Indigenous businesses are losing millions to fraudulent firms. We need stronger oversight

Over the next five years, the federal government plans to buy more from Indigenous businesses, while cracking down on a practice known as “Black cladding”. That’s when non-Indigenous businesses fraudulently exaggerate or falsify Indigenous people’s involvement in their firm to access opportunities meant for Aboriginal and Torres Strait Islander-owned businesses.

The national Indigenous Procurement Policy was launched under the Abbott government in 2015. It was a recognition of past under-investment in Indigenous businesses.

Since then, it’s delivered more than A$12 billion in contracts for Indigenous businesses. Much of that procurement funding has supported thousands of genuine First Nations businesses.

But since the beginning of the scheme, Indigenous business owners and leaders have raised concerns about millions of dollars being lost to businesses misrepresenting themselves as Indigenous. When this happens, the chance to build livelihoods, skills and community strength is taken away.

The current federal government has pledged “zero tolerance for black cladding”. However, my new research published today has found its reforms – underway now and into 2026 – don’t go far enough.

What’s being done about it now?

Past Coalition governments and the current Labor government have acknowledged “Black cladding” is a problem under the Indigenous Procurement Policy.

There are some big shifts underway in how federal Indigenous procurement policy will be funded and run. Among the most significant are:

Increased spending: From July 1 this year, the Albanese government increased its Indigenous procurement target from 2.5% to 3% of its contracts for 2025–26. That will rise to 4% by 2030.

Stricter eligibility criteria: From July 1, 2026, businesses must be at least 51% Indigenous-owned and controlled – up from 50% now – or registered with the federal Office of the Registrar of Indigenous Corporations to qualify.

Tackling “Black cladding”: The National Indigenous Australians Agency plans to make it easier to report suspected companies misrepresenting themselves as Indigenous-led.

But a lot of the details are still being worked out. That’s why now is the time to talk about what hasn’t worked with the Indigenous Procurement Policy over the past decade – and fix it.

We need better cross-checking and oversight

My new research, published in the first edition of the International Journal of Indigenous Business, finds the Indigenous Procurement Policy needs additional reforms. All of them come down to better oversight and public accountability.

Robust protections and penalties: At the moment, calling out Black cladding can come with personal or professional risk.

Many Indigenous business owners stay silent because there’s no safe way to report misconduct. Strong whistleblower protections and enforceable consequences are needed to make accountability real, not optional. With stronger protections, procurement contracts could also include clear penalties for misrepresentation.

Investigative infrastructure: There is no independent system to properly investigate fraudulent claims of Indigeneity or business structures designed to look Indigenous, but in fact are not.

In contrast, other areas of public spending – such as corporate reporting and taxation – are subject to rigorous external oversight. The lack of equivalent safeguards in Indigenous procurement makes it easier for fraud to thrive.

Too often, Black cladding is only exposed when community advocates intervene.

An investigative arm, staffed with cultural and commercial expertise, could follow up on suspicious structures and offer safe reporting pathways for those who spot misuse.

Indigenous oversight and cross-checking claims: Black cladding isn’t just a matter of a few fraudulent operators. Instead, it’s a predictable, systemic outcome of Indigenous procurement policy being designed around centralised compliance over genuine community knowledge.

Research published in November revealed that from 2015 to mid-2023, just 18 firms won 50% of federal Indigenous procurement spending, worth $A7 billion. It also mapped where the money went – showing businesses in Canberra won a shockingly large slice of the funds.

Despite Indigenous business leaders raising concerns for years, there’s still no process for cross-checking claims through community-controlled bodies or cultural authorities. Such independent checks on ownership structures and transparent reporting would provide better protection against Black clad fraud.

Read more: Just 18 firms won 50% of federal Indigenous procurement spending: new study

Beyond compliance, a different model of business success

Black cladding doesn’t only divert contracts; it erodes the identity and values of Indigenous enterprise.

Many Indigenous enterprises don’t exist solely to maximise profit. They work to meet community needs and aspirations, guided by culture, shared responsibility and custodianship of Country.

For example, some businesses prioritise training young people over short-term revenue. Others reinvest earnings into cultural programs, or community infrastructure.

When systems reward Western commercial models over those grounded in culture, the distinctiveness of Indigenous enterprise is erased, and its social and cultural value is lost in the process.

The solution is not to abandon the federal government’s procurement reforms. But we do need to transform those reforms, meaningfully, in genuine collaboration with Indigenous communities.