The Abbott government’s once-in-a-generation overhaul of indigenous spending has failed to deliver reform, instead leaving the entrenched system of “parasitic” organisations and passive service delivery intact, one of the nation’s most respected leaders says.

Noel Pearson last night gave the Indigenous Advancement Strategy a minimal score, and declared that collecting many streams of indigenous funding into five did not mean the money was being spent any better.

“There’s nothing about the IAS that constitutes any definition of reform,” Mr Pearson said. “The scorecard on reform in relation to the IAS, you wouldn’t even say it’s two out of 10.”

He attacked overbearing “ministerial direction” and inexperienced bureaucrats “picking winners” for indigenous service delivery. He said the IAS was flawed because it lacked “a funnel and a sieve” to get the money where it was needed, and called on the government to reconsider his own Empowered Communities model.

The comments come as The Australian can today reveal evidence that hundreds of millions of dollars worth of IAS grants targeted at very remote areas are instead going to organisations based mainly in cities and towns.

Analysis of government records shows only about two-thirds of $1 billion worth of IAS grants supposed to benefit very ­remote regions is going to local ­organisations. Very remote areas comprise about three-quarters of the continent.

GRAPHIC: Location and remoteness

Labor will today ask the Auditor-General to investigate the IAS tender process and the Abbott government’s oversight and monitoring of IAS spending as a whole.

Opposition indigenous affairs spokesman Shayne Neumann criticised the government for refusing to reveal where indigenous dollars were really going, and described the IAS overall as a ­“debacle”. “We do not know how or where indigenous funding is being spent, and it is clear that the Abbott government doesn’t want us to know that either,” he said.

“That is why we need an audit to examine the governance and rollout of the IAS.”

On Saturday, The Weekend Australian published analysis showing about $2.5bn out of $4.1bn, or more than half of all IAS grants listed on the Department of Prime Minister and Cabinet website, were to organisations with charitable or tax-exempt status.

A further $441 million worth, or 10 per cent, were given to various government bodies.

The grants comprise a mixture of new and existing programs that have been incorporated and in some cases modified by the Abbott government as part of the IAS.

In a press release on Saturday, Indigenous Affairs Minister Nigel Scullion described The Weekend Australian’s analysis as “fundamentally flawed”, and accused the paper of confusing “outcomes of the grant-funding round under the IAS with other funding provided through the overall IAS”.

This newspaper analysed all grants designated as IAS funding by the government, and Senator Scullion’s office was made aware of this in correspondence before publication. Senator Scullion’s spokeswoman last night declined to explain what the minister had meant in his press release.

Greens senator Rachel Siewert yesterday praised The Australian for overcoming the government’s secrecy and for providing sought-after information to the community. “What was released in The Weekend Australian serves as a more transparent summary of the Indigenous Advancement Strategy than what the government has been able to roll out since its announcement of IAS funding earlier in the year,” she said.

“Emerging details from the ­article highlight the chaotic rollout of the Indigenous Advancement Strategy. It confirms the need for the Senate inquiry I initiated, which was essentially the only level of transparency the process was being subjected to.”

Mr Pearson said the figures supported his view that “parasitic” NGOs and bureaucracies were feeding off the indigenous world. He likened such organisations to the crown of thorns starfish.

“Most Australians have no idea that the greatest beneficiaries of investment of indigenous funds are non-indigenous organisations not based in the communities in whose name the expenditure has been justified by parliament,” he said.

“Of course there are specialised organisations in the mainstream, but this is like the crown of thorns starfish.”

Analysis of government rec­ords of IAS funding shows that, nationwide, more than $2.2bn, or more than half the total value of all grants published to last month, are going to businesses not headquartered in the areas those funds are supposed to benefit.

The analysis, displayed in greater detail online today, reveals direct evidence of indigenous dollars being poured into the predominantly non-indigenous economy as remote communities are serviced by organisations based in cities and towns. Indigenous leaders have for years complained bitterly about money allocated for indigenous people “not hitting the ground” and supporting the “Aboriginal industry”.

Senator Scullion’s spokeswoman said the minister was travelling and unable to comment. She said The Australian appeared “not to have interpreted the figures correctly”, but again declined to explain what she meant.

Indigenous Labor senator Nova Peris said it was absurd that media was able to provide better information about government programs than the Prime Minister’s Department.

“It’s clear from the data that ­little is known about where each dollar ends up. We don’t know if this money is actually hitting the ground,” Senator Peris said.

“In order to prevent funding siphoning, the government needs to know where every last dollar is landing. It’s become apparent that the Abbott government doesn’t understand its own IAS funding or is trying to conceal the details.

“Either way, more accountability is needed.”

In a landmark speech to the Sydney Institute in March 2013, setting out “a Coalition approach” to indigenous affairs policy, then opposition leader Tony Abbott said prosperity and remoteness “need not be mutually exclusive”.

“What’s needed is a real economy locally or local residents who are participants in a real economy elsewhere,” he said.

“As long as the first Australians are unemployed and poor at rates that would be a scandal among any other group, we are all diminished. We will never be able fully to enjoy our nation’s wealth until it is more widely earned by Aboriginal people too.”

Late last year, Senator Scullion described the IAS as a “once in a generation opportunity” to change the relationships between government, communities and service providers, and said he was, “focused on getting this right — if we keep doing as we have done, we will get the same result”.

Response to IAS report in The Australian

The Australian’s analysis today of Indigenous-specific funding is fundamentally flawed.

The writer confuses the outcomes of the grant-funding round under the Indigenous Advancement Strategy (IAS) with other funding provided through the overall IAS.

As Minister, I was absolutely committed to ensuring providers delivering services to First Australians had certainty of funding.  As a consequence, more than 80 per cent of the $1 billion in funding provided through the grant round has been contracted for more than two years.  The grant round, for the first time, provided a comprehensive picture of funding to ensure money was spent to target areas of greatest need.

Amounts below $15,000 referred to in today’s story are largely payments to employers and educational institutions to support the employment or tuition of Indigenous workers and students.  These are often based on three or six month outcomes.  They are not grants to providers for the provision of services in communities.

Many of the payments to governments and its agencies, particularly the Northern Territory, is for the direct delivery of critical services, such as teachers and other school positions in remote schools.

Additionally the Commonwealth provides investment to the Northern Territory through national partnerships, outside the IAS, for improved housing amenity and critical direct service on the ground.

It should be no surprise that the Northern Territory receives significant amounts of Indigenous-specific funding from the Commonwealth.  This reflects the disadvantage of many remote communities in the NT and is consistent with funding provided by previous Governments.

Similarly, some government departments and agencies are funded for additional costs associated with the employment of Indigenous people.  This provides funds for additional training and mentoring support that may be required.  Governments of all persuasions have provided these funds for many years as they provide a direct benefit to many First Australians