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Intelligence

Report of the Inquiry into  Australian Intelligence Agencies  

Chapter 8 - Summary of Findings and Recommendations


[Table of Contents]

 

Overview
Oversight and Accountability
Priorities and Resource Planning
High Quality and Independent Advice
Division of Labour and Communication among Agencies
Contestability of Assessments
Agencies' Effectiveness and Resources
Community-wide Issues
Public Presentation of Intelligence
Intelligence case studies
Lieutenant Colonel Lance Collins
Conclusion
Recommendations

Overview

Good intelligence is arguably more important to government now than at any time since World War II. Global terrorism has transformed Australia's perceptions of its security. Security problems in our immediate neighbourhood and the use of Australian forces to help resolve them have also brought security to centre stage. Intelligence is a key element in Australia's response to this changed environment, and the past four years have seen a doubling of the intelligence budget, with over $650 million invested in the intelligence community in 2004-05. Staff numbers in the Australian intelligence community have risen by 44 per cent over the same period. Overall, the government has committed more than $3 billion in additional funding for national security from 2001-02 to 2007-08.

Coupled with the increased investment has been far greater public scrutiny and expectation of Australia's intelligence agencies. Public interest - and concern - has been fuelled by intelligence failures on Iraq's weapons of mass destruction, and the failure to prevent either the September 11 attacks or the Bali bombings. Intelligence successes, such as uncovering terrorist networks in South East Asia and helping to disrupt planned terrorist attacks, receive little or no publicity, and must remain secret to protect intelligence capability, leaving an impression that is unbalanced.

This is complicated by the confusion in much of the public debate between intelligence assessment and raw intelligence, between policy advising and intelligence assessment, and between decision-making and policy advising. Raw intelligence - an intercepted phone call, an image, or a report from a human source - may be used in the formulation of an intelligence assessment. That assessment may inform policy advice, and both or either may influence the government's ultimate decision. But the role of intelligence in policy formulation or in government decision-making should not be overstated.

The Inquiry found that Australian intelligence agencies are performing well overall, and represent a potent capability for government. All have adapted to the major challenges posed by global terrorism and increased requirements for support to deployed Australian forces. Despite the high profile failures, the quality of assessment provided to government has been generally very good and, just as importantly, independent of political influence. Intelligence assessment is by its nature inexact and predictive, often based on information which is incomplete, ambiguous or contradictory. Intelligence will never get everything right - even if all the recommendations of this Inquiry were to be accepted and fully implemented, there would still be intelligence 'failures'.

But Australia's intelligence community can do better - and must give optimum performance to meet the demands of the new security environment. On South East Asia and the South Pacific, Australia needs to be an unquestionable global leader - and it needs to be exceptionally good on North East Asia, and very good on South Asia. Intelligence alliances with the US and UK are a great asset to Australia, and need to be fully exploited and carefully managed. Stronger relationships can also be built with other partners.

While the structures supporting the community are fundamentally sound, the Australian intelligence community needs stronger coordination, especially in the areas of priority setting, assigning of resources and collection management. Accountability mechanisms need to be tightened and made more transparent, recognising both the increased importance of intelligence, and public interest in it. The division of effort between the assessment agencies needs refinement, and contestability needs to be better managed. While most agencies are appropriately resourced, ONA needs to be strengthened significantly.

Oversight and Accountability

Effective oversight and accountability of intelligence agencies is critically important for a healthy democracy. The more relevant intelligence becomes to government, the greater the need and public demand for strong and transparent oversight and accountability. To the greatest extent possible, these mechanisms should be similar to those of other government agencies. In particular, greater parliamentary scrutiny is necessary to enhance public confidence in Australia's intelligence agencies. Because security issues will preclude full parliamentary scrutiny of the operations and output of the intelligence agencies, the role of the Parliamentary Joint Committee on ASIO, ASIS and DSD, extended to cover all agencies, should be supplemented by periodic external review.

Australia's oversight and accountability mechanisms have been strengthened over recent years through the introduction of the Intelligence Services Act 2001 covering the activities of ASIS and DSD, and the extension of parliamentary oversight to ASIS and DSD. The Office of the Inspector-General of Intelligence and Security has been increasingly active in monitoring the operational activities of ASIO, ASIS and DSD as a result of these developments, and changes to the agencies' mandates. A vigorous and engaged National Security Committee of Cabinet has exercised strong decision-making on resources and strategic directions for the intelligence community. And Portfolio Ministers are closely engaged in the collection activities of the agencies. The Intelligence Services Act has brought increased ministerial accountability for the operational activities of ASIS and DSD in particular.

While these are welcome developments, they have come about in a somewhat haphazard way, and there is a lack of consistency across the community. DIGO, established in 2000, is yet to be included in the Intelligence Services Act along with the other foreign collection agencies. Similarly, DIGO is not yet legally subject to the Inspector-General of Intelligence and Security Act 1986 although, consistent with government agreement to establish DIGO, it operates as if it were. The Parliamentary Joint Committee has no purview over ONA, DIO and DIGO. The Inspector-General of Intelligence and Security has more limited authority to initiate inquiries into the assessment agencies than into the foreign collection agencies. These anomalies should be remedied as a priority, with the Intelligence Services Act amended to include DIGO, the mandate of the Parliamentary Joint Committee on ASIO, ASIS and DSD extended across the community to create a Parliamentary Joint Committee on Intelligence and Security, and the Inspector-General of Intelligence and Security powers to initiate inquiries independent of a ministerial referral made consistent across all agencies.

Less visible to the public, but nonetheless essential for effective oversight and accountability, are strengthened processes within government. The present arrangements to support National Security Committee oversight are too cumbersome and need to be streamlined to ensure effective and timely consideration of agencies' performance. The Department of the Prime Minister and Cabinet should have a strengthened role in providing the National Security Committee with advice independent of the intelligence community, and should supplement ONA's reporting on the foreign intelligence community with a report on ONA's performance. ONA's role in coordinating, monitoring and reporting on the foreign intelligence community needs to be strengthened and appropriately resourced. Its review of the agencies' performance needs to be more searching and comprehensive, and should highlight more explicitly successes, failures, and significant gaps in collection.

The current relatively informal arrangements for community coordination should be enhanced by a formal committee process. The Inquiry recommends the establishment of a Foreign Intelligence Coordination Committee to assist the Director-General of ONA in his coordination role, chaired by the Director-General of ONA and comprising the heads of intelligence agencies, the Commissioner of the Australian Federal Police, and senior representatives from the Departments of the Prime Minister and Cabinet, Defence, and Foreign Affairs and Trade. The committee should consider cross-community issues including intelligence policy, capability development and resources.

ONA's statutory independence should be the subject of periodic review by the Inspector-General of Intelligence and Security, who should report to the Prime Minister on the basis of an examination of ONA reporting and interviews with ONA staff and senior customers.

Priorities and Resource Planning

An effective priorities system is vital for a healthy, accountable intelligence capability. At the highest level, the system must provide for government to set broad priorities, and to allocate resources on the basis of those priorities. At the other end of the scale, it must provide detailed guidance to collectors of intelligence, matching requirements to the capabilities of each collection discipline and ensuring that expensive intelligence assets are directed only towards that which cannot be gained through overt means. The priorities and oversight system needs also to identify gaps in coverage against the government's intelligence priorities and to monitor and report on achievements.

Australia has many of the elements of a strong priorities system. Ministers endorse the national-level foreign intelligence assessment priorities, and these are effective in setting the broad agenda and providing the basis on which agencies' performance is reported back to government. ONA chairs a committee which translates the broad priorities into guidance for collection agencies. Informal feedback is an effective supplement to these formal processes.

But there are also weaknesses in the present system. The most significant of these relates to the inadequate links between reporting, priorities and resource allocation, and the Inquiry recommends a number of changes to align the three processes for government consideration, including a stronger coordinating role for the Department of the Prime Minister and Cabinet. There is a need for greater policy engagement in the drafting of priorities and more discipline in their allocation: the number of priorities in the highest category has more than tripled since 2001, limiting the utility of a system which is designed to discriminate among priorities. Lack of integration of strategic Defence priorities into the national system further limits its effectiveness, particularly in enabling ministers to make key decisions on relative priorities, and should be redressed. These top-order changes, supplemented by stronger community-wide collection management by ONA, would deliver a tighter and more effective system which would optimise agencies' performance.

High Quality and Independent Advice

Intelligence can be a potent tool for government. It can give government - and the war-fighter - the edge in policy formulation or in battle. But its utility, as it competes for the decision-maker's attention with many other sources of information, is dependent on its quality and its independence. Good intelligence covers important strategic, as well as current, issues. It is soundly based, analytical and predictive. It should seek to create new knowledge, rather than rehearse what is known. And it must be free of political influence, of bias, of untested assumptions, and of the intent to influence policy.

While Australia is generally well-served by the quality of intelligence provided to government, significant improvements can be made against the criteria above. Intelligence derived from all sources and integrating all elements of an issue is produced by ONA, as the peak foreign intelligence agency. ONA's product is generally regarded as very good: typically it is relevant to policy and tightly tailored to the needs of its readers, comes to judgments, and explores implications for Australian interests. Despite the overall high quality, individual reports sometimes sacrifice thoroughness for brevity and readability, and there has been too little focus on longer term reporting and National Assessments, which the Inquiry recommends be redressed.

The quality of DIO's strategic assessment has improved considerably over recent years and is also generally good. Written for a fundamentally different audience and a different purpose from that of ONA, it typically contains more detail than that of ONA. Senior-level readers tend to find it less readable but more comprehensive than ONA product.

In reviewing ONA and DIO strategic assessments and speaking with staff and customers, the Inquiry found no indication that either agency's reporting was subject to any political influence. Their reporting on Iraq also demonstrated their capacity to remain independent of allied assessments, despite heavy reliance on allied intelligence collection.

Many factors underpin the quality and independence of intelligence. The Inquiry has identified a number of challenges for the agencies in maintaining and improving the quality of their output. Key amongst these are recruitment and training, particularly in non-traditional languages and cultures, and in core intelligence analysis skills across the agencies; more active exploitation of alliances, including with non-traditional partners; more active and collaborative interaction between collectors and assessors on intelligence sources; and more active management of intelligence collection. Agencies also need to manage distribution of intelligence closely to ensure that senior readers are not swamped with too much intelligence, particularly direct from collection agencies, and at risk of missing vital pieces of intelligence as a result of too great a volume of material. The Inquiry sees a role for the Foreign Intelligence Coordination Committee in reviewing the distribution of intelligence.

Division of Labour and Communication among Agencies

For Australia to get best value from the government's significant investment in intelligence, the agencies must operate with minimal duplication and maximum cooperation. In 1977, Justice Hope found the Australian intelligence community "fragmented, poorly coordinated and organised". He articulated a set of principles on which the current intelligence architecture was built that remain valid and important, supporting much of what is successful about the community today. The separation between intelligence assessment and policy formulation has contributed to strongly independent intelligence advice. The distinction between intelligence assessment and collection has helped to ensure the integrity of assessment and lack of bias towards particular sources. The separation of collection disciplines has produced three agencies with clarity of purpose and strong international alliances.

At a community level, the success of Justices Hope's underpinning principles is demonstrated by the minimal duplication among agencies, the lack of wasteful competition, and the cooperative and inter-dependent nature of agency relationships. Communication amongst the agencies is extensive and constructive. The community's value is particularly well illustrated by the strong support it has given to the Australian Defence Force.

The Inquiry recommends some rationalisation of the overlap between ONA and DIO, emphasising ONA's role as the provider of all-source national assessments and DIO's focus on defence assessment in support of Defence planning and operational needs. But this does not detract from the overall conclusion that the agencies are appropriately structured for current challenges, have demonstrated their flexibility to adapt to new and demanding environments, and operate effectively as a community.

Contestability of Assessments

Contestability of advice is a hallmark of the information age. It strengthens policy making and is highly valued in Australian intelligence assessments by ministers, senior officials and operational commanders alike. Contestability is being provided, to some extent, by areas of overlap or duplication between ONA and DIO. Importantly, contestability is built into assessments which have been through processes to challenge key judgments, either internally within each agency or across agencies, departments and sometimes external bodies. Finally, information from sources outside the intelligence community, such as journalists, think tanks and academics, provides government with alternative points of view on issues of national significance. But contestability mechanisms are not being used to best effect: to give greater authority to decision-makers by presenting considered alternative interpretations or judgments, or the most rounded single interpretations.

The architecture of the Australian intelligence community was not designed with contestability as a goal, nor has the issue attracted great priority in the past. It is unsurprising, therefore, that the community is not currently optimising the mechanisms available to it to provide contestability. ONA, with support from the Department of Defence, needs to establish systems to ensure more deliberate management of the overlap between ONA and DIO, and conscious identification of substantive points of agreement and difference between analysts and agencies. ONA and DIO must foster stronger internal processes of contest and challenge, more engagement with external experts, and greater use of vehicles such as the National Assessment, including the recording therein of dissenting views. This will ensure the government's requirements for contestability are better served.

Agencies' Effectiveness and Resources

Australia's intelligence agencies have faced enormous challenges over the past five years. It has always been important to get the most accurate, timely and considered intelligence to government leaders and operational commanders. But since 1999, intelligence has not only supported Australian men and women in four operational theatres as different as East Timor, Afghanistan, the Solomon Islands and Iraq but has also, since 2001, been at the forefront of the fight against terrorism - the greatest direct threat to Australia and Australians in many decades. Intelligence hasn't always got it right, and all of the agencies can improve their performance. But the commitment of the intelligence staff and their leaders to helping secure Australia is unquestionable. The people who make up Australia's intelligence capability work under the stress of a great responsibility. They often deal with disturbing information and sometimes operate in personal danger, to ensure the provision of intelligence vital to Australia's security.

The effectiveness of the agencies in meeting these challenges has been generally strong, and in some cases excellent. The collection agencies have had some notable successes over recent years. These significant successes are balanced by collection gaps in key areas, which the agencies are working to redress. Environmental factors will always impact on collectors' capability - humint sources will come and go, and new technologies will take time to exploit. What is important is that the agencies anticipate such changes to the greatest extent possible, and overcome gaps expeditiously.

Most of the agencies have had significantly increased resources since 2000-01. Across the five foreign intelligence agencies, the budget has increased by 88 per cent, and staff numbers by 44 per cent. With the important exception of ONA, this investment is sufficient to allow the foreign intelligence agencies to meet their mandates.

ONA is a well-regarded organisation producing high-quality product with generally strong customer support. Its performance is underpinned by highly skilled staff and flexible staffing strategies, although ONA's analytic talent is too thin, leaving it with insufficient depth on both regional and on globally significant issues. Its intelligence output, while highly valued, has too strong a bias towards current intelligence at the expense of more thoughtful, better researched longer term assessments, including more National Assessments. ONA is also ill-equipped in resource terms to undertake effective community coordination, set out in its legislation.

ONA's role as the peak foreign intelligence agency might be asserted, both through a stronger legislative mandate, and through a more appropriate and more publicly understandable name such as the Australian Foreign Intelligence Assessments Agency. A budget increase from $13.1 million to $25 million per annum (plus the reallocation of $2.5 million for the transfer of the Open Source Unit from the Department of Foreign Affairs and Trade and some additional one-off costs relating to accommodation), which includes an increase in staff numbers from 74 to 145, is recommended to equip ONA to fulfil its mission effectively. This includes an additional deputy Director-General and four additional officers at the Senior Executive Service level.

DIO has made significant improvement to the quality of its strategic assessment product over the past several years, and is satisfying well the needs of strategic-level customers in Defence. The extent to which it is fulfilling the military assessment needs of the ADF operational elements is less clear. DIO's current mandate overlaps with ONA on strategic assessments, and with the operational-level intelligence centre (the Joint Operations Intelligence Centre or JOIC) in the provision of support to the Australian Defence Force. With unlimited resources DIO might be able to cover this range of requirements, but in an environment of constrained resources and high operational tempo for the ADF, DIO must have its primary focus on strategic defence issues. The Inquiry has recommended a refined mandate to reduce areas of overlap and enable DIO to become a centre of excellence on strategic defence issues. The changes made to DIO's workforce over recent years have been positive and have lifted the organisation's capability, but will need review and refocus to respond more fully to the requirements of the Australian Defence Force.

To fulfil its mandate effectively, DIO will need assistance from the ADF, in particular through better articulation of ADF intelligence requirements and the placement of more uniformed officers in DIO, including in senior leadership positions. For its part, DIO needs to develop more robust management processes and systems to underpin its efforts. The Inquiry recommends few structural or resource changes for DIO, save the divesting of management of the broader Defence intelligence system to the office of Deputy Secretary of Intelligence and Security in Defence (along with the resource and administrative functions performed within DSD for all three Defence agencies), and the formal designation of a Deputy Director. Further review of structure and resources may be warranted once DIO has implemented its new mandate.

ASIS is undergoing a period of substantial transition with a doubling of its budget since 2000 and an expanded and more diverse range of responsibilities. It is well-positioned to meet the challenges posed by this transition, with a good management team, high staff commitment, a tight customer focus, and a strong focus on planning and managing its expansion. These characteristics represent a significant step forward from the systemic organisational failings that led to the damaging exposures of the 1980s and 1990s.

Its current intelligence reporting is well regarded, with strong coverage of some high-priority areas, and room for improvement in others. The Inquiry has recommended a number of measures to review and strengthen ASIS's business practices and its output for government. The sensitivity of the activities to which these relate precludes their inclusion in a public report. It is critical that ASIS's new capabilities be allowed to mature at an operationally manageable pace. The potential risks of pushing too hard and too soon for a return on the significant investment in ASIS are greater than any short-term benefits of increased intelligence.

DSD is a highly regarded, well-managed agency with a technically skilled and talented workforce. It represents a significant and impressive capability for Australia. DSD has adapted well and quickly to the new requirements of the post-2001 security environment, and has been much valued for its support on counter-terrorism. Its operational support to ADF operations since 1999 has also been strong. Its alliances with its counterparts are the strongest in the intelligence community and pay a disproportionately great dividend to Australia. DSD manages a large capital investment programme effectively, and has sound organisational structures which underpin its management of the sigint capability. In view of its technical complexity and relatively large budget, DSD would benefit from a periodic external review of its capability against high-priority intelligence targets as a quality assurance mechanism for its internal processes and the ONA-led annual reporting process.

Despite suggestions that DSD might become a statutory agency, the Inquiry found DSD appropriately positioned within the Defence portfolio, particularly given its dual role as a national and central defence capability. DSD has grown significantly over the past four years, and is adequately resourced to fulfil its mission. Despite this growth, DSD's management structure has remained largely static for many years, and the Inquiry recommends an additional two SES officers or star-ranked military officers to ensure DSD is equipped to manage the significant responsibilities it carries.

DIGO is the newest of the foreign intelligence agencies, and one that has undergone a rapid expansion programme over the past four years. Although still developing capability, DIGO has provided useful support to the ADF in recent operations, and is generally regarded as an organisation of significant, if as yet undersold, potential. Its primary challenges are twofold: first, to bring the imagery and geospatial capability to fruition through effective management of DIGO's growth path through to 2007 and second, to engage DIGO's customer community to ensure that capability is fully utilised. The first of these appears to be well managed and on track, with sound processes and systems underpinning DIGO's efforts. The level of engagement with customers is less advanced, and the Inquiry recommends that DIGO develop and implement a strategy to redress this gap.

With DIGO's growth path and investment plans clearly articulated within the Defence system, the Inquiry recommends no resource changes for DIGO, other than to note the inadequacy of ADF numbers within DIGO. DIGO allocates in the order of 70 per cent of its resources to support of the ADF: it cannot realise maximum value with only five per cent of its staff coming from the ADF.

Community-wide Issues

Australia's intelligence partnerships are an enormous asset to Australia. While strongest within the sigint community, across the board they are deep and broad, based on mutual trust and shared goals, and work overwhelmingly in Australia's favour. But in most areas, particularly that of intelligence assessments, the agencies need a more focused effort to deliver better access to intelligence vital to Australia's interests. Australia's network of liaison officers in the US and UK is generally effective, but needs to be driven in a more deliberate way, as part of a community-wide strategy to exploit more fully these valuable relationships.

Beyond Australia's traditional intelligence allies, the agencies have a network of additional partnerships, primarily in the Asia-Pacific region, but also with key European partners. The Inquiry sees benefit in reviewing these relationships to establish how they might be strengthened to provide access to information or perspectives not gained through traditional partners. A wider range of views could help to broaden Australian assessments and provide more contestability for government. These issues are covered more fully in the classified report.

In an environment of strong growth, critically important tasks and high expectation, strategic management of the people who make up the intelligence community becomes ever more vital. The staffs of the various agencies are not interchangeable; nor do they need common skills or attributes in many areas. But the Inquiry found a number of areas in which a corporate community approach might maximise the value of all agencies.

At the broadest level, this could involve developing, on a selective basis, an intelligence community-wide approach to career management, reducing competition within the community and offering wider career options for staff. Cross-community training will help staff understand the system to which they contribute. This might be achieved by the development of both induction and mid-course training aimed at awareness raising, and by a targeted strategy of inter-agency secondments. Most agencies have a need for linguists and people with cultural understanding, including Arabists and specialists from other non-traditional areas for Australia. Common strategies to develop a pool of such expertise, both through recruitment and development, may ensure a better community outcome. Programmes to develop and extend the analytic skills particularly relevant to ONA and DIO might be developed in conjunction with academic institutions. And the agencies' senior leaders might strengthen and extend the community's overall capability by organising and participating in strategic seminars.

Public Presentation of Intelligence

The use of intelligence in the public domain, brought to prominence by debate on Iraq's WMD, raises complex issues. The public interest in having access to information used by government, and government requirements to use intelligence to support policy, must be balanced against both the protection of intelligence sources and methods, and the integrity of the intelligence process. The critical importance of protecting both continued access to intelligence and intelligence officers in the field is well understood. Equally important is ensuring that intelligence assessments are not adversely influenced by the knowledge that they may become public - intelligence would serve Australia less well if analysts made assessments only on the basis of iron-clad evidence.

For these reasons, governments should take a cautious approach to public release of intelligence. Nevertheless, there will be occasions on which public interest or government's need to explain the context of important policy decisions will lead to a legitimate requirement to put intelligence in the public domain. The Inquiry recommends that guidelines be adopted to manage the public presentation of intelligence in these circumstances. Chapter 7 includes suggested guidelines.

IT connectivity, both within the community and out to policy-makers and customers, is in need of urgent attention. The AIC-wide system, AICnet, was a significant advance in the late 1990s, but has a number of limitations in the applications it can provide, and the connectivity it supports to organisations which interact at a secure level with external agencies, such as the AFP and the Department of Immigration and Multicultural and Indigenous Affairs. AICnet is further limited by policy-imposed constraints, some agency-specific and some derived from the 2000 Blick review into security. In developing a new architecture, the intelligence community should review the principles underlying the architecture, and seek to maximise the opportunities for collaborative intelligence production across the community. There are likely to be significant costs associated with this project.

Intelligence case studies

A full analysis of Iraq WMD, set out in Chapter 3, concludes that there has been a failure of intelligence on Iraq.

Australia shared in the allied intelligence failure on the key question of Iraq WMD stockpiles, with ONA more exposed and DIO more cautious on the subject. But many of their judgments have proved correct: that the Iraqi leadership retained the ambition and intent to have a WMD programme (and that there was indeed a weapons programme, if not stockpiles of weapons); that there was insufficient evidence to determine that Iraq had renewed production of WMD; and that production of a nuclear weapon was likely to be at least four to six years away.

The lack of comprehensive assessment, which might have been achieved by production of a National Assessment by ONA or an Intelligence Estimate by DIO to support ADF deployment considerations, was regrettable. Such comprehensive reporting may have helped to clarify a complex and fragmented picture. The failure, by and large, of the assessment agencies to explain the significance of their judgments on Iraq's WMD in terms of the threat posed by Iraq also impacted on the utility of the assessments.

The two agencies' key judgments were largely consistent until late January 2003, when ONA reporting assessed that Iraq must have WMD while DIO reporting did not. But differences in style, including ONA's lesser use of detail and qualification, led to an implicit difference in assessment on that issue from late December 2002. On the key points of Iraq's possession of WMD, and the significance of its concealment and deception activities, ONA judgments were expressed with fewer qualifications and greater certainty than those of DIO.

On the critical issue of independence, the Inquiry's investigations showed that, despite a heavy reliance on foreign-sourced intelligence collection, both agencies had formulated assessments independent of those of the US and UK, in several notable cases choosing not to endorse allied judgments. The Inquiry found no evidence to suggest policy or political influence on assessments on Iraq WMD.

Despite the key failure of intelligence judgments on WMD stockpiles, the assessments produced by ONA and DIO up to the commencement of combat operations reflected reasonably the available information and used intelligence sources with appropriate caution, although ONA's judgments on Iraq's possession of WMD became firmer than DIO's in the weeks immediately preceding the commencement of major combat operations.

Intelligence was thin, ambiguous and incomplete. The publicly available information, including the large body of UNSCOM material, together with Iraq's history of use of WMD, deceit and obfuscation, contributed heavily to the intelligence assessments.

Saddam Hussein's behaviour in the months before March 2003 and his ultimate miscalculation, which saw his regime fall, his sons killed and him captured, further complicated the assessment challenge. By any measure his was a miscalculation of massive proportions. Prior to 19 March 2003, the only government in the world that claimed that Iraq was not working on, and did not have, biological and chemical weapons or prohibited missile systems was the Government of Saddam Hussein.

The Inquiry recommends a number of changes to ONA and DIO processes to improve the robustness of assessments.

Intelligence on Jemaah Islamiyah was inadequate prior to the December 2001 arrests in Singapore - in fact, little was known of Jemaah Islamiyah under that name. Australia's challenge in understanding the threat posed by JI was made the more difficult by Indonesia's failure to appreciate the serious nature of that threat. But with the benefit of hindsight, it is possible to say that Australia and regional countries should have known, by the end of 2001, much more about Jemaah Islamiyah, its development of terrorist capabilities, and its intentions towards Western targets. The importance of effective links with regional intelligence and security organisations is well-illustrated by Australia's experience with Jemaah Islamiyah.

From December 2001, ONA assessments on Jemaah Islamiyah reflected an increasingly deep understanding of the nature of the JI threat, including its potential focus on Westerners and its capacity to launch significant terrorist attacks. DIO, on the other hand, continued to assess that regional extremist groups were domestically focused and had little intent or capability to target foreigners or launch mass-scale terrorist attacks. Despite the increased focus of both agencies on regional extremist groups, the Inquiry has seen nothing to suggest that any Australian agency, including ASIO, had any specific intelligence warning of the attack in Bali. This is consistent with the findings of the Inspector-General of Intelligence and Security's report on the Bali terrorist attack.

The Australian Federal Police, in cooperation with the Indonesian police, did outstanding work post 12 October 2002 in helping track down those responsible for the bombings. JI's rise demonstrates the crucial importance of Australian agencies being alert to shifts in the regional security environment and the emergence of new threats.

Intelligence advice on the Solomon Islands was generally of a very high quality, particularly post-June 2000, and clearly independent of policy or political influence. The assessments produced before the June 2000 coup suffered in two aspects: they tended to do little more than monitor events, and while they recognised the potential for a coup, they either dismissed its immediate likelihood or failed to predict how and when it might occur. DIO reporting did not engage operational decision-makers sufficiently in active planning to respond to a coup, as it ideally should.

Post-June 2000, both agencies' reporting was accurate and useful, assessing that the Solomon Islands downward spiral was irreversible and highlighting the necessity for external intervention. These assessments were made in a context of Australian government policy not to intervene in the Solomons, a clear indication of the integrity and independence of the intelligence advice. The reporting of the two agencies was complementary, with ONA focused on the political and economic implications of Honiara's collapse in terms of regional reactions and Australia's national interests, and DIO focused primarily on security and operational issues to support ADF operational planning.

Lieutenant Colonel Lance Collins

The Inquiry received no evidence to support the conclusion of Captain Martin Toohey RANR in the Report of Investigation - Redress of Grievance submitted by Lieutenant Colonel Lance Collins that "a pro-Jakarta lobby exists in DIO, which distorts intelligence estimates to the extent those estimates are heavily driven by Government policy... in other words DIO reports what the Government wants to hear".

The Inquiry looked at all assessments on Indonesia produced by DIO (and by ONA) from 1998 to May 2004. The Inquiry found no evidence of pro-Jakarta or pro-Indonesian assessments.

The present situation in ONA and DIO is that there is no evidence of any pressure on either organisation, or pressure within either organisation, to produce pro-Indonesian assessments or to tone down any criticism of Indonesia. It is clear that analysts are free to call the situation as they see it and that their assessments reflect a robust approach to Australia's interests.

In view of media comments about DIO, the Inquiry notes that it found no evidence whatsoever that the current Director of DIO, Mr Frank Lewincamp, has exerted pressure of any kind on his analysts to reach particular conclusions or that he expected analysts to report what the Government might be presumed to have wanted to hear. On the contrary, it is evident that while Mr Lewincamp tests analysts' views through vigorous internal debate, he encourages analysts to think freely, to express different and robust opinions, to reach conclusions irrespective of Government policy and to be prepared to take prudent risks in their assessments.

Conclusion

It is the nature of such a report as this to focus on those issues which need attention - and the Inquiry has identified a number of failings both in the way in which the foreign intelligence agencies operate as a community and in the performance of each agency. But these do not suggest that the intelligence agencies are, on the whole, performing without the diligence demanded by the importance and sensitivity of their functions. On the contrary, the Inquiry found the level of commitment, talent and integrity within the leadership and staff of the intelligence community impressive, and their focus on the goal of protecting Australians and Australian interests very clear. The recommendations which follow will underpin their efforts, and deliver for Australia a more effective foreign intelligence capability.

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Recommendations

  1. The mandate of the Parliamentary Joint Committee on ASIO, ASIS and DSD (PJCAAD) should be extended to all of Australia's intelligence agencies - that is, it should cover also ONA, DIO and DIGO on the same basis as it at present covers ASIO, ASIS and DSD. The parliament may consider renaming the committee as the Parliamentary Joint Committee on Intelligence and Security (PJCIS).
  2. The functions and ministerial accountabilities of DIGO should be formalised in legislation by amendments to the Intelligence Services Act 2001. Similarly, the Inspector-General of Intelligence and Security Act 1986 should be amended to include scrutiny of DIGO on a basis comparable with that which applies to DSD and ASIS.
  3. The mandate of the Inspector-General of Intelligence and Security should be extended to allow IGIS to initiate inquiries at his or her own discretion into matters relating to ONA and DIO without ministerial referral, consistent with the IGIS jurisdiction in respect of ASIO, ASIS and DSD. The Inspector-General should also conduct a periodic review of ONA's statutory independence.
  4. The budget of the Office of National Assessments, Australia's peak foreign intelligence agency, should be expanded significantly from $13.1 million to $25 million (excluding $2.5 million by transfer from the Department of Foreign Affairs and Trade - see 5 below) by 30 June 2007 to enable a significant expansion in its analytic capacity.
  5. The Open Source Unit (annual budget $2.5 million), at present within the Department of Foreign Affairs and Trade, and its budget should be transferred to ONA as soon as practicable over the next two financial years.
  6. The Office of National Assessments Act 1977 should be amended to remove the references to two assessments boards - the National Assessments Board and the Economic Assessments Board - to reflect the reality that there is only one National Assessments Board which covers strategic, political and economic issues, but with provision for different composition according to subject matter. The Act should also be amended to strengthen ONA's community coordination role in section 5(1)(d). Consideration should be given to investing ONA with a name which reflects more accurately what it does and one which is more publicly understandable, such as Australian Foreign Intelligence Assessments Agency (AFIAA).
  7. A Foreign Intelligence Coordination Committee (FICC) should be established under the chairmanship of the Director-General of ONA comprising the heads of ASIO, ASIS, DIO, DSD, DIGO and the AFP and Deputy Secretary-level representation from the Departments of the Prime Minister and Cabinet, Defence, and Foreign Affairs and Trade. The FICC should assist the Director-General of ONA in undertaking his role in coordinating, monitoring and reporting on the performance of the Australian foreign intelligence community, and should consider cross-community issues including intelligence policy, capability development and resources. The FICC should report to the National Security Committee through the Secretaries Committee on National Security.
  8. The Foreign Intelligence Coordination Committee should also:
  9. a) develop and implement a community-wide collection management strategy

    b) develop a community-wide strategy on liaison relationships to ensure maximum value from traditional alliances with the US and UK

    c) develop recommendations to Ministers to extend the range and utility of intelligence partnerships

    d) examine the flow of foreign intelligence product to senior users and identify means by which distribution can be more precisely tailored to requirements

    e) commission with the Department of Defence, a periodic review of DSD's performance against top-priority targets

    f) develop community-wide training initiatives, including consideration of a general induction programme, a mid-level refresher course, some joint training in the discipline of intelligence assessment, common language training and a programme of senior leadership strategic seminars

    g) consider options for career management across the intelligence community, including a programme of secondments across agencies

    h) develop a strategy for IT connectivity and collaborative intelligence production within the intelligence community, and a strategy for IT connectivity with primary customers.

  10. ONA should produce a greater number of National Assessments on issues of strategic importance to Australia and reflect significant dissenting views. A National Assessment should be prepared prior to any significant deployment by the Australian Defence Force, and in support of major strategic reviews.
  11. The Department of the Prime Minister and Cabinet should take an enhanced role in assisting Ministers manage the foreign intelligence community, using ONA's knowledge of the community as a resource. The Department of the Prime Minister and Cabinet should:
  12. a) advise the National Security Committee annually on the performance of the foreign intelligence community

    b) advise the National Security Committee on the appropriate priorities for the agencies, based on advice from ONA

    c) undertake the central role for advising the National Security Committee on the resource needs of the foreign intelligence community

    d) undertake an annual review of ONA's performance, replacing ONA's current role in reviewing its own performance.

  13. The Department of the Prime Minister and Cabinet should ensure that the foreign intelligence community's reporting, priority setting and resource allocation mechanisms are aligned. Specifically:
  14. a) The annual reports of agencies and ONA's report on the agencies' performance should be produced and considered by the National Security Committee promptly.

    b) Annual reports, in particular the identification of intelligence gaps therein, should inform the priorities setting process, which should be undertaken annually.

    c) Both the reporting and priority setting processes should inform the National Security Committee's consideration of the resource report.

    d) The resource report should be considered each year in sufficient time to inform the individual budget processes of each agency.

  15. The Department of the Prime Minister and Cabinet should ensure that ASIO's performance and resource reporting is undertaken in parallel with the process outlined in recommendation 11 for the foreign intelligence community.
  16. The Department of the Prime Minister and Cabinet should ensure the national and defence priorities systems are integrated, and approved by Cabinet annually.
  17. The Department of the Prime Minister and Cabinet should prepare for Government consideration guidelines, as outlined in chapter 7, for the public presentation of foreign intelligence material.
  18. The Department of Defence and the Australian Defence Force should:
  19. a) issue a revised mandate for the Defence Intelligence Organisation which focuses the organisation clearly on supporting defence strategic policy and meeting the strategic assessment needs of the Australian Defence Force

    b) re-examine guidelines for the division of responsibility between the Defence Intelligence Organisation and the Joint Operations Intelligence Centre (JOIC), last agreed in 1999, to ensure they reflect current needs and command structures. DIO should undertake an outreach strategy with the ADF and the JOIC in particular to develop an agreed set of requirements and level of service in order to synchronise expectations and reduce duplication

    c) agree on a strategy to redress the shortfall of military personnel assigned to the Defence intelligence agencies, including in leadership positions, to ensure military staffing levels are commensurate with the growing importance of intelligence in war-fighting and planning

    d) restructure current arrangements to ensure the position of Deputy Secretary Intelligence and Security is supported by adequate resources to undertake an effective coordination role for the Defence intelligence agencies. In particular, staff working on defence intelligence system-wide coordination and capability development issues, and cross-agency administrative issues, should be functionally united with and report directly to the Deputy Secretary

    e) on vacancy, fill the position of Director, Defence Intelligence Organisation through a competitive selection of civilian and military candidates. Selection should be made on merit with a preference for a suitably qualified high-quality military officer if such an officer is available. The position should be filled on a 3-4 year contract basis

    f) create a Deputy Director position for the Defence Intelligence Organisation. Where possible, if the Director is a military officer, the Deputy Director should be civilian, and vice versa

    g) strengthen DSD's management structure with the creation of a Deputy Director responsible for technical matters and a branch head responsible for collection and analysis.

  20. The Defence Intelligence Organisation should:
  21. a) produce Strategic Intelligence Estimates for significant military operations and for issues of high security relevance to Australia

    b) cease publishing intelligence not directly serving requirements for strategic-level military-related analysis. The resultant product should be more strongly defence-oriented and distributed primarily to defence customers. The Department of Defence should take an active role in monitoring this

    c) review its workforce management structures, including possible introduction of agency-specific workforce arrangements and wider use of senior analyst positions and Australian Workplace Agreements, to attract and retain high-quality staff, particularly in key technical and scientific disciplines

    d) undertake an integrated review of its business systems, including those for information, collection and liaison management, and of its information technology needs. The latter should take place in the context of IT network developments across the AIC and internationally and may require some one-off funding supplementation.

  22. The Defence Imagery and Geospatial Organisation should develop and implement a comprehensive customer engagement strategy.
  23. ONA and DIO should:
  24. a) give greater focus to longer term and strategic assessments

    b) institutionalise measures to ensure rigorous and interactive challenging of sources, and effective dialogue between collectors and assessors

    c) institutionalise measures to ensure effective challenge to judgments, including formal peer review mechanisms within, between and outside the agencies, and between technical and geographic experts

    d) consult on and, where appropriate, reconcile their forward work programmes. As a minimum each should attend the other's existing weekly requirements meetings.

  25. The Australian intelligence agencies should be active in building a profile of staff with necessary language skills, paying particular attention to emerging issues and ensuring the agencies have the language skills, including in Arabic, and other expertise to match emerging needs.
  26. ASIS should be provided with additional funding to bolster the key language capabilities of its staff. ONA also should make use of additional staff resources recommended by this Inquiry to supplement its stock of key linguistic skills.
  27. Funding should be provided to ensure that an expanded ONA and an expanded ASIO, as already decided upon, can continue to share a building, including funding to cover transitional accommodation arrangements. The Inquiry is advised that the cost for this is likely to be in the order of $11 million over and above the construction and fit-out of an extension to the present ASIO building.
  28. The intelligence community should be subject to periodic external review every five to seven years.
  29. ONA should, in consultation with the foreign intelligence agencies, produce an unclassified brochure on the role of the intelligence agencies, their place in government and the accountability mechanisms that support them.
 

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