Part 8: Local authority funding of private museums and art galleries

Management of heritage collections in local museums and art galleries.

In this Part, we discuss funding arrangements between local authorities and private museums.

This was the second part of our audit. Our objective was to assess the nature of these funding arrangements, including accountability requirements for stewardship of the collection, and the nature and extent of monitoring by the local authority to ensure that its interests are met.

We examined a selection of 6 funding arrangements (see Figure 2), involving total annual expenditure by 6 local authorities of $810,000. The annual funding ranged from $42,000 to more than $400,000, and made up a significant portion of the income for each museum. Each museum also raised funds from other sources.

For each funding arrangement, we sought evidence of:

  • a clear specification of the purposes of, and outcomes sought from, local authority funding;
  • a contract between the local authority and the museum (or museum governing body) that set out the expectations of the funding local authority, and the museum’s obligations for, and need to provide assurance on, responsible stewardship of the collection; and
  • accountability arrangements that incorporated periodic reporting to the local authority and provided relevant assurance on management of the collection.

We did not examine each local authority’s justification for funding the museum concerned.

We talked to local authority staff responsible for administering each funding arrangement. We also spoke to museum directors, staff, and (in some instances) members of the governing body about the museum’s relationship with the local authority.

We summarise our key findings and raise issues for local government to consider from our assessment of:

  • ways that local authorities support private museums and art galleries;
  • types of funding arrangements;
  • relationships between local authorities and private museums; and
  • challenges for smaller museums with limited resources.

Key findings and issues for local government

The 6 museums depended on local authority funding to meet ongoing operational expenses. In all but one instance, local authority funding of the museum was governed by a contract for services. Three of the 6 funding commitments were for more than a single financial year, which provided important certainty for the governing body and museum staff.

Each local authority had defined broadly the purposes of their funding and the outcomes sought, but these were not reflected in performance expectations and measures for reporting. Only 2 contracts made stewardship of the collection a specific priority.

Reporting of performance and stewardship was weak. None of the 6 museums used comprehensive and relevant performance information to support accountability reporting. In some cases, the relationships between the local authority and the museum were distant or informal, and the local authority received little or no assurance about the use of funding to support the services (including care of the collection) delivered by the museum.

In our view, local authorities need to seek active assurance about the performance and stewardship of the museum through specified conditions in funding contracts, and regular reporting against objective measures relevant to management of the collection.

We also noted risks to the financial viability, performance, and capability of smaller museums.

District and community museums hold important collections of local history, along with significant community archives. However, we consider that, because of their limited resources (including a lack of professional staff, inadequate facilities, and insecure funding), some small museums face significant challenges to meet professional standards for the management of their collections.

Funding, governance, staffing, planning, and facilities are all crucial for responsible stewardship. Museums need adequate resources and facilities to care for, and make best use of, their collections. If they have limited resources available to meet stewardship obligations and increase the quality of services to the community, then it raises fundamental questions about long-term governance and funding.

In some cases, a closer relationship with the associated local authority may bring benefits to both the museum and the local authority, through systems support, sharing of expertise, closer oversight, and greater certainty of funding.

We recommend that all local authorities that provide funding to museums put in place systems to monitor their interests in the responsible stewardship of heritage collections held for the benefit of their communities. That monitoring relationship should consist of:

  • a clearly defined and specified funding purpose and statement of outcomes sought by the local authority;
  • reporting to the local authority on the delivery of services, and providing assurance on stewardship of the collection; and
  • a service contract that:
  • reflects the specified funding purpose and outcomes;
  • makes funding contingent on an approved business plan or work programme;
  • identifies collection care as a priority; and
  • contains requirements for periodic reporting against relevant measures of performance, including matters related to management of the collection.

Ways that local authorities support private museums and art galleries

A large number of private museums receive funding from local authorities to meet operational expenses or capital costs. This support is often essential to their day-to-day operations.

We estimate that as many as half of all local authorities are providing operational funding to private museums. This funding varies in size from small annual contributions to local heritage bodies, to significant funding commitments to regional, provincial, and district museums.

Museums can also benefit indirectly from their relationship with the local authority. These benefits can be both financial and non-financial. For example, a local authority may own the building in which the museum is housed, relieving the museum of some responsibility for meeting maintenance costs. Other local authority support can include access to advice on meeting legislative requirements, information technology services, and participation in local authority-run training workshops.

Local authorities need to have the necessary means to ensure that such funding is well spent. An association with a private museum may also expose a local authority to criticism in the event of adverse publicity about the stewardship of a community collection in the museum’s custody. These factors support the need for an informed and structured accountability relationship.

Types of funding arrangements

Figure 15 summarises the 6 funding arrangements between local authorities and private museums or art galleries. In all 6 instances, the purpose and outcomes sought from funding arrangements were broadly specified (for example, in annual plans, or Long-term Council Community Plans).

Figure 15
Summary of what was specified in the 6 funding arrangements

Assessment criteria Total (out of 6)
The local authority had broadly specified the purpose and outcomes of the funding 6
There was a funding contract 5
The museum was reporting periodically to the local authority 2

Use of contracts

Five of the 6 local authorities had a contract with the museum or art gallery they were funding.

The funding contract is an important accountability document. It records the obligations of the local authority as the funding provider, and the responsibilities of the museum for delivering services and caring for the collection.

The absence of a contract defining this relationship leaves the formal obligations of the museum – and the local authority – unclear, and leaves the local authority without the formal means to obtain the necessary assurance about stewardship. These obligations should cover all aspects of collection care, including the environment in which objects are displayed and stored, security, and the integrity of the building in which the collection is housed.

It is common practice for councillors to be represented on, or otherwise involved with, the governing bodies of community organisations, and this was the case with some of these museums. This representation can help keep the local authority informed of museum activities.

Monitoring of contracts

We examined the 5 contracts and how they were being monitored. We expected each contract to link performance to museum plans or programmes, and specify collection care as an important priority. We also sought evidence that contracts were monitored through periodic reporting by museums on their performance and stewardship.

Few contracts made collection care a priority, and most contracts were not being adequately monitored. All 5 contracts made funding conditional on local authority approval of a business plan, budget, or work programme. We endorse this approach, but saw no evidence to confirm that it was followed in practice.

Three of the 5 contracts were for multi-year funding, which provided important certainty for museum planning.

Only 2 contracts made care of the collection and other aspects of stewardship a priority. One referred only to visitor numbers and resident satisfaction levels. The other 2 contracts were not sufficiently specific in their requirements to provide the basis for useful reporting on collection care.

Relationships between local authorities and private museums

Relationships between local authorities and private museums were often informal and sometimes distant. Only one of the 5 local authorities with an annual contract was receiving periodic information during the term of the contract about the museum’s management of its collection.

The contract with one local authority contained a commitment to monitor the museum’s performance against the performance indicators in the museum’s business plan. However, no such monitoring was taking place. The museum advised that it was reporting to its own board periodically against specific performance measures. Our discussions with the board and the local authority resulted in an agreement for quarterly reporting against similar measures to meet the local authority’s own requirements. We recommend this approach.

Although 5 of the 6 local authorities received an annual report from the museum, the reports did not always contain reference to collection management activities and issues. We were not provided with any evidence that local authorities were using the reports to review the museum’s performance and capability, or the amount of its annual funding.

Accountability arrangements

Only one of the 6 local authorities had in place accountability arrangements that met our expectations for effective service specifications and monitoring. The summary of those arrangements (in the next 2 paragraphs) outlines what we would expect from the accountability relationship.

The local authority kept an active oversight of its museum, ensuring that councillors and staff were fully informed. The contract between the local authority and the museum made stewardship of the collection a priority, specifying 3 areas of responsibility for the museum:

  • protection, preservation, and maintenance of the collection;
  • access to the collection for viewing and research; and
  • delivery of specified services as outlined in the museum’s business plan.

The museum is required to report each 6 months to the local authority. One of the reporting requirements is that the museum must report any incidents of note, positive or negative, that may affect the collection. If required, the Museum Director will appear before the local authority to speak about any matters in the reports.

Risks of being poorly informed

Another funding arrangement illustrated the risks that arise when a local authority is poorly informed of matters affecting the funding relationship.

In this example, local authority staff responsible for monitoring the funding had little knowledge of the museum and its activities. The funding contract provided for the local authority to receive an annual report and business plan that contained detailed information about managing the museum. We saw both these documents, but were told that neither was presented to the local authority for its information or consideration. The local authority was receiving no other periodic reports from the museum.

A recent independent review of this museum concluded that it needed to develop a new vision, that it lacked trained staff, and that the collection was housed in a building that provided neither the necessary security nor environmental controls for proper collection care. Our discussions with the museum and our own observations confirmed these concerns.

However, because of the distant relationship, the local authority was unaware of the museum’s concerns or the possible implications. This put the local authority’s own funding at risk, and limited any opportunity to work with the museum to address the challenges it was facing with its limited resources.

Challenges for smaller museums with limited resources

We had discussions with a selection of smaller public and private museums in the course of our audit, and especially in our examination of funding arrangements. Concerns were raised about the long-term financial security of some museums, and their capability to improve the delivery of museum services and meet museum standards.

Some smaller museums with limited resources face challenges to maintain and improve services and meet standards. This may raise fundamental issues about local authority governance, funding, and capability.

Without such support from the local authority, some museums would probably find it difficult to continue operating. Many museums receiving local authority funding are small, and may have limited access to other funds to meet operating expenses.

Local authority funding does not cover all costs for museums, and they need to seek other funding sources. Their limited resources and limited access to additional funding sources may create fundamental challenges for the smaller museum. Challenges include:

  • Low and insecure base funding can make it difficult for museums to plan with certainty, and fundraising tasks can distract their few staff from day-to-day museum work.
  • There is a reliance on volunteer and part-time staff to perform core tasks. Without trained and qualified staff, there may not be the capability to prepare and maintain collection management policies and systems for staff, financial, and information management, including the recording and maintenance of information about the collection.
  • Display and storage facilities may not have the necessary security and environmental controls to provide proper care of the collection. In our visits – mainly when we visited small community museums – we were told about, or found evidence of, collections at risk through being housed in conditions where security was weak, building design or maintenance was poor, or environmental controls were inadequate.
  • Some museums have difficulties in meeting professional museum standards, and have limited prospects of doing so without additional resourcing.

These challenges raise questions about the most effective model for longer-term governance and funding relationships with such bodies.

While we were carrying out our audit, we were aware that 2 local authorities were reviewing the governance and funding of museums. In one case, this review had led the local authority to take over the museum’s operations. A closer relationship between local authorities and museums would help to identify where there may be a need for similar reviews of governance, funding, and capability.

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