ON LINE Opinion:  This past October, Olga Havnen, the Northern Territory Coordinator General for Remote Indigenous Services, released her annual report. The response of the NT Government was to sack her. It’s her story to tell the reasons why. What is clear from her report is that Olga doggedly asked government departments what proportion of their budget was taken up by administrative overheads. Her requests were “met with a reluctance to comply and, in some instances, outright hostility.”

Olga is not the first to ask the question of government. Mid 2009, Prime Minister Kevin Rudd ordered a Strategic Review of Indigenous Expenditure, and the Department of Finance commissioned Neil Johnston, former Secretary of Veteran Affairs, to lead it. The final report was initially buried but then released under Freedom of Information laws. When Johnston asked the same question, most departments declined to respond.

The Productivity Commission estimates that $5.4bn in government funding is allocated nationally to Indigenous specific programs. If we broaden this to the total amount of services, by adding mainstream services like health, education, policing and corrections, the total figure is $25.4bn; more than double that per head of other Australians. The sheer size of these numbers gives the impression that the intractable disadvantage of Indigenous Australians is not due to lack of government spending. But the figures tell us nothing of the efficiency of this expenditure, in what is widely suspected to be a dysfunctional system. Olga is right to ask how much is actually used for grants and services to the benefit of her people.

The Australian National Audit Office (ANAO) found that the three major funders of federal Indigenous programs – families (FaHCSIA), health (DOHA) and employment (DEEWR) – had Indigenous-specific expenditure of $3.3bn, but only about $1.3bn was given in direct grants to Indigenous organisations. Yes, much was legitimately channelled through non-Indigenous providers, and much was legitimately spent on overheads by government. But in the absence of adequate transparency, no-one can say how much of this remaining $2bn actually hits the ground.

Government demands this transparency from Indigenous organisations, NGOs and other providers that it funds. The figure that it typically accepts for administrative overheads is 10%.

International NGOs report on their overheads for their work in developing countries, under the scrutiny of their public supporters. Through their Australian Council for International Development (ACFID) Code of Conduct, they are bound to “truthfully and transparently” disclose “the percentage of funds spent on administration and fundraising costs incurred.” There are enormous variations between international NGOs, according to their size, activities, and areas of focus. There is no ‘industry’ benchmark, but research undertaken at the Queensland University of Technology calculated the average at 20%. Importantly, there are codes and watchdogs that ensure transparency.

So what is the overhead for government expenditure in Indigenous Affairs? The problem is that the keepers of the data are within the back rooms of a multitude of Federal, State and Territory government departments. Like all accounting tables, you can only understand what is selectively reported. We just limited ourselves to Federal spending. We know that the Federal departments divide their accounts between ‘departmental’ and ‘administered’ funds, with the latter, counter-intuitively referring to their grants to Indigenous organisations, NGOs and other providers. So they have it in their accounting machinery to calculate their overheads. We think that ‘departmental’ spending is almost all ‘overhead’, as the Federal government delivers few direct social services in Indigenous Affairs through its own staff.

Neil Johnston and his team in the Department of Finance provided our best source of data. They tackled double counting, departmental transfers, special accounts and strange appropriations. We stared long at their graphs and tables, like the surface of wishing pond revealing hidden truths. We think that the overhead figure is at least 30%, and higher in some areas.

There are two reasons why we think the overhead figure may be so high. The ANAO review revealed the sheer number of small grants awarded to Indigenous organisations: “820 Indigenous organisations funded were required to submit 20 671 performance, financial and acquittal reports”. A large chunk of public servants’ time goes into reading these reports and general surveillance of accountability. And that’s not including the time involved for Indigenous organisation to compile and submit these reports, rather than delivering services.

We also think that much expenditure has occurred through an increased number of Federal Government public servants based in priority community and regional centres. Perhaps it can be argued that some of their time is engaged in service delivery, but much also is spent on oversight, coordination and risk management as well.

We openly declare that we are speculating from the figures provided. Only government departments have the means to do the calculation. We propose that either the Productivity Commission or the Department of Finance and Deregulation be commissioned to investigate this. It is the role of these agencies to oversee productivity issues in government, and, in the words of Neil Johnston: “this major investment, maintained over many years, has yielded dismally poor returns.”

There are certainly explanations to justify expenditure on overheads. The media scrutiny of Indigenous Affairs means it is necessary for the public servants to manage political risks, and excessive accountability reporting is a side effect of a volatile political environment. As well, governments must equitably distribute public resources across the large numbers of Indigenous organisations, and other providers, and this needs coordination. Then there is the need to intervene in high priority areas usually with the higher costs of remoteness. But these explanations should be benchmarked against other public sectors, including foreign aid, education and health, who also manage risk, universal entitlement and remote servicing.

More important than a figure is transparency of public expenditure on administrative overheads. Olga shouldn’t be the only one asking the question.

Mark Moran and Patrick Sullivan