ASPI fumbles Washington office amid lies and legal failures

Hawkish military think tank the Australian Strategic Policy Institute (ASPI) lied to the auditor-general about the establishment of a US subsidiary in Washington DC, a new report from the Australian National Audit Office (ANAO) reveals, amid calls for the militarist talk shop to lose funding.

In its annual survey of government sector audited financial statements for 2023-24, the ANAO has revealed a number of problems from within the Defence portfolio, including at ASPI, which gets $4 million a year from Defence, a similar amount from other government departments and several million dollars a year from foreign powers like the US State Department. For most of its life, ASPI also drew funding from arms companies. The institute, especially when it was led by former defence bureaucrat and Liberal staffer Peter Jennings, has been a reliable advocate for hostility towards China.

It was this advocacy for US defence interests that prompted ASPI to ask for additional funding from the Morrison government to open an office in the heart of the US military-industrial complex in Washington DC. In 2021, the Coalition gave ASPI $5 million for the DC office.

That’s when ASPI’s problems commenced. It had failed to do its homework properly and didn’t check the legal status of its office, while its plans to generate additional revenue from the DC venture fell afoul of US tax laws. According to the ANAO, “ASPI obtained legal advice which recommended the branch office become a US incorporated subsidiary. The board authorised the US subsidiary’s creation in early 2023.”

ASPI went ahead and created its US mini-me in April 2023, with two ASPI personnel appointed directors. But when the ANAO conducted its 2022-23 audit of ASPI, on “4 September, 2023, ASPI provided the ANAO with a written declaration that the US subsidiary had not been established. Subsequently, in January 2024, ASPI informed the ANAO that the US subsidiary had been incorporated on 3 April, 2023.” ASPI lied to the ANAO and failed to correct the record for five months.

Worse, despite all its supposed strategic nous and deep affection for the United States, ASPI still hadn’t done its homework properly.

The ANAO reviewed the processes around the establishment of the US subsidiary and identified a number of governance risks which were not addressed. ASPI did not undertake a fulsome risk assessment process and did not properly assess the legal and regulatory risks in both the US and Australia before the board approved the subsidiary’s creation. Significant legal compliance risks raised in advice prepared by two separate legal firms for ASPI were not addressed until the ANAO inquired as to the status of these matters.

It was only after the ANAO chipped them that ASPI started doing the kind of work it should have done in 2021. It still isn’t completed — according to the ANAO, “ASPI has advised the ANAO that significant progress has been made during 2023–24 to enhance governance, increasing transparency and ensuring consistency with both Australian and US laws. The subsidiary is expected to commence operations during 2024–25.”

While ASPI was bumbling around in DC, it was also failing to lodge its annual report on time — the report still hadn’t been tabled in Parliament when the ANAO began writing up its results on December 7 last year (the report is now available). ASPI is also one of only three entities across hundreds of departments, agencies and government enterprises that has failed to meet minimum governance requirements around internal audit processes — a possible reason why its DC venture has been so botched.

The annual survey also reveals that the Department of Defence failed to fix a major security problem long after the auditor-general drew it to the attention of the department. In its 2022-23 audit of Defence, the ANAO discovered that nearly 1,500 former employees or contractors hadn’t had their access to Defence systems stopped when they ceased working for the department, and that it had continued to pay some staff after they left Defence — in one case for more than two months. This meant staff who no longer needed access to the department’s financial management system in many cases still had it.

After the auditors drew this to the department’s attention, Defence undertook to fix the system flaws that were creating the problem. But a year later, “the ANAO was unable to confirm that the enhanced systems and processes implemented captured the full population of personnel and contractors that had separated from Defence during the period. Defence has not established processes to regularly confirm the completeness and accuracy of data…” And nothing had been done about people being able to access financial information when they didn’t need to.

For those who pay attention to Defence’s usual offering of staggering ineptitude, it comes as no surprise. But ASPI’s Washington follies further undermine the already battered reputation of the local spruikers of US forever wars.

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