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Tuesday, 31 May 1994
Page: 965

Senator MICHAEL BAUME —(6.35 p.m.)—by leave—I move:

  That the Senate take note of the document.

I do not intend to delay the Senate for very long, but I would like to speak to this report—Project Audit—Australian National Maritime Museum Commercial Operations—for a variety of reasons. One reason is that I am a strong supporter of the National Maritime Museum. I am proud to be member No. 44 and indeed I joined on the day it opened when I was shadow minister for the arts. I have a strong feeling of pleasure in the achievements of the museum but also a feeling of regret that the saga of basic problems surrounding the concept still continue, as is revealed in the Auditor-General's report.

  The Senate will remember that the project was born as a result of a most extraordinary arrangement done by Mr Brereton when he was a minister in the New South Wales state Labor government. The project involved that government in a building commitment that resulted, as I recall, in the building costing twice as much as the state government had been advised it would cost. The state government was required to pick up the rest of the tab.

  What has happened since then has been another series of grievous miscalculations. As the Auditor-General notes, the expectations of revenue by this museum—which is a high quality museum that is well worth visiting, and I encourage any senators who have not yet visited it yet to do so and indeed to become members—at the time it was opened were massively higher than could possibly be achieved. As the Auditor-General points out, in 1992-93 revenue from the museum was estimated at $4 million; it was 28 per cent of the expenditure budget of $14.8 million. But in fact revenue achieved in that year was only $1.64 million—in other words, only 10.7 per cent of final expenditure. In the current financial year revenue estimates were reduced to about $2 million, which is 13 per cent of the expected expenditure budget.

  I do not know who one can blame for the non-achievement of those targets. The Auditor-General clearly says that there are ways of improving the financial situation. In the current financial year the government is having to supplement the income of the Maritime Museum by $13.5 million, which is up about $800,000. But the fact is that this is some $4.6 million higher than the pre-opening forecast of the government. This clearly means that this museum is a financial disaster. That is a great shame. I do not know whether one should say that the original calculations were ludicrous and therefore it is not fair to criticise the museum, or that the museum should be doing better. However, the Auditor-General clearly outlines some improvements that he believes are capable of being introduced to the museum's procedures.

  I think it should be noted that the museum itself in its response to the Auditor-General contends:

. . . the audit has, in a number of instances, identified the need to progress areas of commercial management that the Museum was evolving towards through its own experience and identified needs.

  In summary, the Museum accepts that it can improve on its commercial performance to date. However, from any comparative analysis of its competitors, and given the modest nature of its own budgets, the Museum believes it is unlikely such improvements will result in more than marginal increases in net revenue or returns.

This is the key question in these kinds of government enterprises. The question is whether an alert, lively promotional campaign, had the funds been available for it, would have sufficiently increased revenues; whether the changes in the procedures recommended by the Auditor-General would sufficiently improve revenues to make it worth while.

  There is no doubt that what the Auditor-General is recommending is absolutely and totally right—as we are accustomed to, as this government is so accustomed to that it is now setting out to cut the Auditor-General's revenue, because it does not want the Auditor-General pointing out so accurately the failures of the government. However, in this case, I think it may be true that the benefits to be obtained at the moment may well not merit an enormous expenditure on improved structures, but there is clearly a case, which I think the museum has totally accepted, that there can be improvements made. There must be improvements made because this kind of subsidy simply cannot continue, this proportionate failure.

  Perhaps the new casino project, which will be its neighbour at Pyrmont, will attract more customers, because at this stage the museum is at the end of the walkways, at the end of all of this redevelopment. But the present situation simply must not be allowed to continue. The Auditor-General points out:

  The principal commercial operations objective of the ANMM is to improve commercial revenue to the Museum. To achieve this objective the Museum must have:

.effective and efficient marketing and promotion, with appropriate pricing, and

.effective and efficient conduct and control of commercial   operations, including

  —costing and cost control and

  —management and supervisory control.

The Auditor-General's principal findings were that:

  Operational and business planning has not been timely nor comprehensive. Annual Operational Plans have not been prepared and submitted to the Minister in accordance with the ANMM Act.

  The Museum's stated objectives are broad in scope and need to be complemented by appropriate performance indicators to enable effective evaluation. No performance measures have been formally adopted and there is no systematic review of performance information.

  Commercial practices and policies are not implemented or widely understood throughout the Museum. No salaries or other overhead costs are attributed to museum commercial activities, and no corporate profit and loss statements or profitability analyses are prepared for Commercial Operations, sections or products. Neither line managers nor senior management are provided with total costs of activities or programs. The Museum has no overall pricing policy and prices for commercial goods and services are not systematically set or reviewed.

  There is no current documented marketing plan. Not all relevant market information is up to date. Quantitative assessment of the effectiveness of promotion or advertising activities is not systematically undertaken.

As a result, the Auditor-General has concluded that:

  The ANMM has not effectively planned its commercial and other operations, and lacks effective policies and mechanisms to evaluate and control its operations and costs. The ANAO believes that there is scope for the Museum to improve its commercial revenue.

It recommends that:

  The Museum should produce clear, comprehensive and timely outcome and performance oriented operating and business plans.

The other Auditor-General's recommendations are that:

  Performance indicators appropriately measuring achievements of all major aspects of the Museum's commercial activities should be developed and systematically reported to and reviewed by the Museum's management and Council.

  The Museum should develop, publicise to staff, and implement costing, pricing, and other commercial operations policies, including:

.attribution of costs including staff and overheads to sections, and products and programs

.costing of resources provided by one section or branch to another

.general overall pricing policy, including criteria for products for which no charge will be made, and

.specific pricing policies for products and programs.

  The Museum should improve the cost effectiveness of its marketing by ensuring that it is appropriately planned, controlled and evaluated.

  I stress that I believe the staff and management of the National Maritime Museum are totally dedicated and committed to the success of that museum. I believe nothing in the Auditor-General's report should diminish our recognition of that dedication and enthusiasm. I concede that the Auditor-General's report does point out some areas where there is a clear need for major improvement. I hope that in future years we will have the opportunity of commending the National Maritime Museum for its progress and its procedure. In Senate estimates committees I did complain about the nature of its financial reporting, but that was not its fault, that was the fault of the Department of Finance's new guidelines. I seek leave to continue my remarks later.

  Leave granted; debate adjourned.