Three of the Northern Territory's largest construction companies received more than $10 million of taxpayer funds through an Indigenous employment program that was later shut down over allegations of widespread fraud, an ABC investigation can reveal.

Key points: The Indigenous Employment Provision Scheme (IEPS) was axed due to fraud concerns

The Indigenous Employment Provision Scheme (IEPS) was axed due to fraud concerns Developers Halikos, Sunbuild and Probuild NT claimed more than $10m through the fund

Developers Halikos, Sunbuild and Probuild NT claimed more than $10m through the fund All IEPS reporting guidelines were followed, companies maintain

Darwin developer Halikos Group and major Northern Territory prime contractors Sunbuild and Probuild NT claimed millions through the NT Government's Indigenous Employment Provisional Sum (IEPS) scheme that the Auditor-General previously found was "lacking in oversight and accountability" and that resulted in other, smaller companies being charged.

The program was established to incentivise local contractors to hire Indigenous workers by awarding them roughly 10 per cent of a project's total value to be used to pay Indigenous wages.

A 2016 KPMG review of the IEPS scheme, authored by current NT Government Buy Local advocate Denys Stedman, found the program was "being taken advantage of", but suggested the Government relax reporting requirements for companies.

According to the report, a business quoted in an anonymous case study — now understood to be Halikos Group — claimed they employed 134 Indigenous workers during construction of the $31 million Darwin Henbury School project in 2015.

This figure has been called into question by industry professionals, but resulted in the company being paid $2.8 million in taxpayer funds through IEPS funding.

Number of Indigenous employees 'unusually high'

Highly placed sources with knowledge of the investigation and the operation of the program told the ABC that Halikos Group was the only company awarded 45 per cent of on-costs to cover overhead expenses through the scheme, which was only permitted after seeking approval from department executives and not offered to any other company.

According to the Stedman report, numerous construction companies had reported difficulties accessing Indigenous employees, but Halikos Group claimed it had 134 Indigenous workers during the construction of the Henbury project.

A 2016 review of the employment scheme found it had been "taken advantage of" ( Pixabay: Public Domain )

The report shows the company did not provide previous employment histories for those workers to Mr Stedman, as requested, for his case study analysis of the benefits of the IEPS program on keeping Indigenous people off welfare.

Numerous industry insiders told the ABC the figure of 134 Indigenous employees on one construction project in Darwin was unusually high.

"That figure is hard to believe," said one long-time Darwin businessman, who asked not to be named.

"They'd be lucky to get half that for a job in Darwin."

The company stands by its claim, a spokeswoman said.

Halikos Group managing director Shane Dignan declined to answer specific questions posed by the ABC, but said in a statement that the company managed its government contracts "in strict accordance with the respective contractual requirements, including the reporting required for [the] IEPS".

"This scheme aimed to increase Indigenous employment and training in the construction industry, something which we embraced and encouraged all project stakeholders including our subcontractors to do," he said.

"As a leading construction company in the Territory, we were afforded the opportunity to provide feedback on this scheme and how it was managed.

"We support developing Indigenous employment opportunities and will continue to do so."

Reporting guidelines were followed, Sunbuild says

According to a list of government tenders, Halikos Group was awarded roughly $51 million in contracts between December 30, 2014 and February 25, 2016, to which the IEPS funding would have applied.

It's unclear how many millions of dollars were paid to the company through the IEPS program in total over that time period because of flawed controls and poor record-keeping when the program was established in 2014.

Probuild NT and Sunbuild also made claims through the IEPS program between 2014 and 2017, worth more than an estimated $10 million combined on projects valued at $112 million.

Sunbuild said it also followed the IEPS reporting guidelines.

Managing director Neil Sunners disputed suggestions his company received up to $3 million through the IEPS program, and said that was "over double what we have claimed".

Mr Sunners said the company had employed "up to around 15" Indigenous employees for construction projects during the program's run.

Probuild NT managing director Phil Danby did not respond to questions around his company's estimated claims of $8 million through the IEPS program for dozens of remote government contracts between 2014 and 2017.

Report suggested government scrap reporting requirements

The KPMG report, commissioned by the Department of Business, discovered the IEPS scheme had been "taken advantage of", but suggested the government scrap reporting requirements for contractors and expand the program to include smaller government contracts.

The review was conducted by Mr Stedman, while he was managing director of KPMG's Darwin office.

"The policy framework is susceptible to and is being taken advantage of — e.g. claiming for non-Indigenous workers, claiming disproportionately high labour rates," he wrote.

The KPMG report was conducted by Denys Stedman ( Youtube: NT Department of Trade, Business and Innovation )

Halikos Group was consulted for their views on the IEPS program and called for mandatory timesheet reporting to be scrapped, which Mr Stedman later passed on to the Government.

In the "options for improvement" section of the 2016 KPMG review, Mr Stedman suggested the Government implement a change that would be "favourably received by industry".

"One 'quick win' [would be] to remove the requirement for contractors to submit signed timesheets with their claims for IEPS reimbursements," Mr Stedman wrote.

He declined to answer why he would raise the issue of fraud in his 2016 report and then suggest the Government scrap reporting requirements.

He concluded in his evaluation that "there have been success stories" with the program and that the purpose of his review was to "highlight these successes more broadly".

The IEPS program was suspended eight months later, in August 2017, over "potential widespread fraud" after an internal investigation determined that some companies were allegedly submitting false Indigenous employment claims.

The ABC understands none of the three major construction companies have been formally referred to police.

It could take 'a number of years' to uncover fraud total

In a report tabled last month, Auditor-General Julie Crisp found the amount rorted through the IEPS program could be more than $100 million — making it the largest known fraud ever committed in the Northern Territory.

However, she also found the full extent was currently unknown due to delays in the Department of Infrastructure's internal investigation and that as of August, only 10 per cent of claims, paid out through the IEPS program before it was suspended had been reviewed.

The department told the Auditor-General it could take "a number of years" to ascertain who defrauded the program and by how much.

The employment fund was attached to all NT Government projects valued at more than $500,000 between December 2014 and August 2017, which was originally designed to offer 10 per cent of the value of a contract to companies as a type of bonus to hire Indigenous employees.

But that figure was not applied consistently and some contractors saw payments of up to 20 per cent of the value of the contract, awarded in some cases without providing any documentation of Indigenous employment, the Auditor-General previously found.

Other internal department reports were conducted before and after the Stedman report, which eventually resulted in Alice Springs company MPH Constructions and the Darwin-based Timber and Steel Constructions referred to police in early 2017 for allegedly defrauding the program.

Both companies are currently before the courts, facing charges of defrauding the program of $220,000 each through alleged false Indigenous employment claims.