Appendix J Aboriginals Benefit Account Annual Report 2010–11

Aboriginals Benefit Account overview

Role and functions

The Aboriginals Benefit Account (ABA) is continued under Part VI of the Aboriginal Land Rights (Northern Territory) Act 1976 (the ALRA) and is a special account for the purposes of the Financial Management and Accountability Act 1997 (the FMA Act).

The ABA receives statutory royalty equivalent monies from appropriations, the level of which is determined by the value of the statutory royalties generated from mining on Aboriginal land in the Northern Territory. ABA funds are public monies. The Minister for Families, Housing, Community Services and Indigenous Affairs allocates ABA funds to the four land councils for operational purposes; funds are distributed to royalty associations in areas affected by mining, and the Minister allocates grants for the benefit of Aboriginal people living in the Northern Territory. In this latter function, the Minister is assisted by the ABA Advisory Committee chaired by Ms Pat Brahim.

Under the ALRA, administration costs and rental payments associated with township leases are also drawn from the ABA. This acknowledges that reformed land arrangements in townships on Aboriginal land can assist with better service delivery and improved housing management, and both facilitate home ownership and increase economic development for land owners and other residents. Expenditure for this purpose represents 1.2 per cent of the total ABA drawdown for 2010–11.

The major functions of the ABA are outlined in Table J-1.

Table J-1 Major functions of the ABA

Function according to section of the ALRA Description
Credits into the ABA
Sections 62 and 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 the Northern Territory land councils in proportions determined by the minister to meet their administrative expenditure. The ALRA requires the administrative expenditure of the land councils to be in accordance with proposed estimates of expenditure approved by the minister.
Payments to royalty associations
Section 64(3)
To make payments to the land councils for distribution to incorporated Aboriginal associations, communities or groups (royalty associations) in order to benefi t those Aboriginal people who are aff ected by mining operations. These payments are directly linked to the amount of 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 benefi t 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 acquiring and administering township leases approved under section 19A of the ALRA.

The ABA contributes to closing the gap on Indigenous disadvantage by engaging with and supporting individuals, families and communities to improve their wellbeing and capability.

Operating environment

In 2010–11, the minister responsible for the account was the Minister for Families, Housing, Community Services and Indigenous Affairs, the Hon. Jenny Macklin MP.

The ABA is administered by the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) in accordance with the requirements of the ALRA and the FMA Act.

In relation to FaHCSIA’s 2010–11 outcome and program reporting structure, the ABA is part of Outcome 7—Indigenous, Program 7.4—Indigenous Capability and Development.

The ABA Advisory Committee, established under section 65(1) of the ALRA, plays an important role in advising the Minister on beneficial payments under section 64(4) of the ALRA.

Offices

The ABA is administered across two offices, FaHCSIA’s national office and the Northern Territory state office, located in Darwin.

The national office is responsible for advising the Minister on the overall policy and financial direction of the ABA. Its activities include:

The Northern Territory state office is responsible for managing ABA grants (including the ABA Community Stores Infrastructure Project) and for providing secretariat support to the ABA Advisory Committee.

Strategic direction

During 2010–11, a key focus of the Department has been the commencement of a number of initiatives to further improve the strategic management of the ABA. In partnership with the ABA Advisory Committee, work has begun on developing a strategic plan to help set the framework for the future direction and management of the account. The plan will identify the role the ABA can play in assisting people to overcome barriers to economic and social development and is expected to be finalised in the second half of 2011.

This critical work is expected to drive a number of complementary initiatives, including the development of an annual ABA business plan that will assist in managing the unprecedented demand for ABA section 64(4) funds. In recent years, the rise in demand followed increases in both ABA royalty equivalent receipts and the account balance. However, in 2010–11 there was a reduction in receipts to $155.316 million, which emphasises the potential volatility of future royalty streams. The Department intends to conduct research into future mining activity on Aboriginal land in the Northern Territory and the implications for receipts into the ABA, which will provide critical data to inform ABA planning and forecasting processes.

The ABA Community Stores Infrastructure Project funding theme commenced in late 2010. This project will mark a significant investment in community stores and will focus on improving infrastructure. The project will ensure that:

Stakeholders

The Department works with a number of key stakeholders to ensure the effective administration

of the ABA and the delivery of benefits to Aboriginal people living in the Northern Territory.

ABA stakeholders include:

ABA performance in 2010–11

Year in review

Tables J-2 and J-3 summarise ABA income and expenditure, respectively.

A continued high level of activity in the mining sector provided the ABA with substantial mining royalty equivalent income in 2010–11, with $155.316 million credited to the account. This is a slight decrease from the $175.217 million received in 2009–10 (see Table J-2).

Table J-2 Summary of ABA income, 2009–10 and 2010–11

Income category 2009–10
$’000
2010–11
$'000
Royalty equivalents 175,217 155,316
Interest 17,041 24,027
Resources received free of charge 1,882 1,879
Lease rental income 585 524
Total income 194,725 181,746

Table J-3 Summary of ABA expenditure, 2009–10 and 2010–11

Payment category 2009–10
$’000
2009–10
% funding
2010–11
$’000
2010–11
% funding
Payments to land councils for administrative purposes—ALRA s. 64(1) 20,263 19.9 46,975 27.7
Payments to land councils for distribution to royalty associations—ALRA s. 64(3) 52,565 51.8 46,594 27.6
Beneficial payments to Aboriginal people in the Northern Territory—ALRA s.64(4)a 24,118 23.8 70,712 41.8
Payments in relation to township leases and subleases—ALRA s. 64(4A) 1,821 1.8 1,876 1.2
Administration (suppliers and employees)—ALRA s. 64(6)b 2,781 2.7 2,840 1.7
Total expenditure 101,548 168,997

Note: These figures are from the statement of comprehensive income; details are in 2010–11 financial statements.

aPayments in this category include payments made for the mining withholding tax.

bPayments in this category are inclusive of the supplier and employer administration for the community stores project and the ABA Advisory Committee.

The fall in mining royalty equivalent receipts in 2010–11 led to a fall in payments to royalty associations (see Table J-3).

Payments to the land councils and grants under section 64(1) increased. Expenditure on beneficial payments approved by the Minister under section 64(4) also increased, from $24.118 million in 2009–10 to $70.712 million in 2010–11.

The ABA Community Stores Infrastructure Project is part of a new strategic direction for the ABA that includes a greater orientation towards economic development and the use of a funding theme.

2010–11 funding highlights

Despite the fall in royalty equivalent receipts, the account balance enabled the ABA to fund an increased number of beneficial projects under section 64(4) of the ALRA.

In 2010–11, the Minister approved a total of $118.1 million in funding for 86 beneficial projects and initiatives against the following ABA funding categories:

Beneficial projects improve the lives of Aboriginal people in the Northern Territory by improving employment opportunities, education, infrastructure and health. Key beneficial projects during 2010–11 included:

Further information on individual funding for beneficial projects approved in 2010–11 can be found on the FaHCSIA website.

Fund management and reporting framework

FaHCSIA is responsible for ensuring that the ABA complies with the ALRA and relevant financial legislation and that it meets its financial accountability responsibilities to the Government and Parliament. 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 about the estimates and timing of royalties payable for mining on Aboriginal land in the Northern Territory. The information supports the preparation of annual projections of receipts and payments for the ABA to meet budget obligations.

In 2010–11, FaHCSIA continued to implement the recommendations of the 2008 performance audit of the ABA by the Office of Evaluation and Audit to improve ABA governance, administration and reporting.

The activity reporting framework adopted for this report (Table J-4) is aligned with the main functions of the ABA as described in Table J-1.

Table J-4 ABA activity reporting framework

Administration of the ABA
1: Credits into the ABA
2: Debits out of the ABA
3: Office of Township Leasing
4: ABA Secretariat
5: Advisory Committee membership
6: Investment portfolio

ABA activities in 2010–11

Credits into the ABA

Section 63 of the ALRA requires the Commonwealth to credit to the ABA royalty equivalent monies, the level of which is equivalent to the royalties received by the Commonwealth and the Northern Territory Government for mining on Aboriginal land in the Northern Territory.

Section 62(3) of the ALRA requires interest received from the investment of ABA funds to be credited into the ABA. The interest earned from investments is receipted directly into the ABA’s official bank account and used to make payments as required.

Royalty equivalent credits

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 from uranium mining on Aboriginal land are paid to the Australian Government Department of Resources, Energy and Tourism, and royalties from non-uranium mining on Aboriginal land are paid to the Northern Territory Treasury.

Following advice from these bodies and any necessary determinations made by the Minister, special appropriations are made from the Consolidated Revenue Fund to enable funds equivalent to the amount of royalties received from mining on Aboriginal land to be credited to the ABA. Advice is provided weekly by the Northern Territory Treasury and twice yearly by the Department of Resources, Energy and Tourism.

Table J-5 provides uranium and non-uranium royalty equivalents credited to the ABA in 2009–10 and 2010–11.

Table J-5 Royalty equivalent receipts, 2009–10 and 2010–11

2009–10
$,000
2010–11
$'000
Uranium royalties 31,659 20,031
Non-uranium royalties 143,558 135,285
Total royalty equivalents 175,217 155,316

Note: See the 2010–11 financial statements for further details.

ABA royalty equivalent income is volatile because it is subject to fluctuations in production and the market price of commodities. Figure J-1 shows section 63 receipts from royalty equivalents transferred into the ABA in the past eight years.

Figure J-1 Section 63 royalty equivalent receipts transferred to the ABA, 2003–04 to 2010–11

Figure-J1

Debits out of the ABA

ABA expenditure in 2010–11

Table J-3 provides a summary of total ABA expenditure in 2009–10 and 2010–11.

Payments to land councils for administrative expenses

Table J-6 lists ABA monies paid in 2009–10 and 2010–11 to the four Northern Territory land councils to meet their administrative costs.

Table J-6 Section 64(1) payments (net of mining withholding tax) to land councils for administrative costs, 2009–10 and 2010–11

Land council 2009–10
$'000
2010–11
$'000
Northern Land Council 7,697a 28,798b
Central Land Council 9,252 11,723
Tiwi Land Council 1,665 1,979
Anindilyakwa Land Council 882 2,668
Total 19,496 45,168

Note: The figures in this table are net of mining withholding tax, unlike the section 64(1) payments listed in Table J-3. See the 2010–11 financial statements for further details.

aThe Northern Land Council 2009–10 figure of $7,697 million is net of a since reversed liability treatment of $7,852 million.

bThe Northern Land Council 2010–11 figure of $28,798 million includes a liability of $11,406 million relating to entitlements under prior year legislation based on historic data.

Payments to royalty associations

Under section 64(3) of the ALRA, 30 per cent of the royalty equivalent monies must be paid to each land council in the area in which a mining operation is situated. These monies are distributed to Aboriginal organisations (royalty associations) in those areas affected by mining operations. Table J-7 lists payments made in 2009–10 and 2010–11 to land councils for distribution to royalty associations.

Table J-7 Section 64(3) payments (net of mining withholding tax) to land councils for distribution to royalty associations, 2009–10 and 2010–11

Land council 2009–10
$'000
2010–11
$'000
Northern Land Council 12,349 9,636
Central Land Council 6,197 2,790
Anindilyakwa Land Council 31,916 32,305
Total 50,462 44,731

Note: See the 2010–11 financial statements for further details. There is currently no mining in the Tiwi Land Council area.

Mining withholding tax

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 4 per cent.

From 1 July 2003, the Australian Taxation Office determined the ABA to be a large pay-as-you-go (PAYG) withholder. MWT liabilities on payments made are paid on or before due dates in accordance with the PAYG withholding for large withholders guide issued by the Taxation Office.

Table J-8 shows the total MWT for 2009–10 and 2010–11.

Table J-8 Mining withholding tax, 2009–10 and 2010–11

2009–10
$'000
2010–11
$'000
MWT expenditure for the year 3,225 5,656

Note: See the 2010–11 financial statements for further details.

Beneficial payments

Under section 64(4) of the ALRA, the Minister can make payments for the benefit of Aboriginal people living in the Northern Territory. The Minister is advised by the ABA Advisory Committee in relation to these payments.

Table J-9 lists expenditure under section 64(4) for 2009–10 2010–11.

Table J-9 Section 64(4) expenditure—beneficial payments (net of mining withholding tax and return of unspent funds), 2009–10 and 2010–11

2009–10
$'000
2010–11
$'000
Section 64(4) beneficial payments 23,763 68,751

The significant rise in section 64(4) payments is a reflection of the increase in both royalty equivalent receipts and the account balance over the previous two years.

Sections 64(6) and 64(4A) administrative payments

Administration costs associated with the running of the ABA are captured under sections 64(6) and 64(4A) of the ALRA. Table J-10 provides a breakdown of administration and Office for Township Leasing expenses for the ABA for 2009–10 and 2010–11, including consultancy services and services provided free of charge to the ABA.

The majority of resources required for the administration of the ABA were provided free of charge by FaHCSIA. Resources provided free of charge represent staffing costs associated with the management of the ABA not reimbursed to FaHCSIA by the ABA. Resources provided free of charge are included as revenue in Table J-2 and expenses in Table J-10.

Financial statement audit services are also provided free of charge to FaHCSIA by the Australian National Audit Office.

Table J-10 Departmental administration, sections 64(6) and 64(4A) expenditure, 2009–10 and 2010–11

Payment category 2009–10
$'000
2010–11
$'000
Departmental administration expenditure
Resources provided free of charge 1,882 1,879
Section 64(6) payments
Committee members’ sitting fees/superannuation 203 238
Consultancy services 295 146
Committee meeting expenses 124 141
Payments to meet the administration of the ABA 69 0
ABA Community Stores Infrastructure Project 207 436
Section 64(4A) payments
Office for Township Leasing Executive Director administrative expenses 1,188 1,218
Payments for township leases 633 658
Total administrative costs of the ABA 4,601 4,716

Note: See the 2010–11 financial statements for further details.

Consultancy services

Table J-11 lists consultancy services used by the ABA in 2009–10 and 2010–11.

Table J-11 Consultancy services (GST inclusive), 2009–10 and 2010–11

Consultancy 2009–10
$'000
2010–11
$'000
KPMG Darwin 166.1 90.3
Deloitte Touché Tohmatsu 20.9 23.7
PSI Asia Pacific 17.6 4.2
Norton Rose 0 6.0
Remote Rural Resources 119.9 0
Merritt Partners 0 42.2
Total consultancy services 324.5 160.4

Office of Township Leasing

The Office of Township Leasing is now close to finalising all subleasing arrangements in the communities of Wurrumiyanga (Nguiu) on the Tiwi Islands, Angurugu and Umbakumba on Groote Eylandt, and Milyakburra on Bickerton Island. The office has successfully implemented the leasing/subleasing arrangements in the townships, promoted economic development opportunities and facilitated individual home ownership.

The office has worked closely with the Mantiyupwi Traditional Owners (of Wurrumiyanga), who have embraced the opportunity to invest funds in their own community and to take advantage of the economic opportunities provided by major capital infrastructure projects being undertaken in the township. The investments have included a number of sound business ventures that will show an immediate investment return. Other investments include major infrastructure projects that will benefit community residents generally and have a longer-term return on investment.

Progress in the communities of Angurugu, Umbakumba and Milyakburra has been encouraging and a number of economic development opportunities are starting to emerge now that occupiers have obtained secure land tenure. To date several businesses have invested in their new and existing infrastructure so that economic returns can be improved. Family groups are also considering investing the funds from the advance payment from the township lease in economic opportunities which will improve the development and sustainability of each of the townships.

ABA Advisory Committee

The ABA Advisory Committee is established under section 65(1) of the ALRA to advise the Minister on beneficial payments under section 64(4) of the ALRA.

In 2010–11, the ABA Advisory Committee dealt with a large number of applications for funding. The committee met four times to consider applications and formulate advice to the Minister in relation to beneficial payments. The outcomes of each of the meetings held in 2010–11 are summarised below.

Meeting outcomes

August 2010 meeting (Darwin)

The committee considered 65 applications for funding:

October 2010 meeting (Darwin)

The committee considered an application for funding of phase one of the Community Stores Infrastructure Project. The application was supported.

November 2010 meeting (Darwin)

The committee considered 53 applications for funding:

April 2011 meeting (Darwin)

The committee considered 106 applications for funding:

During this period, FaHCSIA and the ABA Advisory Committee also worked together on the development of a strategic plan for the ABA. Planning meetings were held in Darwin in March 2011 and Alice Springs in May 2011 to develop the strategic plan, which will guide the direction of the account for the next five years (2011–16).

Advisory Committee membership

The Advisory Committee comprises 14 members nominated by the four Northern Territory land councils and the chairperson, Ms Patricia Brahim, appointed by the Minister. Land council representatives are elected from within each land council’s own membership. The membership of the committee in 2010–11 is shown in Figure J-2.

Figure J-2 ABA Advisory Committee members, 2010–11

Figure-J2

Investment portfolio

The ABA investment strategy is focused on cash-flow requirements, preservation of the fund and management of risk. Monies that are surplus to immediate requirements are invested under section 39 of the FMA Act.

To minimise the risk of any loss, section 39 of the FMA Act restricts the investment of public money to a limited number of specific low-risk investments such as government bonds, state and territory bonds, term deposits and negotiable cash deposits with a bank.

Table J-12 shows the term deposits and negotiable cash deposits that the ABA had with Australian banks on 30 June in 2010 and 2011.

Table J-12 ABA investment portfolio, 30 June—2010 and 2011

2010
$’000
2011
$’000
Interest-bearing deposits 368,969 405,829
Negotiable cash deposits 9,212 0
Total ABA investment portfolio 378,181 405,829

Note: See the 2010–11 financial statements for further details.

Total equity

Table J-13 lists the closing balances of the ABA as disclosed in part four of the financial statements.

Table J-13 Total equity, 30 June—2010 and 2011

2010
$'000
2011
$'000
Balance carried forward from previous year 306,372 399,549
Income minus expenses (surplus) 93,177 12,749
Closing balance as at 30 June 399,549 412,298

Next