Posted by Stephanie Kemp
on 9 May 2016
Is measuring everything really such a good idea?
Reading a piece in the Guardian Australia
on the planned relocation of the Powerhouse Museum to Parramatta (how many visitors, apart from true science nerds, are really going to take a 30 min train journey out to Parramatta, when visiting Sydney is all about the Harbour?) made me pause to reflect on the conundrum of the measurement of heritage assets in the public sector.
Conventional wisdom has it that accounts should be sector neutral (ie items should be treated the same regardless of whether they are in the accounts of a private sector business, a charity, or held by a government) and a value should be placed on all the assets that an entity controls. An asset is understood as being the embodiment of the future economic benefits that it brings to the entity that owns it.
So far, so good. In the case of a major heritage asset such as the Powerhouse Museum, the future economic benefits are hard to quantify: they include things like being a repository of knowledge about design in NSW, which gives it value as a research and educational resource and as a tourist attraction. These attributes are well served by its current location. Public transport radiates out of central Sydney, making it accessible to families, tourists and students. Ultimo is accessible to all of Sydney's universities and the mueum's current site is huge, with massive storage for collections that are not on display. Will these future economic benefits continue to the same extent when the institution is in Parramatta?
Where things go wrong in Sydney is that NSW public sector entities have to recognise all their physical non-current assets at fair value, based on the highest and best use for the asset . The highest and best use is a use that is physically possible, legally permissible and financially feasible, which, if the building has not been listed, in central Sydney is often its value as an attractive development site with water views. Governments see all the zeros on the development use valuation and get greedy. Sadly there has been a reluctance in recent times to add properties to the State Heritage List to protect them for future generations one cynically wonders whether this is because the government wants to keep its options open.
There are three listed items in the vicinity of the Powerhouse, two pumping stations and Ultimo Post Office, but not the Powerhouse itself . These other items were listed back in 1999, but somehow the Powerhouse was overlooked...
Two key attributes of a good financial report are relevance and reliability. From the sorts of comments that are appearing in the press about the Powerhouse proposals, it is clear that there is a community expectation that a major heritage asset like a museum, gallery, or public garden is held in trust for future generations and merely managed by the current government on behalf of our descendants. As such, a development valuation is not relevant and its existence merely tempts our politicians to see if they can turn the asset into cash.
Reliability of any valuation figure is of course entirely dependent on the quality of the assumptions that went into it - the financial press is full of accounting stories on the theme of inappropriate valuations.
So what is the answer? The answer may be cast the sacred cow of sector neutrality into the flames and impose specific requirements on public sector heritage/community assets. Possibilities might be to put such assets into government accounts at $1, with narrative notes to explain their value to the community, or to show them as if they are in a trust for future generations they could be valued, but it would be clear that the value was not available for realisation and use for general running expenses. It is interesting to note that the international public sector standard IPSAS 17 Property, Plant and Equipment
does not require the recognition of heritage assets that would otherwise fall under property, plant and equipment .