Subject: Forensic Audit Needed into Aboriginal Funding - Royalty payments nottransparent, Land Council CEO and chair also head up mining company: both ofwhich directly or indirectly received a total of $24 million in royalty moneyfrom the land council

NT Independent newspaper - Royalty payments nottransparent, land council CEO and chair also head up mining company: both ofwhich directly or indirectly received a total of $24 million in royalty moneyfrom the land council i

typayments not transparent, land council CEO and chair also head up miningcompany: Audit

by David Wood | Feb 21, 2024 | Business, News, Subscriber | 0 comments

The Anindilyakwa Land Council chief executive officeris also the CEO of a mining company, as well as the director of a mininglogistics company that services the mine, both of which directly or indirectlyreceived a total of $24 million in royalty money from the land council in oneyear, an independent audit found, raising conflict of interest concerns.

The Australian National Audit Officealso found the CEO’s wife has a role in all three organisations, while thechair of the land council chair has roles in all three, plus a directorship ofa royalty distribution entity.

The audit report found the AnindilyakwaLand Council (ALC)’s management had not fully met the intent of the land rightsact with respect to appointments, meetings and training, while council membersdid not receive training or adequate guidance on how to discharge their duties,which were not clearly documented.

Indigenous organisations “associated”with the ALC chief executive officer Mark Hewitt had a far higher chance ofreceiving royalty payments, the report found, and the success rate by value wasalmost double the success of the other applicants.

The National Audit Office said thedistribution of royalty equivalents lacked transparency, and showed that MrHewitt – who began in the role in September 2011, and who is non-indigenous –was also the boss of two other connected corporations, including CEO andindependent director at the Groote Holdings Aboriginal Corporation, and co-CEOat Winchelsea Mining, companies that both received funding directly orindirectly from the land council.

A source, with knowledge of thesituation, but who did not want to be named for fear of retribution, said MrHewitt would earn at least $600,000 combined from two of his roles, with theALC and the mining company, but would not be paid for this role with GHAC.

The 2023 ALC annual report does notdisclose Mr Hewitt’s wage, but states there were five senior managers sharingin $1,358,114, which is an average wage of $217,622 including superannuationand “other long term employee benefits”.

The audit report said the CEO’sremuneration was stipulated in his 2022–2027 employment contract, which was signed by ALC chair Tony Wurramarrba, but that the chair did not have the delegation to approve the contract.

Mr Hewitt’s Chinese-born wife Sophy Liuis the ALC major investment and development co-ordinator, the GHAC chief operationsofficer, and the executive assistant to her husband at Winchelsea Mining. Thesource said she was included in the senior management at the ALC.

ALC chair Mr Wurramarrba is also chair of GHAC, chair and director of Winchelsea Mining, and also a director of Anindilyakwa Royalty Aboriginal Corporation, which was established by the ALC to distribute royalties in a timely manner to traditional owners. He is also on the ALC finance committee which makes recommendations to the board about which royalty distribution applications to support.

He was appointed to the role of ALCchair in 2003, and as at March 2023, was in his seventh term.

The 2023 ALC annual report also listshim as being on the Anindilyakwa Mining Trust – which is a royalty future fund– and the Miwatj Health Aboriginal Corporation (which is also given royalties)and the Aboriginal Sea Company.

As ALC chair, Mr Wurramarrba was paid$199,330 the audit report said – based on a March 2023 figure – but inaddition, he was an employee of the ALC, along with six other members of thecouncil. Which would mean that Mr Hewitt both reported to him, and was hisboss.

Several sources said Mr Wurramarrba couldearn between $125,000 and about $200,000 at Winchelsea but would not be paidfor his role at GHAC.

The audit office said Mr Wurramarrbaadvised the agency he also received sitting fees for seven organisationsoutside the ALC, and the report said under subsection 7(11) of the Remuneration Tribunal Act 1973, a full-time public office holder is prohibited from receiving remuneration for holding, or performing the duties of, another public office.

“The ANAO did not examine whether thechair’s performance of duties for other entities impact on his capacity tocomplete his duties for the council as a full-time remunerated public officeholder,” the report said.

Mr Hewitt, Ms Liu, and Mr Wurramarrbaall live in Darwin.

The ALC covers Groote Eylandt and BickertonIsland – as well as 40 uninhabited islands – in the Gulf of Carpentaria, whichhave three main townships and an Aboriginal and/or Torres Strait Islanderpopulation of about 1574 people. One of the towns, Alyangkwula (Alyangula), wasestablished by the Groote Eylandt Mining Company (GEMCO) in the 1960s. GEMCO isthe world’s largest manganese mine.

The performance audit, part of a seriesof audits of the governance of NT land councils, made 15 recommendations about the ALC’sgovernance, findingthe ALC had not provided enough assurance it was not receiving financialbenefit from its function of helping Aboriginal corporations with commercialactivities, the NT Independent had previously reported.

“ALC provides assistance to Aboriginal corporations,as required, however the arrangements lack transparency. Decisions about thedistribution of royalty equivalents also lack transparency. The rationale forassessment outcomes is not clearly documented,” the audit found.

The ALC disagreed with onerecommendation, which had to do with strengthening the royalty distributionsystem, rejecting developing an assessment method that included fundingpriorities, and telling potential applicants about the method, saying that ithad been previously tried and did not work, adding that the wishes of the TOsas represented in the finance committee and board, were the only guidenecessary for the distribution of royalty equivalents.

In a response letter to the audit signedby Mr Hewitt, Mr Mr Wurramarrba and ALC deputy chair Thomas Amagula, the mensaid the findings of the audit were “mostly administrative or procedural innature”.

The letter said they believed itreflected the rapid growth of the ALC and the challenges in establishingeffective governance practices with limited resources in a very remote locationand had also identified an additional 10 initiatives to enhance governancearrangements.

It said a request for additional resourcesfrom the funding agency for governance has previously been declined.

The chair and CEO’sconflicts of interest

The Audit Office reiterated themanagement strategies applied to managing the “high risk of the conflict ofinterest” presented by Mr Hewitt, Mr Wurramarrba, and Ms Liu, were eitherinsufficient or not implemented.

“The involvement of the ALC chair, CEOand CEO’s spouse in organisations that, in 2021–22, received the majority ofroyalty equivalents and that, in 2020–21 and 2021–22, received the majority ofNT Indigenous Economic Stimulus Package funds, creates a risk of conflictedinterests,” the audit said.

The ANAO recommended the ALC develop andimplement effective management plans for interests declared in the staff andcouncil registers of interests and assess whether management plans for MrWurramarrba’s and Mr Hewiit’s interests in Winchelsea Mining and GHAC wereeffective. The ALC agreed to develop that.

In its audit response letter, the ALCsaid that the case of its chair and CEO also holding those roles in WinchelseaMining was consistent with section 23 of the Aboriginal Land Rights Act 1976,and that the conflict of interest had been “very carefully managed” for thefive years the mining company had existed.

The land council said that followinglegal detailed advice for those roles and the management of conflicts, thesewere declared to former federal Indigenous affairs ministers Nigel Scullion andKen Wyatt.

“Included in this managementarrangement, the ALC board, if deciding in regard to the Winchelsea miningproject requires both the chair and CEO to leave the room, and for the ALCmining and sustainability manager facilitates the ALC board’s decision,” theletter said.

However, the audit report said thatwhile the chair and CEO positions were partly declared to the ALC board in2018, the 2021–22 finance committee and council meeting minutes did not recordthat Mr Hewitt or Mr Wurramarrba left the meeting when AAAC or GHAC funding wasdiscussed or decided upon.

The ANAO also said Mr Wurramarrba wasnot recorded as having left the meeting when GHAC funding was discussed ordecided upon during finance committee or council meetings.

“The ALC did not retain minutes or anyother record of consent for the final Winchelsea Mining proposal meeting on 31March 2021,” the report said.

“Minutes for the other meetings were notall finalised — some were labelled ‘draft’ or contained edits and reviewcomments.

“ALC was unable to provide minutes ofthe council meeting where the terms and conditions for the Winchelsea Miningagreement were approved.”

It said the analyses of how thisspecific risk was managed by the ALC demonstrates the risk had been partlyrecognised and documented by the ALC, but not all potential conflicts weredeclared, not all declared conflicts had a management plan, and the managementplans that exist for declared conflicts were not fully implemented.

After recent reporting on the issue, MrHewitt told AAP in a statement: “We have implemented the recommendation toassess whether management plans for the chair’s and CEO’s interests inWinchelsea Mining and Groote Holdings Aboriginal Corporation are effective.”

The distribution ofroyalties

The finance committee of the ALC, whichhad seven members including the ALC chair Mr Wurramarrba, makes recommendationsto the ALC board, of which Mr Wurramarrba is the chair, regarding thedistribution of royalties.

However, the audit report said thefinance committee does not provide briefings to the council that allow it tomake fully informed decisions, did not provide complete information to thecouncil, and were up until August 2022, not briefing council members on fundingapplications not supported by the finance committee.

In 2021–22, the audit report said the ALC received $7.4 million from the Aboriginals Benefit Account for its operations and distributed about $70.2 million in combined land use rents and royalties.

Of that, there was $48.7 million worthof royalty equivalent distribution in 2021-2022, $4.5 million, or nine per centwent to Anindilyakwa Advancement Aboriginal Corporation (which has no CEO andthe money was applied for on its behalf by Mr Hewitt), which owns a 60 per centstake in Winchelsea Mining (of which Mr Hewitt is co-CEO and independentdirector and Mr Wurramarrba is chair). It said that money would be used tosupport the mine and Little Paradise mine logistics base, which is actuallyowned by GHAC (a company of which Mr Hewitt is CEO and independent director of,and Mr Wurramarrba is chair, and Ms Liu is chief operations officer.)

Meanwhile $19.5 million, or 41 per cent,went to Little Paradise infrastructure and Winchelsea Mining, again, companiesthat all three have significant roles in.

The report said that during two 2022finance committee meetings – where decisions about where royalties aredistributed are made – at which Mr Hewitt was present, 112 requests for fundingvalued at $109.1 million were reviewed.

The finance committee meetings are heldin Darwin or Cairns, not on Groote Eylandt.

The finance committee resolved torecommend to the council 79 requests valued at $69.7 million be approved, andthe council adopted all of the finance committee’s recommendations.

The report said the non-traditionalowner, Mr Hewitt was the applicant, either on behalf of GHAC or the AAAC (themine owner), for 16 requests, totalling $25.7 million. GHAC, among otherthings, is trying to create the Little Paradise mine logistics base business toservice Winchelsea Mining, while AAAC, among other activities, owns 60 per centof Winchelsea Mining. The mining company has an exploration licence formanganese over about 20sq km of Winchelsea Island. AUS China InternationalMining, which The Australian reported was owned by Chinese businessman Yu Dongfang, controls the other 40 per cent stake.

The Winchelsea Mining website stillstates that by mid-2022 it is proposed that direct shipping of high grademanganese ore would commence being exported. However the public consultationperiod for the mine’s environmental impact statement does not close until April9.

All 16 requests made by Mr Hewitt wereapproved in part, or in full, for an amount of $25.4 million, including onerequest that was approved for $1 million more than the original request.

“In summary, requests submitted by theALC CEO represented 24 per cent of funding applied for, and 36 per cent ofapproved funding; and the success rate for requests submitted by the ALC CEOwas 99 per cent by value, compared to a success rate for the other applicantsof 53 per cent by value,” the report said.

“In the above example, there was noclear reason for the ALC CEO being the applicant on behalf of AAAC, since theALC CEO holds no formal position in AAAC (although he is co-CEO and director ofWinchelsea Mining, which is a subsidiary of AAAC).

“The majority of applicants for royaltyequivalent funding are Groote-based Aboriginal corporations that do notgenerally have the opportunity to personally present their applications tofinance committee meetings taking place in Cairns or Darwin. In contrast, theALC CEO attends all finance committee meetings.

“The (audit) observed disproportionatebenefit to the entities with which the CEO is associated.

“Given the influence of the chair andCEO over the ALC’s funding and management decisions; the financial benefit thatAAAC, GHAC and consequently Winchelsea Mining obtain from the ALC; and the ALCchair’s, CEO’s and CEO’s spouse’s positions in GHAC and Winchelsea Mining; therisk of conflicts of interest is high…”

In the response letter the ALC saiddecision making took place through consensus following extensive consultationand discussion in language.

“The ALC accepts that documentation ofthese extensive consultations can be improved,” the land council wrote.

‘…The ALC accepts that there is a needto improve on the communication of the decision of the ALC board to the greatercommunity.

“The ALC notes that the royaltydistribution unit, in providing an open door approach to all community members,receives regular feedback in the form of informal complaints from the communityabout not being informed on what goes on at ALC board meetings.”

Federal Indigenous Affairs MinisterLinda Burney told the media she would work with the ALC to ensure therecommendations are implemented.

The CEO’s wife

The ALC said in the response letter thatin the case of Mr Hewitt’s spouse, Ms Liu, she was appointed as chiefoperations officer by the GHAC board and reports directly to them and not toher spouse.

It said the same applied to her role atthe ALC, where she is the major investment and development co-ordinator, andthat she was appointed by the board and reports to the manager of the ALCroyalty development unit.

The land council made no mention of herrole with Winchelsea Mining, where her husband is CEO and director and she ishis executive assistant.

The audit report states the CEO’sdeclaration identified an interest arising from the ALC’s employment of hisspouse, who was first employed by the ALC in 2014.

“The ‘notes’ section of the declarationwas left blank, and no management plan was included in the register orelsewhere. The CEO had not made a written declaration of the interest prior to2022,” the audit said.

“The ALC entered into a one-month casualemployment contract with the CEO’s spouse in May 2014. In June 2016, it enteredinto a full-time ongoing employment contract for the role of finance officer.There were weaknesses in the process for establishing the permanent contractualarrangements in 2016.”

The audit report said that in 2014, ashort-term appointment was taken to the council for approval and the meetingminutes document that the CEO declared an interest and left the room, and thatthe council was briefed on the length and basis of employment, the role and thefunding source, and that it resolved to approve the appointment with thecontract signed by the ALC chair.

It said that in 2016, the permanentposition Ms Liu was given had not been advertised and no alternative candidateswere considered, with the appointment taken to the council for approval, wherethe meeting minutes document that the CEO declared an interest and left theroom.

The minutes discuss the role, and thelocation and department of employment, the report said, however do not documentclear approval of the appointment, including the terms and conditions ofemployment.

The ANAO also found the contract wassigned by the CEO, who was also involved in the drafting of the contract.

“Management of the potential ongoingconflict could be achieved through line reporting relationships,” the reportsaid.

“The CEO’s spouse reports to adepartment manager, who reports to the CEO. There have been instances where theCEO’s spouse has sought and received spending authority directly from the CEO.”