the Scheme's contribution to the Government's broader native title outcome and would allow AGD managers to better assess the ongoing performance of the Scheme. Improved performance information at the individual grant level would help AGD's grant monitoring and acquittal arrangements and provide assurance that grant funds are being expended in line with specific grant objectives.
As Respondents Scheme grants are largely open ended and do not specify financial assistance in stages, it is difficult for AGD to accurately predict actual annual expenditure associated with respondents participation in native title claims proceedings. In any one year, AGD may commit to spending proposals that span several years. This means that future year budgets are liable for these expenses of some $12.9 million.13
While AGD has undertaken a range of risks treatments, as part of its Respondents Scheme planning process, it would be useful for AGD to also formally document its risk management arrangements. Such an approach would provide greater assurance that the specific risks, including financial risks, faced in administering the Respondents Scheme have been identified and managed.
The ANAO acknowledges that delays in one part of the Native Title System can affect the efficient functioning of the Respondents Scheme and that these external influences present challenges for the administration of the programme. The resolution of claims in the National Native Title Tribunal14 and the Federal Court15 can be protracted making it difficult to predict when and how much of a recipient's grant will be expended in any one financial year. This environment requires AGD to more closely monitor its grant commitment, individually and in total. This financial monitoring is especially important because of issues within the Native Title System that may affect the timely resolution of native title matters and the participation of respondent parties.
The Attorney–General's Guidelines, which provide the framework for authorising financial assistance for respondent parties, are being revised as part of the Native Title System reform process. The ANAO notes that the draft of the revised Guidelines includes the provision of financial assistance in stages to funded respondents. This will help AGD to better manage its financial assistance commitment in the outer years. It will also provide a more transparent view of how individual grant expenditure links to the achievement specified in stages and the overall goals of the programme.
AGD requires a more robust financial monitoring and reporting system to better manage the financial risks associated with the Respondents Scheme. The ANAO found that AGD's ability to accurately identify and report Respondents Scheme expenditure to Parliament and other stakeholders was compromised by the reporting functionality of DAWGS. The current system has limited reporting capabilities, which impedes AGD's ability to accurately identify its unfunded forward commitment and to accurately identify and report total Respondents Scheme expenditure to Parliament and other stakeholders. AGD is aware of the situation and is taking steps to rectify it through a range of measures including improving the quality of DAWGS data. AGD has also secured additional funding in the 2006–07 Budget to refine and enhance DAWGS, including its reporting functionality.
The ANAO notes AGD's positive response to the audit findings by establishing a project team to coordinate the implementation of the report recommendations.
Respondents Scheme planning (Chapter Two)
Planning is an activity that allows programme objectives to be elaborated, performance measures and targets to be agreed upon to track progress in delivering results, and risks to be identified and treated.
Section 183 of the Act establishes the legislative basis for the Native Title Respondents Funding Scheme. A significant amendment to the Act in 1998 enhanced respondent parties' participation in the voluntary agreement making process by making available financial assistance to non–claimant parties under the Respondents Scheme at s.183 (2) of the Act. This provision supported the Government's desire to provide parties with ‘a legally certain, procedurally straight forward and comprehensive agreements framework'.16
Between 1998 and 2005, the Government expressed its preference for resolving native title matters by negotiation rather than litigation.17 In September 2005, the Australian Government restated its objective for the Native Title System as a whole: 'to promote the resolution of native title issues through agreement making wherever possible, in preference to litigation.'18
A finding of this audit was that DAWGS does not distinguish between grants which are funded for mediation and those for litigation. AGD advised that individual case officers are aware of the few matters funded for litigation and DAWGS functionality will be upgraded, as part of the 2006–07 Budget enhancements, to enable it to distinguish between mediation and litigation for reporting purposes. It should be noted that the status of a matter can move from mediation to a litigation phrase and then return to mediation and continue to change status over a number of years. AGD has advised the ANAO that it will contribute to enhanced data collection by the Native Title Coordination Committee to inform the Committee's advice to Government on the operation of the Native Title System, including the identification of trends.
AGD's ability to report on the performance of the Respondents Scheme would be improved by the use of more appropriate and relevant performance measures. The ANAO reviewed AGD's existing and proposed measures and found that they did not allow for an assessment of the extent to which the Respondents Scheme is meeting the Government's objective to promote agreement making rather than litigation. Subsequently, AGD has proposed a new performance indicator to apply solely to the Respondents Scheme enabling the quantification of grants for mediation/agreement making purposes as a proportion of total grants.
By adopting a disciplined and structured approach to risk management, agencies are able to identify, assess and mitigate risks, including fraud and financial risks. While AGD had undertaken a range of risks treatments, as part of its Respondents Scheme planning process, AGD had not formally documented its risk management arrangements for the Scheme.
There are factors within the Native Title System which affect AGD's ability to accurately predict when its grant recipients will expend the funds committed under the Respondents Scheme. This increases the importance of AGD's identification of the specific risks associated with the Respondents Scheme and to develop robust financial controls to manage these risks.
In any one year, AGD may commit to spending proposals that span several years. This means that future year budgets are liable for these expenses of some $12.9 million.19 The ANAO found that while AGD's Data and Workflow Grants System produces standardised internal reports, it is not able to automatically report on the Scheme's financial status, including the total amount of grant funds committed in future years. AGD relies on a manual process to produce reports on the Scheme's financial status. This approach introduces additional risks, particularly the consistency of the manual reporting process. AGD has secured additional funding in the 2006–07 Budget to refine and enhance DAWGS including its reporting functionality.
While the legislative Guidelines provide the overall framework for AGD decision– making concerning grants of assistance for respondents to native title claims, clearer articulation of the programme's financial and performance management arrangements would help AGD to better monitor and evaluate the programme.
Financial management of the Respondents Scheme (Chapter Three)
The ANAO found that AGD had appropriate delegations in place to approve the expenditure of individual grant funds. However, Respondents Scheme funding agreements with grant recipients lead to payments in both current and future years. FMA Act Regulation 10 authorisation by the Finance Minister or his delegate is required prior to approval of a spending proposal, where the period of the spending proposal extends beyond a financial year.20 The ANAO found that AGD was not meeting Regulation 10 requirements. However, during the audit, AGD initiated discussions with the Department of Finance and Administration (Finance) to ensure compliance with this Regulation going forward.
The Respondents Scheme has had a number of funding strategies and payment systems since its commencement. These included:
- advancing funds to solicitors' trust accounts;
- advancing funds to peak organisations' accounts; and
- direct payments to grant recipients on the presentation of an invoice.
The ANAO analysed data held in AGD's DAWGS to identify the total amount of grant funds directed to these funding strategies. This information is presented in Figure 1.
Source: ANAO analysis of DAWGS data.
Note: Trust advances refer to grant funds held by legal firms and peak organisations. Trust balances are trust advances minus the drawdowns approved by AGD.
AGD has increasingly adopted the practice of making grants to peak organisations to pay the salary of Native Title Officers. This process simplifies the management and payment of grants for peak organisations and provides administrative efficiencies for both AGD and the peak organisation concerned. To aid transparency and accountability, AGD should require peak organisations to provide regular financial reporting on their management of Respondents Scheme grant funds.
The ANAO found divergent practices amongst peak organisations in the way they used the interest earned on grant funds advanced to them. The ANAO is aware that AGD obtained legal advice regarding the interest earned on funds advanced to funded respondents which stated that they are accountable to the Commonwealth for any interest earned and should not use this interest for their own purposes. There would be benefit in more closely aligning Respondents Scheme funding agreements with legal advice received by AGD.
Respondents Scheme decision–making (Chapter Four)
In assessing support for decision–making, the ANAO found:
- the ‘reasons for a decision' note to be a transparent and effective method of capturing the reasoning behind the decision–making process;
- grant recipients—including legal firms and peak organisations—noted the time–consuming nature of AGD's invoicing requirements. AGD requires items of work to be based on time units of no greater than six minutes and aligned to the rates specified under the relevant scale item in the Federal Court Scale of Costs.21 In a number of instances, peak organisations commented that they do not have the record keeping systems to help prepare invoices with the level of detail required by AGD. AGD advised that it simplified peak organisations' management of grant funds through the practice of making grants to them to pay the salary of Native Title Officers;
- AGD's Native Title – Grant Administration: Policies and Procedures Manual is an assemblage of emails between legal officers and delegates discussing various issues related to grant administration, including the treatment of the goods and services tax (GST), specific Federal Court Scale items, travel and accommodation rates;
- AGD's internal audit committee recommended that: ‘formal sign offs on decision notes by a secondary staff member would provide an additional safeguard against inappropriate decisions and therefore inappropriate payments being made.'22 The ANAO analysed DAWGS data concerning the separation of duties in the approval process and found that of the 174 payments recorded post-DAWGS implementation, 62 records were found where the legal officer and the delegate approving the payment were recorded as the same person. In addition, a further 27 records were found to have a blank field for administrative officer, legal officer or delegate 23;
- the native title claim ‘proceeding type'24 is one of the fields in the native title claims table in DAWGS. The ANAO analysed records held in the table and found that of 359 records, the ‘proceeding type' for 173 records in the native title table was blank. Of the balance, 176 were recorded as proceeding with litigation/mediation and eight were proceeding with an ILUA; and;
- AGD has developed a draft document—Identification of Key Performance Indicators, 26 June 2000, which identified goals and key performance indicators for grant processing. The ANAO was advised that the document has not been implemented yet.
The ANAO found that the processing time of Respondents Scheme's applications, extensions, invoices and internal reviews of decisions had improved with invoices now being processed within the standard 30 day turnaround. However, while performance indicators were in place for the processing of invoices, no indicators had been established for the other assessment processes noted above. As well, the ANAO found that AGD does not have any measures in place to monitor consistency within its decision–making processes.
The management, monitoring and acquittal of the Respondents Scheme funding agreements (Chapter Five)
Respondents Scheme funding agreements did not:
- specify precisely the deliverables required through the funding arrangements; and
- include a timely review clause to alert AGD to situations where little or no progress was being made to achieve individual grant objectives.
AGD's funding agreements contain terms and conditions additional to those set out in the Attorney–General's Guidelines. The ANAO reviewed the additional terms and conditions and found they were not based on an assessment of the programme's risks.
While AGD had introduced monitoring arrangements in its funding agreements for new initiatives such as the Native Title Officer positions, there was variability in these arrangements between organisations where Native Title Officers were funded. The ANAO found a lack of consistent and timely monitoring arrangements in the other types of grant arrangements for the Respondents Scheme—for example grants made to respondents to participate in native title proceedings in the Federal Court.
DAWGS helps AGD staff monitor individual grants by calculating the remaining funds that should be held in trust every time authorisation is given for trust drawdowns. However, the ANAO found that AGD did not have systematic procedures to monitor individual grant progress to determine whether or not grant funds were still required. Subsequent to ANAO fieldwork, AGD advised that individual delegates have initiated the retrieval of reports from DAWGS on matters which have been inactive for 18 or more months for review and possible decommitment.
While AGD sets out budgets for anticipated work in its funding agreements, the ANAO found there were no monitoring arrangements in place to enable an assessment of whether or not activities undertaken were achieving the required results. AGD's own internal review supports this finding. The review found that the frequency and content of reports to the department varied significantly between grants and that a picture of significant events, dates and issues in a claim was not revealed until all grants related to the claim were examined.
There were delays with AGD‘s reconciliation process that impeded the approval of grants and the accurate reporting of the Respondents Scheme's financial status. AGD has secured additional funding in the 2006–07 Budget process to refine and enhance DAWGS including its reporting functionality. The ANAO considers that DAWGS enhancement is essential to enable AGD to accurately and reliably report on commitment as a precursor to developing a strategy with the Department of Finance and Administration to manage its unfunded forward commitment.
AGD's decommitment project, which aims to identify inactive grants and recall outstanding grant monies, is dependent on timely reconciliation of AGD grants. While DAWGS has the facility to record decommitted amounts, AGD has experienced difficulties with this part of the workflow and has recently begun to manually record the amount of money decommitted. AGD advised that the process of decommitment and the facility to report on decommitments will form part of the proposed enhancement of DAWGS.
The ANAO found that there is no process to reconcile records between DAWGS and AGD's financial management system (SAP).
AGD has acquittal procedures in place to ensure proper accountability for the funds made available to grant recipients. Current acquittal procedures are such that there can be no loss of Commonwealth funds as grant funds are no longer paid into trust accounts. However, the ANAO found that the specification of ‘deliverables' in funding agreements with grant recipients was clear in some agreements but very broad in others. In addition to checking that funds have been expended appropriately, AGD should assure itself that funds have been expended to achieve Respondents Scheme objectives.
The funding agreement template did not provide sufficient instructions to the grant recipient as to what AGD would regard as suitable assurance that grant recipients had, in fact, acquitted the grant in line with the grant's objective.
Respondents Scheme review and evaluation (Chapter Six)
The Native Title Coordination Committee monitors, reviews and advises the Government on the Native Title System as a whole. The ANAO considers that the committee's reviews provide useful comment on the operation of the Respondents Scheme as part of the overall Native Title System. It is appropriate that an ongoing external process of review of the System assesses the effectiveness of its component elements, including the Respondents Scheme.
The ANAO considers that AGD's ability to evaluate the effectiveness of the Respondents Scheme at the individual grant level and at the programme level would be enhanced by the specification of performance information at both levels.
Agency Response: Attorney-General's Department
The Attorney-General's Department welcomes the Report on the Administration of the Native Title Respondents Funding Scheme. AGD has in place a range of procedures to ensure quality decision-making to achieve Scheme objectives and accountability for Scheme funds. AGD will continue to review processes to ensure on-going effective and efficient delivery of Scheme outcomes. The Australian Government announced a package of complementary reforms to the Native Title System in 2005, including a review of the Respondents Scheme funding Guidelines. The draft Guidelines incorporate features that will further enhance AGD's ability to ensure that funded respondents contribute positively to native title outcomes in accordance with the Australian Government's objectives.
1 The Native Title System includes the structures and processes established by the Native Title Act 1993 and the programmes funded by the Australian Government for the administration and management of native title.
2 Australian Government parties include the Attorney–General's Department, the National Native Title Tribunal, the Division of the Federal Court of Australia responsible for native title matters and the Department of Families, Community Services and Indigenous Affairs (FaCSIA) which administers the Native Title Representative Bodies (NTRBs) and Prescribed Bodies Corporate. State and Territory and local government bodies also play a significant role in the resolution of native title issues. Non–government parties include Indigenous Australians, who are generally represented in the process by the NTRBs and respondent parties, for example pastoralists, miners and fishing interests who may be eligible for Australian Government financial assistance to participate in the process.
3 The Provision of Financial Assistance by the Attorney-General in Native Title Cases Guidelines.
5 Attorney–General, 4 September 1997, Second reading of the Native Title Amendment Bill 1997, Hansard.
7 Attorney–General, 22 May 2001, News Release–More Money for Native Title .Attorney–General, September 2002, Native Title: The Next 10 Years—Moving forward by Agreement; and Attorney–General, June 2004, The Government's Approach to Native Title.
8 Attorney–General, September 2005, Practical Reforms to deliver better outcomes in Native Title.
9 The agreements provision offers a flexible alternative to other processes under the Native Title Act. It allows parties to agree on procedures that are tailored to meet their particular needs, in place of the Native Title Act procedures.
10 These rights refer to the right of access for traditional activities.
11 AGD, 1998, Provision of Financial Assistance by the Attorney–General in Native Title Cases, para 5.6.
12 Attorney–General, September 2005, Practical Reforms to deliver better outcomes in Native Title.
13 At 12 October 2005.
14 The National Native Title Tribunal mediates native title claims under the direction of the Federal Court and assists the parties engaged in the process of native title agreement making.
15 Under the Native Title Act 1993, the Federal Court of Australia is responsible for the management and determination of all applications relating to native title in Australia.
16 Attorney–General, 9 March 1998, Second Reading Speech–Native Title Amendment Bill 1997.
17 Attorney–General, 22 May 2001, News Release–More Money for Native Title. Attorney–General, September 2002, Native Title: The Next 10 Years—Moving forward by Agreement; and Attorney–General, June 2004, The Government's Approach to Native Title.
18 Attorney–General, September 2005, Practical Reforms to deliver better outcomes in Native Title.
19 At 12 October 2005.
20 FMA Regulation 10 ‘Approval of future spending proposals' provides that: If any of the expenditure under a spending proposal is expenditure for which an appropriation of money is not authorised by the provisions of an existing law or a proposed law that is before the Parliament, an approver must not approve the proposal unless the Finance Minister has given written authorisation for the approval.
21The Federal Court Scale of Costs sets out a schedule for solicitors' fees and related clerical support items such as typing and photocopying. The Attorney–General's Guidelines—Provision of Assistance by the Attorney–General in Native Title Cases requires the use of the Federal Court Scale to cost solicitors' fees and these related matters.
22 AGD, April 2005, Follow up Review of Financial Assistance Grant Administration—Legal Assistance Branch, p. 16.
23 AGD has advised that these results were input errors and a function to eliminate such input errors will be considered as part of the DAWGS enhancement programme.
24 Proceeding type refers to whether the matter is being handled by the National Native Title Tribunal or by the Federal Court.