Funding Indigenous organisations: improving governance performance through innovations in public finance management in remote Australia

This review explains the context and past experience of public finance reform and its effects on governance in remote Indigenous communities. Preamble The poor development standards experienced by Indigenous Australians, especially in places remote from urban areas, are regularly characterised in public and academic discourse as a crisis, with calls for ‘new approaches, new thinking and new commitment’. This paper focuses on the modalities used to manage the conversion of public financing of Indigenous organisations into activities designed to impact on these standards. By modalities we mean the policies and instruments that structure and govern how funding is delivered and aligned with government priorities, including administrative, financing and accountability mechanisms. In this review, block funding was identified for its potential to reform the public finance system to create enabling conditions for enhanced Indigenous governance. Building a devolved accountability framework around the organisation, rather than the centralised grant program, is a sensible alternative to multiple grants and ineffective cycles of grant risk management and attendant accountability measures. As block funding has never been explicitly trialled in Australia, there is a lack of evaluations and other evidence for its efficacy in remote Indigenous contexts. In comparison, the international development literature documents a wealth of experience of the success and shortcoming of generically similar financing modalities. The paper therefore considers the circumstances under which block funding could be usefully adapted to the unique context of remote Indigenous communities in Australia. This review examines the literature and evidence from two principal sources. First and foremost, lessons are distilled and the context defined from a wide array of experience over the past two decades across remote Australia. This is then compared with the evidence from similar contexts abroad; that is, countries and regions that are remote from centres of economic wealth and political power, where populations are generally relatively isolated, scattered and highly diverse. These are often poorly served by administrative and service delivery arrangements due to the impost of great distances and high costs. In these settings, whether abroad or in Australia, local authorities are often referred to as being ‘fragile’ and ‘weak’. Two quite different approaches to handling public finances can be found in these contexts: One is to centralise responsibilities to govern public finances and to institute a host of compliance and reporting obligations on local authorities to manage perceived risks to fiduciary standards. This approach can be an effective way to respond to crises in the short term, but over time, this response tends to corrode local capability and introduce perverse incentives to ‘break the rules’ and ‘game the system’ to respond to local needs and demands. A second, contending approach has developed, particularly in the past decade. This approach shifts responsibility in the direction of local authorities and organisations for a specific range of services and functions. It also negotiates mutually acceptable agreements about the conditions under which public monies can be used and how performance will be jointly assessed. This paper synthesises Australian and international experiences, then suggests avenues for future engagement, including both new experimentation and upscaling of already promising precedents