Contents
- Part 1 Executive Summary
- Part 2 Performance reporting
- Part 3 Corporate governance and accountability
- Part 4 Appendices
- Part 5 Financial Management
Annual Report 2007–2008
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Annual Report 2007–2008
Annual Report 2007–2008 » Chapter 13: Appendices » Appendix 10
The Aboriginals Benefit Account (ABA) is a Special Account (for the purposes of the Financial Management and Accountability Act 1997) established for the receipt of statutory royalty equivalent monies generated from mining on Aboriginal land in the Northern Territory (NT), and the distribution of these monies.
The ABA is administered by the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) in accordance with the requirements of the Aboriginal Land Rights (Northern Territory) Act 1976 (the ALRA) and the Financial Management and Accountability Act 1997 (the FMA Act).
Under sub-section 64(4) of the ALRA, the Minister for Families, Housing, Community Services and Indigenous Affairs, the Hon. Jenny Macklin, MP, is able to direct that amounts be paid, or applied to or for, the benefit of Aboriginals living in the Northern Territory.
For part of the reporting period the responsible minister was the former Minister for Families, Community Services and Indigenous Affairs, the Hon. Mal Brough, MP.
The Aboriginal Land Rights (Northern Territory) Amendment Act 2006 (the Amendment Act) was passed by Parliament on 17 August 2006. The Amendment Act introduced a number of changes relating to the operation and functions of the ABA, including:
In addition to the above changes, Land Council administration expenditure payments under section 64(1) are now approved by the Minister based on performance and need. This replaced the entitlement to a mandated share of the statutory royalty equivalents for the funding of administrative costs of the Land Councils.
The Amendment Act should contribute positively to the ongoing economic and social development opportunities for the Aboriginal people living in the Northern Territory.
The major functions of the ABA are described in Table 4.27 below.
| Function according to Section of the ALRA | Description |
|---|---|
| Receipts into the ABA Sections 62-63 | To receive the equivalent of mining royalty monies derived from mining operations on Aboriginal land in the Northern Territory, and such other income as outlined in section 63 of the ALRA. |
| Payments to Land Councils Section 64(1), in accordance with section 34(1) | To make payments to Aboriginal Land Councils in the Northern Territory in the proportions determined by the Minister to meet their administrative expenditure. The ALRA requires that the administrative expenditure of the Land Councils is to be in accordance with the estimates of expenditure approved by the Minister. |
| Payments to Royalty Associations Section 64(3) | To make payments to the above mentioned Land Councils for distribution to incorporated Aboriginal associations, communities or groups in order to benefit those Aboriginal people who are affected by mining operations. These payments are directly linked to the amount or royalty equivalent monies received in respect of mining in the areas concerned. Royalty associations receive 30 per cent of the royalty equivalents paid into the ABA. |
| Beneficial payments Section 64(4) | For the Minister to make payments for the benefit of Aboriginal people living in the Northern Territory. The ABA Advisory Committee provides advice to the Minister on these payments. |
| Administration payments Section 64(6) | To make payments to meet the expenses of administering the ABA. |
| Office of Township Leasing payments Section 64(4A) | To make payments for the acquisition and administration of township leases approved under section 19A of the ALRA. |
FaHCSIA is taking steps to increase the accountability and transparency of the ABA. The need for this work is expected to be borne out by the Office of Evaluation and Audit (OEA) performance audit of the ABA report, due in early 2008-09.
During the course of the next two years reforms to the operation of the ABA will be made. These changes are aimed at improving the transparency, efficiency and performance of the ABA. The ABA reform agenda includes:
The ABA's output reporting framework (detailed in Table 4.28 below) is based on the major functions of the ABA described previously. As indicated above, a performance monitoring and reporting framework is in the early stages of development to enable the ABA to report against a set of performance indicators in line with standard annual reporting requirements. It is anticipated that the ABA will commence reporting against performance indicators from 2008-09, with a complete performance reporting framework in place by 2010-11.
| Output Group: Administration of the ABA | |
|---|---|
| 1.1 | Receipts into the ABA and other income |
| 1.2 | Payments out of the ABA and other expenditure |
| 1.3 | ABA-Secretariat |
| 1.4 | Strategic Management |
Output Group 1.1 includes:
| 2007–08 $'000 |
2006–07 $'000 |
|
|---|---|---|
| Royalty equivalents | 83,257 | 87,336 |
| Interest | 12,253 | 9,659 |
| Resources received free of charge | 1,382 | 979 |
| Total ABA income | 96,892 | 97,974 |
Under the Northern Territory (Self-Government) Act 1978, all Commonwealth interests in minerals in the Northern Territory, other than a prescribed substance within the meaning of the Atomic Energy Act 1953, are vested in the Northern Territory.
Title to those substances to which the Atomic Energy Act 1953 refers, principally uranium, remains vested in the Commonwealth.
Royalties in respect of uranium and non-uranium mining on Aboriginal land are paid to the Australian Government Department of Resources, Energy and Tourism (DRET) and to the Royalty Branch of the Northern Territory Treasury respectively.
Following advice from these bodies and any necessary determinations made by the Minister, special appropriations are made from the Consolidated Revenue Fund (CRF) to enable funds equivalent to the amount of royalties received from mining interests on Aboriginal land be credited to the ABA. Advices are provided weekly by the Northern Territory Treasury and twice yearly from DRET, exclusive of adjustments, if applicable. These funds are public funds.
Table 4.30 below provides a break-up of uranium and non-uranium royalty equivalents credited to the ABA for 2007-08 and 2006-07.
| 2007-08 $'000 |
2006–07 $’000 |
|
|---|---|---|
| Uranium royalties | 14,139 | 12,340 |
| Non-uranium royalties | 69,118 | 74,996 |
| Total royalty equivalents | 83,257 | 87,336 |
Source: 2007-08 ABA Financial Statement and Annual Report Working Papers
ABA royalty equivalent income is volatile and outside the control of the Minister or the ABA. The following chart shows section 63 receipts from royalty equivalents transferred into the ABA during the past five years.
Figure 4.1 Section 63 royalty equivalent receipts transferred to the ABA for the last five years
The ABA earns interest on funds that are surplus to immediate needs. Interest earned is either receipted directly into the ABA's official bank account or rolled over to a new investment. Table 4.31 details interest earned for 2006-07 and 2007-08.
| 2007-08 ($'000) | 2006-07 ($'000) |
|---|---|
| 12,253 | 9,659 |
The ABA receives resources free of charge in relation to audit services provided by the Australian National Audit Office (ANAO) and in relation to resources (primarily staffing) provided by FaHCSIA. The total value of resources provided free of charge to the ABA are provided in Table 4.32 below.
| 2007-08 ($'000) | 2006-07 ($'000) |
|---|---|
| 1,382 | 979 |
Refer income statement, note 3D as reported in the financial statements.
Table 4.33 summarises ABA cash flow expenditure for 2007-08.
| Payments from the ABA | 2007-08 ($'000) |
|---|---|
| Grants (subsection 64(4) ALRA) | 20,311 |
| Suppliers (subsection 64(6) ALRA) | 610 |
| Employees (subsection 64(6) ALRA) | 17 |
| Payments township leases (subsection 64(4A) ALRA) | 5,000** |
| Payments to Land Councils for administrative purposes (subsection 64(1) ALRA) | 25,084 |
| Payments to Land Council for distribution (subsection 64(3) ALRA) | 24,977 |
| Total cash used | 75,999 |
* The Cash Flow Statement from the audited 2007-08 Financial Statements has been used to show actual cash movements from the ABA (refer to the Financial Statements).
** Flowing from the operation of the newly created Office of Township Leasing (OTL) in 2007-08, the Nguiu Township Head Lease was signed on 30 August 2007. As part of the agreement, an initial payment of $5 million was paid to the Tiwi Land Council. The $5 million payment is classified as a prepayment and expensed over 15 years (refer Explanatory Note for Table 4.38).
Under the Income Tax Assessment Act 1936, payments made from royalty equivalents credited to the ABA, are subject to Mining Withholding Tax (MWT) at a rate specified in the Income Tax (Mining Withholding Tax) Act 1979. In accordance with the Taxation Laws Amendment Act (No. 3) 1994, the current rate of tax applied to payments of MWT is four per cent.
From 1 July 2003, the Australian Taxation Office (ATO) determined the ABA to be a large Pay as You Go (PAYG) Withholder. MWT liabilities on payments made are paid twice weekly on or before due dates, in accordance with the Large withholders guide to PAYG Withholding issued by ATO.
| 2007-08 $'000 |
2006–07 $’000 |
|
|---|---|---|
| Total MWT expenditure | 2,296 | 1,718 |
Source: 2007-08 ABA Financial Statement and Annual Report Working Papers. Section 64(1)-Land Council expenditure
Table 4.35 lists ABA expenditure to the four Northern Territory Land Councils to meet their administrative costs.
| 2007-08 $'000 |
2006–07 $’000 |
|
|---|---|---|
| Northern Land Council (NLC)* | 11,601 | 13,361 |
| Central Land Council (CLC)** | 7,783 | 9,066 |
| Tiwi Land Council | 1,928 | 1,862 |
| Anindilyakwa Land Council (ALC)*** | 640 | 907 |
| Total subsection 64(1) net | 21,952 | 25,196 |
Refer Note 4D Payments to Land Councils for administrative purposes as reported in the Financial Statements.
* The $13.361 million paid to the NLC in 2006-07 includes an approval of additional funding of $2 million for the outfitting of new office premises.
** The $7.783 million paid to the CLC reflects in 2007-08 actual payments made of $9.913 million offset by an adjustment of $2.130 million reflecting the absorption of prior year's amounts due under the former guaranteed funding model.
*** The $640,000 paid to the ALC in 2007-08 reflects actual payments made of $825,000 offset by an adjustment of $185,000 reflecting the absorption of prior year's amounts due under the former guaranteed funding model.
Following changes to the legislation in 2006, the only fixed statutory payments now made are subject to section 64(3) of the ALRA. Under this provision 30 per cent of the royalty equivalent monies received are directed to Land Councils for distribution, in accordance with subsection 35(2) of the ALRA, to Aboriginal organisations in areas affected by mining operations.
| 2007-08 $'000 |
2006–07 $’000 |
|
|---|---|---|
| Northern Land Council | 6,508 | 5,111 |
| Central Land Council | 7,265 | 9,126 |
| Anindilyakwa Land Council | 10,206 | 10,915 |
| Total payments under section 64(3) net | 23,979 | 25,152 |
Refer Note 4E Distribution to Land Councils as reported in the Financial Statements.
During the 2007-08 and 2006-07 reporting period, there were no areas affected by mining operations for the Tiwi Island.
Under section 64(4) the Minister can make payments to or for the benefit of Aboriginal people living in the Northern Territory (Table 11). The ALRA establishes the ABA Advisory Committee to provide advice to the Minister concerning these payments. In 2007-08, 58 funding approvals were paid from the ABA under the following broad categories:
| 2007-08 Accrual ($'000) |
2007-08 ($'000) ; |
2006–07 $’000 |
|
|---|---|---|---|
| Total expenditure | 20,311 | 603* | 16,240 |
* In prior years, a number of grants were incorrectly recorded in the financial statements as expenses rather than commitments.
Further information on ABA discretionary payments, including those organisations that have received funding, is available on the FaHCSIA website.
Expenses relating to the administration of the ABA are paid under section 64(6) and include the value of resources provided free of charge to the ABA (see Table 4.32). Resources provided free of charge are recognised in the ABA financial statements under both income and expenditure and are therefore included in Table 4.38 below. Section 64(6) administration expenses also include ABA Advisory Committee meeting expenses, Committee Members' sitting fees/superannuation and other administration expenses, including consultants.
In 2006-07, the Office of Township Leasing (OTL) was established. The Executive Director of Township Leasing is responsible for managing on behalf of the Commonwealth certain township leases entered into with Indigenous communities in the Northern Territory. Expenses related to township leases are currently paid from the ABA under section 64(4A).
| 2007-08 $'000 |
2006–07 $’000 |
|
|---|---|---|
| 64(6) expenditure, including value of resources provided free of charge | ||
| Employee wages and salaries/superannuation | 1,108 | 689 |
| Committee members' sitting fees/superannuation | 17 | 21 |
| Other administration expenses | 489 | 446 |
| Committee meeting expenses | 51 | 60 |
| 64(4A) expenditure | ||
| Office of Executive Director Township Leasing administrative expenses | 457 | - |
| Payments for township leases | 278* | - |
| Total expenditure under 64(6) and 64(4A) | 2,400 | 1,216 |
Source: 2007-08 ABA Financial Statement and Annual Report Working Papers.
Refer Notes 4A Employees and 4B Suppliers as reported in the Financial Statements
*
The Payments for Township Leases of $278,000 relates to the recognition of the first year's expense of the Nguiu Township Head Lease (the $5 million lease payment is classified as a prepayment and expensed over 15 years-refer Explanatory Note for Table 4.33).
Consultancy expenditure under section 64(6) for 2007-08 was $221,000 (net of GST) and is included in Table 4.38.
Table 4.39 lists consultancy services to the ABA for 2007–08.
| Consultancy | 2007-08 ($'000) |
|---|---|
| KPMG Darwin-Financial Services | 158 |
| Enmark Business Advisors | 45 |
| Ove Arup | 17 |
| Westaff (Australia) Pty Ltd | 1 |
| Total consultancy costs | 221 |
Output Group 1.3 focuses on the provision of secretariat services to the ABA Advisory Committee.
The ABA Advisory Committee is established under subsection 65(1) of the ALRA. Its role is to advise the Minister in connection with debiting the Account for the purposes of making payments under section 64(4).
The committee consists of 15 members. The chairperson is appointed by the Minister, while the remaining 14 members are elected from within the membership of the four Northern Territory Land Councils.
Figure 4.2 ABA Advisory Committee Membership
* These members are retired members.
Through out 2007-08, the ABA Advisory Committee met twice. The first meeting was held between 4 and 6 September 2007, the second meeting was held between 9 and 10 April 2008.
Output Group 1.4 focuses on the strategic management of the ABA and the ABA Investment Portfolio. FaHCSIA is responsible for ensuring that the ABA meets its financial accountability responsibilities to the Government and the Parliament which complies with financial legislation and the ALRA.
Section 64B of the ALRA requires FaHCSIA to keep accounts and prepare Financial Statements in respect of the ABA, as determined by the Minister for Finance.
Section 64B also requires the Auditor-General to report on the Financial Statements to the Minister for Families, Housing Community Services and Indigenous Affairs.
Each year FaHCSIA seeks information from relevant mining companies in relation to the quantum and timing of royalty's payable in respect of mining on Aboriginal land in the Northern Territory.
The information is sought to facilitate the preparation of annual projections of receipts and payments for the ABA and to meet the Commonwealth budget obligations. Projections are incorporated in a cash flow spreadsheet, dissected over the twelve months of the year. Monthly projections are updated with actual figures at the end of each month.
The investment objective of FaHCSIA, as the financial administrator of the ABA, is to ensure that the account complies with legislative obligations under both the Financial Management and Accountability Act 1997 (FMA Act) and the Aboriginal Land Rights (Northern Territory) Act 1976, whilst ensuring the ABA Investment Portfolio and bank account are managed to ensure sufficient funds are available for its statutory payments and its discretionary payments.
Monies which are surplus to immediate requirements are invested under section 39 of the FMA Act. Investments authorised under section 39 of the FMA Act include:
Table 4.40 lists the ABA Investment Portfolio as at 30 June 2008.
| 2007-08 $'000 |
2006–07 $’000 |
|
|---|---|---|
| Interest Bearing Deposits | 131,540 | 124,400 |
| Negotiable Certificates of Deposit | 59,217 | 45,183 |
| Total ABA Investment Portfolio | 190,757 | 169,583 |
Refer Notes 5C Investments as reported in the Financial Statements.
The development of a strategic financial management plan for the ABA incorporating a minimum investment amount, long term investment strategy and financial performance indicators is in the early stages of development. The development of the strategic plan is subject to the Government's policy approach to the Indigenous Economic Development Strategy being developed.
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