Auditor-General's overview

Effectiveness of governance arrangements in the arts, culture, and heritage sector.

New Zealanders place great value on culture and engaging in cultural activities. Public entities in the arts, culture, and heritage sector play an important role in ensuring that all New Zealanders have access to the arts and their heritage, and in supporting and developing artists and arts organisations. Some of these entities are also responsible for conserving many of our national treasures and artefacts.

The Government provides about $500 million to the sector each year. Local authorities provide about another $500 million.

The theme of my work programme for 2014/15 is Governance and accountability. As part of this theme, I wanted to look at whether entities in the sector have effective governance arrangements to help them fulfil their responsibilities. Governance arrangements in the arts, culture, and heritage sector play an important role in maintaining freedom of artistic expression and ensuring that the preservation of heritage is not unduly influenced by personal interests.

We looked at the effectiveness of governance arrangements in six public entities – two art galleries, a museum, a museums trust, and two funding agencies. For each entity, we assessed the governance arrangements according to five aspects of effective governance:

  • strategic direction;
  • leadership and culture;
  • monitoring and review;
  • risk management; and
  • internal controls.

Overall, there is an effective level of governance in each of the six entities. The boards for these entities take their governance responsibilities seriously and have appropriate structures, policies, and practices to help their organisations achieve their strategic direction and fulfil their roles. They are strong advocates for their organisations and for the sector more generally.

The boards are aware of the need to be clear about the difference between the roles and responsibilities of the board and those of management. These roles are well set out in board charters and policies of the entities we looked at. In practice, some boards were becoming involved in detailed matters that we would expect to be left to management. Becoming too involved in operational decisions can limit the ability of boards to challenge and question the performance of management. It can also create a risk that personal views and preferences of board members can unduly influence decisions about funding, or about the management of collections. It is important that boards regularly review how they are fulfilling their role and how well this matches their board charter and policies.

The competence of board members is of paramount importance. Decisions about board appointments are outside of the control of most public entities. Regardless of how board members are appointed, good governance requires boards that have an appropriate mix of skills and experience, including people with an affinity with the sector and people with commercial expertise. Boards that are made up of members from diverse backgrounds provide a depth of perspective that is important for setting strategic direction and for monitoring and challenging the performance of the organisation.

Each of the entities' boards were aware of the importance of good stakeholder engagement, in particular the value to be gained from considering stakeholder views when making decisions, forming strategies, and identifying sources of funding. However, we saw few examples of formal stakeholder engagement plans or formal relationships with key stakeholders through, for example, regular updates on performance.

Many cultural assets are irreplaceable and susceptible to specific risks, such as earthquakes, and need digital or physical preservation. Other cultural assets are intangible, such as traditional knowledge, language, performing arts, and oral history. Understanding and mitigating potential risks to these assets is critical. Boards could improve their understanding of risk and develop better processes for identifying and managing risks.

The training and professional development available to boards and board members could also be improved. I am aware of the successful governance induction workshops for new board members run by the Ministry for Culture and Heritage. These could be extended to provide ongoing programmes for boards and senior managers in the sector. This would help entities and boards to share ideas, information, and good practice.

In carrying out this performance audit, we have prepared criteria for evaluating five aspects of governance arrangements in arts, culture, and heritage organisations. I encourage other entities in the sector to use these criteria to evaluate the performance of their own governance arrangements.

I thank the boards and management of the six entities featured in this report and the staff of the Ministry for Culture and Heritage for their co-operation and help. I also thank Ernst and Young Limited for its significant contribution to our audit.

Signature - LP

Lyn Provost
Controller and Auditor-General

19 May 2015

Photo acknowledgement: mychillybin © Catherine Halbleib

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