Overview

1.1 The Commonwealth Scientific and Industrial Research Organisation (CSIRO) has significant holdings of land and buildings. Its portfolio includes more than 665,878 square metres of built environment, 19,000 hectares of land, 333,000 hectares of pastoral leases and 935 buildings. The 58 CSIRO sites (see Figure 1.1)¹ include farms, laboratories, glasshouses, manufacturing equipment, supercomputers and telescopes. For financial reporting purposes, CSIRO’s property portfolio is valued at $1.68 billion.²

Figure 1.1: CSIRO sites, June 2019

 

 

Source: ANAO analysis of CSIRO information.

1.2 The CSIRO is Australia’s national science agency and CSIRO considers that it is ‘one of the largest and most diverse research agencies in the world’.³ It employs 5915 staff (5359 full time equivalent) dispersed across all Australian states and territories. The CSIRO’s estimated Budget for 2019–20 is $1.76 billion, comprising Australian Government and own-sourced revenue including royalties, and cash reserves.⁴

1.3 Table 1.1 summarises the CSIRO Budget and property expenditure from 2012–13 to 2018–19.

Table 1.1: CSIRO Budget and property expenditure, 2012–13 to 2019–20

Note a: Budgeted expenses for Outcome 1, CSIRO Budget Statements 2019–20.

Note b: A combination of the annual property operating expenditure (provided by the CSIRO to the ANAO) and annual property capital expenditure (reported to the CSIRO Board) for the CSIRO parent entity (excluding controlled entities).

Note c: Estimated property operating expenditure for 2019–20 (provided by the CSIRO to the ANAO) and CSIRO budgeted capital expenditure (reported to the CSIRO Board) for the CSIRO parent entity for 2019–20.

Source: ANAO analysis of CSIRO annual reports; CSIRO information and reporting to the CSIRO Board on property expenditure.

The development of CSIRO’s Property Investment Strategy

1.4 In 2011–12, the CSIRO undertook a review of the condition of its property portfolio. The review assessed 83 per cent of CSIRO buildings as needing significant maintenance to preserve operational capability. In addition to budgeted repairs, an additional $175 million in maintenance expenditure was seen as needed over the next ten years to meet external compliance requirements and certification standards.⁵

1.5 In December 2012 the CSIRO Board endorsed a 10-year CSIRO property investment strategy (the 2012 Property Strategy) to consolidate the organisation’s national footprint and align ‘infrastructure, science directions and partnerships’. The strategy’s key objectives included:

• stabilising operating expenses and costs of repairs and maintenance;
• reducing the size of the CSIRO’s portfolio;
• co-locating sites and buildings to encourage partnership in the delivery of science; and
• delivering fit-for-purpose scientific facilities.⁶

1.6 Key elements of the strategy included the:

• consolidation of sites and capital investment for new facilities in the Australian Capital Territory ($185 million) and Victoria ($30 million);
• divestment⁷ of CSIRO’s 701 hectare Ginninderra field station in the ACT; and
• consolidation of sites in Sydney (New South Wales) — ‘relocating staff and capability to reduce CSIRO’s footprint’ and undertaking renewal works at the Australian Animal Health Laboratory in Geelong (Victoria) ‘to ensure the facility meets current and emerging regulatory compliance standards as part of the third of life renewal’.

Legislation, powers and rules

1.7 The CSIRO is a part of the Industry, Science, Energy and Resources portfolio.⁸ It is established and operates under the provisions of the Science and Industry Research Act 1949 (SIR Act) and is a corporate Commonwealth entity under the Public Governance, Performance and Accountability Act 2013 (PGPA Act)). The SIR Act defines the CSIRO’s primary functions are to:

• carry out scientific research to assist Australian industry, further the interests of the Australian community, contribute to the achievement of Australian national objectives or the performance of the Commonwealth’s national and international responsibilities, and carry out any other purpose determined by the Minister; and
• encourage or facilitate the application or utilisation of the results of such research.⁹

1.8 The CSIRO has managed its own property portfolio since the 1920s and has the power to acquire, hold and dispose of property.

1.9 Table 1.2 illustrates how legislation, policy and the Australian Government’s property management framework applies to non-corporate Commonwealth entities and the CSIRO.

Table 1.2: Legislation, policy and administrative requirements that apply to CSIRO property management

Legend: ◆ mandatory requirement; ▲ the CSIRO applies a non-mandatory requirement; ■ the CSIRO does not apply a non-mandatory requirement.

Note a: Including the requirement for accountable authorities to establish and maintain appropriate systems and internal controls for the oversight and management of risk.

Note b: As a prescribed corporate Commonwealth entity, CSIRO must comply with the Commonwealth Procurement Rules when performing duties related to procurement.

Note c: Capital works projects valued above $15 million require Parliament’s approval, following an inquiry and recommendation by the Parliamentary Standing Committee on Public Works.

Note d: New policy proposals for capital works which are estimated to have a whole-of-life costs of $30 million or more being subject to the Australian Government’s two stage capital works approval process.

Note e: While the CSIRO is not required to comply with the Commonwealth Risk Management Policy, the CSIRO has an enterprise risk management framework which an internal CSIRO review found is aligned to the policy requirements.

Note f: The CSIRO sets its own benchmarks for density which it states are underpinned and in-line with the Occupational Density Target, but notes that its density target guidelines ‘will be applied on a project specific basis and may be varied from time to time to meet operational requirements or building specific limitations’.

Source: Department of Finance and CSIRO documents, ANAO analysis.

Rationale for undertaking the audit

1.10 To undertake its specialised science capabilities, the CSIRO requires fit‐for‐purpose facilities that support science and that will attract and retain leading researchers and scientists. A 10-year property investment strategy was adopted in 2012, at an estimated cost of more than $500 million, to consolidate property holdings and reduce the CSIRO’s footprint by 20 per cent with the aim of eliminating the forecast annual increase in operating costs over 2012–13 levels. In 2019, the CSIRO adopted a new 10-year property investment strategy.

Audit approach

Audit objective, criteria and scope

1.11 The objective of the audit was to assess whether the CSIRO designed and is implementing its property investment strategy in a way that is delivering the intended benefits, and how any lessons learned are being reflected in a new strategy that is being developed. To form a conclusion against the audit objective, the ANAO has adopted the following high level criteria:

• Is the CSIRO on track to reduce the organisation’s property footprint by 20 per cent, and eliminate the forecast annual increase in property operating costs, compared with 2012–13 levels?
• Did the CSIRO establish effective governance arrangements to support the implementation of its 2012 Property Investment Strategy?
• Was the development of the 2019–29 Property Strategy (2019 Property Strategy) appropriately informed by analysis and review of the implementation of the 2012 Property Strategy, and the results that have been achieved?

Audit methodology

1.12 The audit methodology involved:

• review and analysis of relevant documents, including on: governance and administration activities; monitoring and measurement; and advice to CSIRO executives, the Board and the Government;
• consultation with key officials and stakeholders; and
• inspection of science infrastructure and sites where consolidation is occurring.

1.13 The audit was conducted in accordance with the ANAO auditing standards at a cost to the ANAO of $434,857.

1.14 The team members for this audit were Sandra Dandie, Andrew Gavin and Brian Boyd.

2.1 The CSIRO developed its 2012 Property Strategy and identified targets for reducing its property footprint by 20 per cent and eliminating its forecast annual increase in operating costs over 2012–13 levels. In order to assess whether the CSIRO is on track to meet its targets, the ANAO examined:

• whether the CSIRO developed an effective approach to measure its property footprint and operating costs; and
• changes in the CSIRO’s footprint and operating costs since 2012.

Did the CSIRO develop an effective approach to measure its property footprint?

The National Footprint Project

2.2 In April 2010, the CSIRO Board received a report from its Executive¹⁰ on the National Footprint Project. The report indicated the project was initiated to ‘… develop a national view of CSIRO’s current and future footprint directions’. This was to be achieved by the CSIRO reviewing its collaborations with key research partners (universities, publicly funded research agencies and others) and its physical footprint — which was defined and measured through its occupation of sites. The report indicated that:

CSIRO’s footprint has been modelled in a Geographical Information System [GIS], with the key challenge being in describing the many forms of relationships between CSIRO, partners, precincts¹¹, collaborations and networks. Using this system, a spatial view of CSIRO’s key focus areas has been created.

2.3 The report noted that the GIS modelling would ‘… help develop insights and answer strategic questions, including existing research precincts and collaborations’ and that the project resulted in the:

development of an online National Footprint Project Tool, providing a rich information source which, for the first time, provides a much fuller perspective of CSIRO’s sites and interaction and alignment with key research partners.

2.4 The report identified the potential ‘… future state and interactions’ arising from the project, including the activities outlined in Table 2.1.

Table 2.1: National Footprint Project activities

Note a: The CSIRO consolidation to the North Ryde site was reliant upon approval of a concurrent National Measurement Institute (NMI)]/Administrative Arrangements Order (AAO) new policy proposal (NPP) based on consolidating its Pymble, Lindfield and Marsfield operations at North Ryde. However, the NMI/AAO Sydney site consolidations NPPs did not proceed.

Source: ANAO analysis of CSIRO information.

2.5 The report indicated that the:

… national footprint and pathway forward emerges which has the following characteristics:

• Initial analysis indicates that transfers are undertaken within existing capital envelope (or through sourcing new capital from existing sources — e.g. EIF [Education Investment Fund]¹²;
• Minimal withdrawal from regional sites — CSIRO’s footprint is not diminished.
• Capital now concentrated in approximately 14 large sites (largely owned by CSIRO). While not yet modelled, it is expected operating costs for these sites would be reduced through consolidation and better utilisation of space and repairs and maintenance budgets.
• Operating costs reduced in other sites through collocation with larger entities, namely universities.
• Focus on collaborations with key universities through the assessment and establishment of strategic external engagement plans.

2.6 The modelling project was to inform the development of the CSIRO’s:

• National Footprint Roadmap (Roadmap) ‘to guide future developments’ with ‘… financial and risk aspects’ to be reconciled with the four year capital plan¹³; and ultimately the
• 2012 Property Strategy.¹⁴

2.7 In October 2019 the CSIRO advised the ANAO that the National Footprint Project Tool was not used to inform revisions to its 2012 Property Strategy and planning and measurement of the CSIRO’s property footprint over time. The CSIRO advised the ANAO that this was because the tool ‘… did not deliver what was expected’.

Measuring footprint for the 10-year 2012 Property Strategy

2.8 In February 2012, the CSIRO Board received a report from the CSIRO Executive identifying a number of pressures to the organisation’s underlying capital sustainability and capacity to deliver science outcomes. In particular:

• an ageing property portfolio requiring significant expenditure on repairs and maintenance, major refits and upgrades, and replacement of facilities;
• a continuing need to fund capital expenditure on scientific and information technology equipment to deliver science outcomes;
• an absence of cash reserves that means ‘CSIRO is now unable to fund the necessary forward program of property maintenance, enhancement and development’; and
• a projected deficit of ‘unfunded’ depreciation.¹⁵

2.9 The CSIRO Executive reported to the CSIRO Board that it was exploring opportunities to consolidate its footprint and was developing a long term property strategy, indicating:

The most significant opportunity for reducing the need for capital is by reducing the physical footprint of CSIRO’s property portfolio. Given that a) CSIRO’s depreciation in 4 years will be in excess of double the level of current government depreciation funding, b) that the level of repairs and maintenance currently undertaken is approximately 50% of international benchmarks, and c) that we believe CSIRO’s science space to be underutilised, there would appear to be both opportunity and benefit to pursue space reduction.

2.10 The CSIRO Board noted identified actions to address the capital challenges including that it was ‘… exploring a strategy to half our physical footprint over the longer term’.

2.11 In October 2012, the CSIRO Executive indicated that its:

• space utilisation was over double government mandated benchmarks (averaging 38 square metres per person), and that there was a shortfall between identified potential capital funding ($100 million of royalties from the Wireless Local Area Network (WLAN)¹⁶ settlement and $30 million from the Science and Industry Endowment Fund (SIEF)¹⁷ and the cost of repairs and maintenance over ten years ($227 million); and
• property strategy would be focussed on avoiding repairs and maintenance on properties identified for vacating or divestment; divesting and optimising return (e.g. public private partnerships or joint ventures) from underutilised high value properties, and concentrating capability where there are duplicate sites undertaking the same science.

2.12 The CSIRO Board, commenting on organisational sustainability cost and revenue initiatives, noted:

• the opportunity to use the precinct strategy to drive productivity and other gains –but noted the risks associated with reducing sites.
• noted that CSIRO is primarily pursing a capital city consolidation strategy, as opposed to reducing the regional site footprint (with a few exceptions).

2.13 The 2012 Property Strategy¹⁸ was approved by the Board in December 2012¹⁹ and included details on:

• the construction of new facilities at the Black Mountain and Clayton sites and relocation of staff from other sites in the Australian Capital Territory (ACT) and Victoria to these sites;
• the divestment of sites in Ginninderra and a portion of Black Mountain (ACT ), Highett and Parkville in Melbourne (Victoria), Marsfield and Lindfield in Sydney (NSW) and Darwin (Northern Territory);
• plans for a second phase of the program to consolidate sites in Sydney (NSW); and
• ongoing repairs and maintenance to CSIRO sites in Hobart (Tasmania), Darwin (Northern Territory), the ACT and the Australian Animal Health Laboratory in Geelong (Victoria).

2.14 In its endorsement of the 2012 Property Strategy, the CSIRO Board requested management ensure that ‘… intended benefits are realised’. See paragraph 3.69 for further details on benefit realisation.

2.15 The CSIRO accounted for its property footprint in its 2012 Property Strategy according to its owned or leased buildings (building footprint )²⁰, measured in square metres. The CSIRO did not include all of its leased locations in its assessment of its property footprint.

2.16 The CSIRO’s land footprint is not captured in the CSIRO’s estimation of property footprint, despite conducting scientific research and research in areas such as agriculture, biosecurity and astronomy involving the CSIRO holding sites that are predominantly large tracts of land rather than buildings.

2.17 The CSIRO’s measurement approach has not been reviewed and is not guided by a specific framework, although the CSIRO noted its 2011–12 property utilisation benchmarking study (data collected in 2011) was assessed on building footprint. The CSIRO has not undertaken an overarching review of its property utilisation since the 2012 study²¹ and did not develop a comprehensive approach for monitoring and measuring its property footprint over the ten year life of the 2012 Property Strategy.

2.18 The CSIRO Board Chair and Deputy Chair advised the ANAO that they were unaware that the CSIRO property footprint was measured on the basis of building square metres and did not include square metres of land.

How has the CSIRO’s property footprint changed since the 2012 Property Strategy was adopted?

2012 Property Strategy

2.21 The CSIRO Executive reported to its Board that it would achieve an estimated 20 per cent reduction in its property gross floor area (GFA) from implementing its 2012 Property Strategy, shown in Table 2.2.

Table 2.2: Property footprint comparison-gross floor area (GFA)

Note a: The proposed replacement of the Ginninderra site was considered to have no impact on the property footprint given the calculation was on the basis of building footprint.

Source: ANAO analysis of CSIRO Board papers.

2.22 In February 2013, the Government’s agreement was sought for the CSIRO to proceed with a program of rationalisation and realignment of CSIRO property in Canberra (ACT) and Clayton (Victoria) as part of the first phase of implementing the 2012 Property Strategy. The CSIRO Executive reported to its Board on its updated analysis and identified that, after ten years, it expected to have:

• reduced its footprint by 26 per cent²², a revised estimate from the 20 per cent estimate reported to its Board;
• mitigated an estimated $50.9 million of the additional repairs and maintenance costs over the next ten years; achieved utilisation of accommodation consistent with Australian Government benchmark standards; and
• refreshed its significant capital city sites to be fit for purpose in supporting science outcomes.

2.23 In early 2014, the CSIRO Executive discussed reforms and strategy and reported to its Board the intention to reduce the property portfolio to 41 sites in the context of addressing financial pressures.

2.24 From June 2013 to June 2014, the CSIRO’s property portfolio increased from 55 to 57 sites.²³ Sites added over this period include the South Australian Health and Medical Research Institute (Adelaide, South Australia) and Santiago (Chile) (see Table 2.5 for details).

The CSIRO 2015–16 Property Plan

2.25 In 2014, the CSIRO Executive developed the 2015–16 Property Plan (2015 Property Plan) (also see paragraphs 3.22 to 3.26). This accounted for phase two of the 2012 Property Strategy, changes in policy (such as location of the National Measurement Institute (NMI)) and other pressures (impacting on the divestment of sites and ultimately the property footprint).

2.26 The 2015 Property Plan proposed program of work is detailed in Table 2.3.

Table 2.3: 2015 Property Plan: program of work

Source: ANAO analysis of CSIRO information.

2.27 On 11 May 2015, the Government gave its in-principle support to the plan and activities including :

• the joint venture arrangements for the development and sale of the Ginninderra and Marsfield sites and the straight sale of Aspendale, Highett and Parkville and Darwin sites;
• refurbishment of the Lindfield site in Sydney and the minor fit-out of the Eveleigh, Lucas Heights, Newcastle, Clayton, Werribee, Kensington, and Adelaide sites to facilitate the relocation of staff from the North Ryde and Marsfield sites;
• the refurbishment of the Clayton site to facilitate the relocation of staff from the Parkville and Aspendale sites; and
• critical compliance-related capital works at the Australian Animal Health Laboratory.

2.28 Advice to the CSIRO Board had previously identified that the process involved in CSIRO implementing the strategy could ‘… add 18 months to 2 years’ to the timeline of a project.

2.29 The CSIRO Property Plan noted that:

Sale proceeds derived from the divestment of CSIRO sites and the application of part of CSIRO’s annual capital funding underpins CSIRO’s ability to undertake the construction works envisaged in the Property Plan. A substantial portion of these proceeds are contingent on CSIRO being able to successfully undertake the Ginninderra JV [joint venture].

2.30 By June 2015, the number of sites in CSIRO’s property portfolio had declined back to 55 sites with the CSIRO vacating its leased site in Collingwood (Melbourne, Victoria) and divesting its Armidale Arding site (NSW).

The 2019–29 Property Strategy

2.31 In August 2018, CSIRO commenced the development of a 2019–29 Property Strategy (2019 Property Strategy) that was intended to be reviewed annually. The CSIRO Executive reported to its Board in May 2019 that the 2019 Property Strategy would:

… be agile and flexible to accommodate the changing science landscape, while ensuring that facilities are fit for purpose to meet current and future requirements and will

… provide direction on our current capital position, governance, strategic property principles, and decision making frameworks to ensure CSIRO makes the right investment decisions.

2.32 The CSIRO Executive reported to its Board in August 2019 that:

The CSIRO [new] property strategy aims to address a number of issues, challenges and opportunities. Robust planning and longer lead times for decision making will assist the organisation to better manage the complexity of the portfolio more effectively.

2.33 The 2019 Property Strategy, associated priorities (see Table 4.1), and the 2019–20 Property Implementation Plan, endorsed by its Board in August 2019, was to ‘… provide a ten year, holistic view of CSIRO’s property portfolio and the principles and frameworks that are in place to support robust and financially sustainable decision making’. The 2019 Property Strategy activities are detailed in Table 2.5.

Table 2.4: 2019 Property Strategy activities

Source: ANAO analysis of CSIRO information.

2.34 Although previously planned for divestment, the CSIRO has retained its Parkville site in favour of establishing long-term lease arrangements to generate a rental return for the CSIRO.

2.35 The CSIRO identified some of the challenges related to divestment, citing as an example the Highett site [identified in the 2012 Property Strategy] that had been in progress for over five years. (See Table 3.3 for further details).

2.36 The Ginninderra divestment was noted as being ‘a key component for funding the revitalisation of other CSIRO property infrastructure identified through the 2012 Property Strategy’.

2.37 Between 30 June 2015 and 30 June 2019, the number of sites in CSIRO’s property portfolio increased to 58 sites from 55 sites. Table 2.5 shows the sites added and vacated over the period.

Table 2.5: Changes in CSIRO sites (owned or leased) between June 2015 and June 2019

Note a: Site added as a result of the merger between the CSIRO and the then NICTA (National ICT Australia), announced in August 2015.

Source: CSIRO Annual Reports.

Changes in CSIRO investment and divestment plans

2.38 The main changes between 2012 Property Strategy and the program of work identified in the 2015 Property Plan and the 2019 Property Strategy are the CSIRO’s:

• confirmation of the approach to fund the 2015 Property Plan by divesting Ginninderra through a conditional sale that CSIRO identified was within its statutory powers;
• decision to retain and consolidate its Sydney sites to its Lindfield site, and to vacate its leased North Ryde site;
• retention of its Parkville site to earn a revenue stream through leasing it to a third party;
• commencement of the Biosecurity Act 2015 that resulted in CSIRO identifying the need to review and re-cost compliance upgrades in the Australian Animal Health Laboratory.

Capital investment progress

2.39 The CSIRO’s major and medium capital investment projects that have been completed or are near to completion since 2012 are:

• ACT — construction of a 15,000 to 18,000 square metre building at Black Mountain, refurbish/undertake capital works to existing buildings/demolition of redundant buildings;
• NSW — purchase, construction of infrastructure and capital works at Boorowa to replace the Ginninderra (ACT) site.
• Victoria — refurbishment of buildings/the construction of a new facility in Clayton; and
• Tasmania — Hobart building refurbishment.

2.40 Capital investment projects approved by the Public Works Committee include the Sydney consolidation and Myall Vale upgrade projects. Paragraphs 3.17 to 3.29 and Appendix 2 provides more detail on capital projects and when each project was identified.

Capital divestment progress

2.41 Table 2.6 shows capital divestment projects aligned with the 2012 Property Strategy, 2015 Property Plan and the 2019 Property Strategy. As at November 2019, the CSIRO’s Armidale Arding site is the only finalised divestment since 2012. The sale of the CSIRO’s Highett and Geelong Belmont sites are to be finalised by 30 June 2020.

2.42 Since 2010, the CSIRO has removed Armidale Chiswick (2012 Property Strategy), the top portion of Black Mountain, Lindfield (2015 Property Plan), Darwin, Parkville and Montpellier (2019 Property Strategy) from its divestment plans.

2.43 The lack of progress in divestments has delayed CSIRO achieving its planned revenue flow and associated reduction in footprint.

CSIRO’s measurement of its footprint

2.44 The CSIRO Business and Infrastructure Services business unit (CBIS) developed and administers the property investment strategy (see paragraphs 3.8 to 3.9 for further detail on CBIS roles and responsibilities). Prior to the commencement of this audit, the CSIRO did not measure its aggregate property footprint to report against its commitment to the Government in its 2012 Property Strategy.

CSIRO site footprint

2.45 Each year the CSIRO identifies in its Annual Report the number of sites it occupies across Australia and internationally. Figure 2.1 shows ANAO analysis on the number of CSIRO sites, as at 30 June, over time. The number of sites increased from 55 to 58 (five per cent) from 2012–13 to 2019–20.

Figure 2.1: Change in the number of CSIRO sites

Source: ANAO analysis of CSIRO Annual Reports.

Building and land footprint

2.46 Analysing CSIRO data, the ANAO estimated that the CSIRO had reduced its building footprint by 10 per cent (compared to the CSIRO forecast of 26 per cent) and its land footprint by one per cent from 2013 to 2019, shown in Figure 2.2.

Figure 2.2: Building and land footprint (m²)²⁴

Source: ANAO Analysis of CSIRO data.

2.47 The CSIRO’s expectation of meeting its target (26 per cent), based on building footprint, is dependent on no additions to the CSIROs property portfolio, and CSIRO vacating its Crace, Yarralumla (ACT) and North Ryde sites at the end of lease (in mid-2022, mid-2022 and end of 2021 respectively). However, the CSIRO has flagged likely delays to vacating the Crace and North Ryde sites²⁵, the commencement of the Sydney consolidation project including the refurbishment of the Lindfield site, and the sale of the Ginninderra and Marsfield sites by 2021. The CSIRO also identified, in November 2017, that it planned to vacate underutilised sites including its Cairns (end of lease mid-2019 but plans are to extend the lease for one year) and Atherton (owned) sites in Queensland. However, the CSIRO has not identified plans to divest the Atherton site in its 2019 Property Strategy.

2.48 The CSIRO did not regularly review progress in meeting its commitments made to the Government in March 2013 on reducing its property footprint.

Did the CSIRO develop an effective approach to measure its property operating costs?

2.49 All business units pay an overhead charge for energy, property lease and some other semi-fixed costs according to how many square metres the business unit is occupying and the administration of these costs is managed and reported annually by the CSIRO’s Finance business unit (Finance) (see paragraph 3.13 for further details).

2.50 The CBIS scope of services includes payment of some property operating costs (see paragraph 3.9 for further detail). The CBIS pays for costs related to repairs and maintenance on buildings and fencing, security, cleaning and waste.²⁶ The CBIS also pays property overhead costs associated with underutilised accommodation, for instance, when science business units consolidate and there is a resulting reduction in the use of office or laboratory space (a reduction in square meters).

2.51 The CBIS noted that ‘specialised requirements such as maintenance of research instruments, or specific research developed structures are the responsibility and cost of the relevant BU [business unit] however, CBIS will provide support where agreed and where resources allow’.

2.52 The CBIS doesn’t have visibility over the operating costs for CSIRO as a whole, despite being responsible for the property strategy. There is no arrangement in place between CBIS and Finance that facilitates the measurement and reporting of the CSIRO’s total operating costs over time, consistent with the aims of the 2012 Property Strategy.

How have the CSIRO’s property operating costs changed since the 2012 Property Strategy was adopted?

2.53 As noted at paragraph 1.11, the CSIRO aimed to eliminate its forecast annual increase in its operating costs over 2012–13 levels.

2.54 The CSIRO noted in its 2015 plan that its intention was to deliver an $11.1 million improvement to the operating position of CSIRO over 10 years including a $63.6 million reduction in property operating, repairs and maintenance costs.

2.55 Figure 2.3 shows aggregate property related operating costs from 2012–13 to 2018–19, in real terms. Property related costs grew by 43 per cent in real terms from 2012–13 to 2018–19, growing by an average of seven per cent annually. The trend, delays and changes in the actions included in the 2012 Property Strategy that were to achieve the targeted reduction means CSIRO’s property operating costs in 2021–22 are likely to be higher in real terms than they were in 2012–13.

Figure 2.3: Aggregate property related operating costs from 2012–13 to 2018–19

Source: ANAO analysis of CSIRO data.

3.1 The CSIRO Executive began implementing the 2012 Property Strategy in December 2012. In order to assess whether effective governance arrangements were in place to support implementation, the ANAO examined the:

• CSIRO’s governance framework and implementation arrangements, including the management of risks;
• identification of milestones and deliverables; and
• reporting to the CSIRO Board.

Did the CSIRO establish an effective governance framework and arrangements to implement its property investment strategy?

The development of implementation principles

3.2 As noted in paragraph 1.5, the 2012 Property Strategy was endorsed by the CSIRO Board in December 2012. In endorsing the 2012 Property Strategy, the CSIRO Board approved the principles outlined in Table 3.1. The principles were to inform decisions on the CSIRO’s management and implementation of its property strategy. However, at the time, the CSIRO Executive did not have a framework to guide prioritisation on property decisions on capital investment and divestment.

Table 3.1: 2012 Property Strategy principles, December 2012

Source: ANAO analysis of CSIRO information.

Consultation on the 2012 Property Strategy

3.3 There was no overarching consultation plan implemented to support the 2012 Property Strategy.

3.4 In November 2012, the CBIS advised the CSIRO Executive that ‘consultation in respect to the development of the CSIRO property NPP [New Policy Proposal] has included the executive team, Department of Industry, Innovation, Science and Tertiary Education and the Department of Finance and Deregulation’.

3.5 The CSIRO was unable to provide the ANAO with information on any consultation process with its science unit leaders. Subsequently, between August and October 2014, the CSIRO Business and Information Services (CBIS) business unit consulted with science business units and the Executive on a property plan (2015 Property Plan) to support the second phase of the 2012 Property Strategy. In response to the consultation, the CSIRO Executive agreed to examine consolidating in Sydney at the Lindfield site instead of at the North Ryde site as planned in the 2012 Property Strategy. The CBIS also updated the property principles following the consultation.

Roles and responsibilities

3.6 The CSIRO Executive has identified roles and responsibilities for the delivery of property services, planning of capital investments and management of capital works projects. Roles and responsibilities of the Board, Chief Executive and executive team are clearly outlined including in charters and directions statements. The members of the executive team are responsible for business units including science research and enterprise services functions. Appendix 3 provides further detail on the organisational arrangements and the executive team’s breadth of responsibility in the CSIRO.

3.7 The CSIRO Operations Group is responsible for the delivery of the property strategy, led by the Chief Operating Officer (COO). The Operations Group includes the CBIS and Finance business units.

CSIRO Business and Infrastructure Services

3.8 As noted in paragraph 2.44, the CBIS developed and implemented the 2012 Property Strategy and delivers property services to support science. It has almost 250 staff across Australia whose roles include capital works managers, technicians, and stores and logistics officers.

3.9 The CBIS has developed its charter and scope of services that outlines its responsibilities for service provision. CBIS and science unit responsibilities with respect to property are identified in Table 3.2.²⁷ The CBIS monitors space utilisation, consistent with its Accommodation Guidelines, and reviews requirements annually with science business units to determine responsibility for operating costs.

Table 3.2: Summary of scope of service responsibilities, December 2018

Source: The CBIS scope of services.

Oversight of projects

Project Boards and control groups

3.10 Project boards and project control groups (see Figure 3.1) were established to provide oversight for medium ($1 million to $15 million) and major (more than $15 million) value capital works projects.²⁸ The CSIRO Executive did not have a governance structure in place to oversee its proposed divestments (identified in Table 2.6).

Figure 3.1: Roles and responsibilities of project boards and control groups

 

 

Source: ANAO analysis of CSIRO documents.

3.11 The CSIRO Executive established project boards and control groups to implement capital investment and site remediation projects under the 2012 Property Strategy, 2015 Property Plan and the 2019–29 Property Strategy (2019 Property Strategy), and clearly outlined the roles and responsibilities of the project boards and groups.

Ginninderra, Australian Capital Territory (ACT) divestment project committee

3.12 The Ginninderra Core Leadership Group was established and met for the first time in August 2018 to provide oversight of the Ginninderra divestment. The group has a terms of reference that has been in draft form since October 2019.²⁹

Finance

3.13 The Finance business unit (Finance) works with the CBIS to prepare an annual capital plan, identifying funding for major and minor capital works and maintenance. Finance calculates the rates (per square metre) at which property overhead costs will be allocated to business units for their use of property, and recovers overhead costs. Finance also monitors and reports annually to the Board on capital expenditure.

Capital Management Committee

3.14 The Capital Management Committee oversees the allocation and management of CSIRO’s capital budget. Established under the 2019 Property Strategy, the committee’s role is to:

• make recommendations on capital expenditure;
• review the allocation of capital budgets;
• monitor expenditure; and
• oversee the development, update and execution of the 2019 Property Strategy.

3.15 Terms of reference clearly outline the committee’s role.

Implementation

3.16 As discussed in paragraph 2.13, the CSIRO Executive implemented the 2012 Property Strategy in two phases, commencing in 2012 and in 2015.

Phase one of the property strategy

3.17 In January 2013, the CSIRO Executive submitted proposals to the Government for major capital investment projects to consolidate research to its:

• Black Mountain site (ACT) — costing $185 million from 2014 to 2020; and
• Clayton site in Melbourne (Victoria) — costing $30 million from 2013–2016;

3.18 In February 2013, the CSIRO Executive reported to its Board on updates to the CSIRO’s annual capital management plan, to reflect the planned property strategy expenditure until 2016–17. The Government approved the CSIRO’s capital investment projects in April 2013.30 From September 2013, the CSIRO Executive implemented project boards and control groups (see paragraph 3.10) to oversee capital investment projects. The boards and groups met regularly, established terms of reference, kept meeting papers and recorded action items.

3.19 In December 2013, the CSIRO Executive reviewed and revised its 2014–15 capital expenditure budget to incorporate the approved ACT and Clayton consolidations, and to identify revenue sources, including future divestments, and capital works projects through to 2019–20. The Parliamentary Standing Committee on Public Works (PWC) approved the ACT and Clayton consolidations in March 2014.

Phase two of the property strategy (2015 Property Plan)

3.22 As discussed in paragraph 2.25, the CSIRO Executive developed the 2015 Property Plan (phase two of the 2012 Property Strategy) to consolidate its Sydney operations to the Lindfield site in Sydney (NSW), upgrade the Australian Animal Health Laboratory (AAHL) in Geelong (Victoria), and divest six sites including the Ginninderra (ACT) site (see Box 1) (see Table 2.6 for divestment details). The CBIS commenced a submission to the Government before its Executive approval ‘given the urgency behind much of CSIRO’s property strategy’. The 2015 Property Plan was not presented for endorsement by the CSIRO Board.

3.23 In giving its in-principle approval to the 2015 Property Plan in May 2015 (discussed in paragraph 2.27), including on the joint venture development of the Ginninderra site, the Government requested a comeback submission for the 2016–17 Budget process to provide further detail on capital expenditure and revenue streams.

3.24 In December 2015, the CSIRO Board approved delaying a comeback submission due to ‘significant challenges in confirming key elements of the plan’.³¹ The 2018 comeback submission’s key elements were:

• the AAHL compliance-related upgrade (entitled the AAHL Part-life Refurbishment Project, $220 million, 2020–21 to 2025–26);
• works to consolidate Sydney sites to Lindfield (entitled the Sydney Consolidation Project, $113.6 million, 2020–2022);
• direct sales of the Marsfield (Sydney, NSW); Parkville and Highett (Melbourne, Victoria) sites, which the CSIRO Executive estimated would total $115.1 million; and
• a $110 million loan from the Commonwealth to the CSIRO to meet cash flow requirements of the AAHL and Sydney projects, to be repaid from the Ginninderra divestment.

3.25 The comeback differed from the 2015 Property Plan that was agreed in-principle by the CSIRO — requesting the $110 million loan, removing the divestment of the Darwin (Northern Territory) site due to ‘changing market conditions’ and postponing the Aspendale (Melbourne, Victoria) divestment due to the higher than expected cost of relocating staff.³² The Government gave its approval in May 2018.

3.26 The PWC approved the Sydney Consolidation Project in October 2019. From September 2016 to January 2020, the CSIRO implemented project boards and control groups to oversee the Sydney, AAHL and Parkville relocation projects. The boards and groups met regularly, established terms of reference, kept meeting papers and recorded action items.

2019–29 Property Strategy

3.27 As shown in Table 2.6, significant investments and divestments were to be implemented between 2012 and 2029. The activities included: ACT (consolidation and divestment of Ginninderra); New South Wales (Sydney consolidation, Myall Vale investment and divestment of Marsfield); Victoria (Clayton consolidation and divestment of Highett, Geelong Belmont and Aspendale); Queensland (Herston Health Precinct investment); and Western Australia (Perth consolidation).

3.28 In 2019, the CSIRO Executive established project boards and control groups for the Myall Vale (NSW) and Perth consolidation (Western Australia) projects. The boards and groups established terms of reference, met regularly, considered papers and noted action items. A project board for the Canberra Collections Accommodation Project was established, with a terms of reference, in November 2019.

3.29 In the 2019 Property Strategy, the CSIRO Executive identified new governance processes for capital investment planning and a property decision-making framework (see Appendix 5 for further detail), and committed to annual internal reviews of the 2019 Property Strategy and consultation with science business units on their property requirements.

Change management and communication

3.30 CSIRO management planned and implemented change management and communication activities for the ACT, Sydney and Clayton consolidation projects, AAHL Part-Life Refurbishment and Perth consolidation project. Project boards and control groups received regular reports on implementation and noted actions.

3.31 The communication activities for the ACT, Clayton and Sydney consolidation projects, Ginninderra divestment and Highett remediation project included communication with: staff affected by consolidations in the ACT, Melbourne and Sydney; communities around the Ginninderra, Highett and Lindfield sites; and local authorities regarding the Ginninderra, Highett and Lindfield sites.

3.32 Figure 3.2 illustrates key events in the implementation of the strategy.

Figure 3.2: Timeline of key events

 

 

Note a: The CSIRO and National ICT Australia (NICTA) merged in August 2015 to create the CSIRO entity, Data61.

Source: ANAO analysis of CSIRO documents.

Risk management

Risk framework

3.33 The CSIRO has an Enterprise Risk Management Framework, risk policy and a procedure that ‘sets out the mandatory procedures for the assessment and management of risk’.³³ The CSIRO assesses risks in:

• organisational strategic risk assessments conducted annually, which focus on whole-of-entity and strategic risks;
• operations and business unit services risk assessments, which are conducted annually and captured in risk registers; and
• project level risk assessments, which are specific to a CSIRO project. The assessments are conducted at the beginning of each project or during a project and outcomes are ‘captured in a regular status report … and escalated if necessary’.

3.34 The CSIRO Board Audit and Risk Committee monitors and reports to the Board on the ‘adequacy and operation of the risk identification and assessment framework’.

Organisational strategic risk assessments

3.35 The CSIRO Executive noted on three occasions between 2012 and 2018 that implementation of the property strategy depended on the CSIRO’s ability to divest properties — in particular, Ginninderra. In 2013, the CSIRO advised the Government that the risk of failing to proceed with the property strategy would compromise the CSIRO’s ability to avoid the escalating planned repairs.

3.36 Between 2013 and 2018, a number of events delayed or halted divestments and the return of proceeds to the CSIRO to fund the property strategy. These events, summarised in Table 3.3, were reported to the Board.

Table 3.3: Summary of delays and changes to divestment arrangements, 2013–19

Note a: In November 2017, the CSIRO noted that ‘due to delays in CSIRO’s ability to sell Highett, the Highett to Clayton project has been completed using CSIRO’s cash reserves’. The Highett to Clayton project ($30 million) involved the relocation of research functions from the Highett site to the Clayton site in Melbourne.

Note b: The CSIRO advised the Government in 2018 it had removed the Darwin and Aspendale sites from the strategy.

Source: ANAO analysis of CSIRO documents.

3.37 The organisational strategic risk assessments between 2012 and 2018 did not include risks to the implementation of the 2012 Property Strategy, including that funding the 2012 Property Strategy depended on realising the planned inflow of funds from divestments.

3.38 In December 2018, the CSIRO Executive identified two new risks (including controls and treatments to address the risks), that were related to the delivery of the property strategy:

• Ginninderra — financial outcomes not realised: described as offers to purchase the site not meeting ‘CSIRO’s minimum financial threshold’ for the divestment project.³⁴
• Scientific Infrastructure, Buildings and Facilities: described as a ‘failure to adequately invest in the maintenance of existing facilities and development of strategically aligned new facilities’.³⁵

3.39 In August 2019, the CSIRO Executive reported to its Board that ‘there are often sensitivities from a community, political and stakeholder perspective’ around the future of CSIRO’s sites, and ‘sensitivities’ for the Ginninderra, Aspendale and Marsfield divestments would require management.

Risk of exceeding authority

3.40 The CSIRO has 37 leases and 125 other occupancy arrangements³⁶ in place for third party organisations to use portions of the CSIRO’s portfolio of owned and leased sites. The majority of arrangements are to third parties who CSIRO identify as paying full commercial rates to CSIRO.

3.41 The CSIRO owns investment properties valued at $52 million from which it received $3.2 million in rent in 2018–19, including from tenants in a shopping centre it owns in North Ryde, Sydney. The CSIRO Executive is considering leasing more of its sites, including Parkville (which had been identified for divestment) because ‘there remains concerns that the continued divestment of sites is not sustainable (i.e. we will run out of things to sell) and there are other options that may be more financially sustainable’.³⁷

3.42 The December 2016 legal advice to the CSIRO on the Ginninderra joint venture divestment noted that the objective of the development and divestment project — to raise money ‘to fund the future performance of the CSIRO’s functions’ — was ‘not in itself sufficient’ for the project to be within the ‘scope of what is authorised’ by the SIR Act:

Whilst we accept that CSIRO has the power to engage in activities that generate revenue, in our view this does not extend to any activities whatsoever simply because they would result in the receipt of funds that would support other activities that are within the scope of CSIRO’s functions. If CSIRO’s powers were that broad, it would allow CSIRO to do anything whatsoever that is directed towards raising money, even if the activity had nothing to do with science …

3.43 The CSIRO Executive has not sought advice on the extent to which the SIR Act authorises it to conduct other activities described in paragraphs 3.40 and 3.41, such as leasing a shopping centre for a financial return.³⁸

Operations Group and CBIS risk assessments

3.44 As noted in paragraph 3.7, the Operations Group has key responsibilities with implementing the property strategy. The Operations Group includes the CBIS and Finance business units. Prior to 2018, the Operations Group did not have risk registers in which property strategy risks and treatments could be recorded and monitored. In 2019, the Operations Group identified eight risks. These included two property-related risks: financial outcomes not realised from the Ginninderra divestment, and the risk to scientific infrastructure, buildings and facilities (see paragraph 3.38). The remaining six risks were related to strategic, operational and governance risks for the organisation.³⁹

3.45 In 2019, the CBIS had documented four risks in a register, prepared to inform the Operations Group risks.⁴⁰ Two risks related to investment in facilities and equipment, and these risks were linked with the organisational risk described in paragraph 3.38 of a failure to adequately invest in scientific infrastructure, buildings and facilities. Two risks were related to the security of property and the environmental impact of facilities. The CSIRO advised the ANAO that CBIS does not have its own risk register.

3.46 The CSIRO could not provide an overarching risk plan for the 2012 Property Strategy. It advised the risks it identified to its Board in December 2012 on the implementation of the 2012 Property Strategy ‘… were specific to the Board paper at the time’.

3.47 The CSIRO provided the ANAO with a risk management plan for the 2015 Property Plan, which contained a register of 25 risks to implementation. The highest risk (rated as severe) was ‘funding through proceeds of sale of sites not consistent with capital requirements’. The register identified current controls and the risk owner (the Chief Finance Officer) but did not identify treatments or a timeframe for mitigating the risks.

3.48 The 2019 Property Strategy does not include a risk management plan.

Project risk assessments

3.49 The project boards for the ACT, Sydney, Clayton and Perth consolidation projects; AAHL Part-Life Refurbishment; and the Boorowa and Myall Vale projects have prepared, monitored and updated risk registers. However, these were not integrated with the organisational strategic risk assessments.

3.50 A Ginninderra divestment project risk register was prepared in May 2017 and has been updated since 2018.⁴¹ The Ginninderra Core Leadership Group has not regularly considered the risk register.

3.51 A risk analysis of the Highett sale process was prepared in March 2019 but the CBIS did not have an earlier documented risk register for the divestment. In 2017, the CSIRO Executive established a project control group (separate to the sale process) to oversee the remediation of the site. This group did not have a risk register, but there were ‘standing items that address risk’ in its meeting agenda, including for workplace health and safety, budget, program and environmental issues. The group received regular reports on environmental monitoring and costs. See Box 2 for more information on the Highett divestment.

Did the CSIRO identify appropriate milestones and deliverables to monitor its progress in implementation?

3.54 In December 2012, the CSIRO Board papers included an ‘illustrative schedule’ of key milestones for the delivery of the property strategy. The schedule identified dates for divestments, developments and capital expenditure. CSIRO Board papers did not include an updated schedule after December 2012.

3.55 In December 2012, the CSIRO Board approved the schedule, including planned expenditure of at least $567 million on capital investment projects and, to fund this investment, property divestments valued at $400.7 million (2012 prices).⁴²

3.56 Between 2012-13 and 2019-20, the CSIRO had actual expenditure and budgeted expenditure in 2019-20 of $295.4 million on major investments under the 2012 Property Strategy and 2015 update to the strategy.

3.57 As at March 2020, the CSIRO had achieved divestment revenue (actual and contracted) totalling $98.2 million. Divestments with a total value of at least $240.1 million were planned. Divestments identified in the 2012 Property Strategy that were not proceeding, due to updates to the 2012 Property Strategy including the removal of sites planned for sale in 2018 and 2019, had a value of $121.7 million (2012 prices).

Capital works projects

3.58 The CSIRO identified appropriate milestones and deliverables to enable the monitoring of medium and major capital investments it was planning, implementing or had completed. The milestones included scheduling including for design, procurement, construction of facilities, and staff relocation.

3.59 The CSIRO Executive identified milestones in documents including:

• statements of evidence to the PWC;
• operations reports to the CSIRO Board and Executive between 2013 and 2015; and
• papers prepared for project boards and control groups.

3.60 The CSIRO’s operations reports submitted to the CSIRO Executive and the Board tracked progress against the milestones for the consolidations in the ACT and Clayton (Victoria).

3.61 Reports to the CSIRO Board, Executive and the project boards and control groups of the ACT and Clayton projects identify key milestones were met and expenditure was within the approved budgets for the projects.

3.62 Table 3.4 shows the status of 18 proposed capital investment projects, as at December 2019.

Table 3.4: Progress of capital investment projects

Source: ANAO analysis of CSIRO information.

Divestments

3.63 The CSIRO Executive did not identify milestones for the Highett, Geelong Belmont and Armidale Arding divestments. Deliverables were identified for the Highett, Armidale Arding and Geelong Belmont site divestments including by contributing to a reduction in the CSIRO’s property holdings and release of funds for other capital works projects. The divestment of the Geelong Belmont site was intended to remove from CSIRO’s portfolio a building that was no longer ‘fit for purpose’. The remediation costs exceeded the sale proceeds.

3.64 The CSIRO Executive identified milestones for the divestment of the Ginninderra site in reports, timelines and schedules prepared in 2016, 2017 and 2010. The documents contained sufficient detail to enable the CSIRO to monitor delivery of the divestment.

3.65 The deliverables for the Ginninderra divestment included: specified revenue, staged up-front payments to the CSIRO, conservation of parts of the site, and incorporation of science projects into development. The CSIRO Executive identified the deliverables in reports to the Board between 2015 and 2019.

3.66 Table 3.5 shows the status of 12 identified divestment projects as at December 2019.

Table 3.5: Progress of divestment projects

Source: ANAO analysis of CSIRO information.

Has the CSIRO provided appropriate reporting on progress with implementation to its Board, including costs against budget and benefits being realised?

3.67 In December 2012, the CSIRO Board requested that reports on the implementation of the 2012 Property Strategy contain:

• a ‘simple governance framework to accompany each paper related to the property plan that helps orient the Board for each individual step’; and
• ‘a cost / benefit analysis during the program and at the end to ensure that intended benefits are realised.’

3.68 In the nearly eight years between December 2012 and August 2019, the CSIRO Board received six reports on the implementation of the 2012 Property Strategy, 2015 Property Plan and 2019 Property Strategy, detailed in Table 3.6.

Table 3.6: Reporting to the CSIRO Board: December 2012 to August 2019

Source: ANAO analysis of CSIRO information

3.69 The CSIRO Board was not provided with the governance framework until 2019 and was not provided with the cost-benefit analysis it had requested. The CSIRO Board also did not receive reports on the progress on the target of reducing operating costs over time (see areas for improvement in Chapter 2) and the realisation of benefits.

3.70 The Chief Finance Officer has reported to the CSIRO Board on the costs against budget of capital works projects, as a part of annual assessments of organisational financial performance.

3.71 The CSIRO Board has received reports on: the progress of delivery of some capital investments and divestments; and operational funding issues. For example, there have been:

• seven papers on the ACT consolidation project from 2013 to 2017;
• eight papers on the Ginninderra divestment from 2015 to 2019;
• two papers on the Highett divestment from 2017 to 2019; and
• two papers on AAHL operational funding (including the joint funding arrangement between the CSIRO and Department of Agriculture and a planned approach to the Government in 2019–20 for possible additional funding).

3.72 The reports addressed implementation issues including changes to project scope, approvals for divestment processes, progress of construction work and divestments, and responsibility for operational funding.

4.1 The CSIRO noted its intention to develop a new 10-year property investment strategy in 2017, five years after the 10-year 2012 Property Strategy was developed. In August 2019, the CSIRO established its 2019 Property Strategy. In order to assess whether the CSIRO appropriately developed its new strategy, the ANAO examined:

• whether the 2019 Property Strategy was informed by analysis;
• the review of the implementation of the 2012 Property Strategy; and
• consultation on the new strategy.

Has the development of the CSIRO’s 2019 Property Strategy been informed by analysis and appropriate review of the implementation of the 2012 Property Strategy?

4.2 In developing its 2019 Property Strategy, the CSIRO commissioned a consultant ‘… to assist in finalising [the] strategic property plan’. The CSIRO indicated in advice to the ANAO that the consultant reviewed the draft 2019 Property Strategy and recommended the inclusion of a decision-making framework which would provide direction on using decision making criteria to assess whether the CSIRO should hold, divest or invest in property.

4.3 The CSIRO undertook a program of work to establish additional oversight, frameworks and guidance supporting the 2019 Property Strategy, including documenting its capital investment governance processes and establishing its Capital Management Committee (see paragraph 3.14).

4.4 In May 2019, the CSIRO Executive presented the 2019 Property Strategy at the Board meeting. The CSIRO Board was informed that a ‘significant challenge in making decisions’ in CSIRO with respect to capital allocation is a ‘lack of adequately captured and collated information on our portfolio’s performance from a property and science perspective’. The gaps identified by the CSIRO Business and Information Services (CBIS) business unit included ‘an overall physical condition assessment’ to ascertain if facilities and buildings are fit-for-purpose, and master planning at some key sites.

4.5 The CSIRO Board asked the CSIRO Executive to ‘provide a more succinct articulation of the property strategy that will provide strategic clarity, priority/focus areas for the next 10 years (including financial/budget implications and funding arrangements) and principles for decision making and development of annual implementation plans (including financial implications, analyses, key cost areas, conditions of facilities and projections)’.

4.6 The CSIRO Board also approved an asset review ‘… led by its Finance business unit’, guided by terms of reference to be conducted in 2019–20 with the proposed scope to include a review of assets, to ‘… better inform the Executive on the future capital requirements/pressures’.⁴³

4.7 In August 2019, the CSIRO provided the Board with a revised 2019 Property Strategy, to reflect the Board comments at the May 2019 Board meeting. The CSIRO Board: approved the 2019 Property Strategy, including strategic property priorities⁴⁴; agreed to six monthly reporting on implementation; and requested CBIS ‘… come back with [a] capital plan that will provide options for moving forward’. The CSIRO advised the ANAO on 20 May 2020 that the Board received a report on 30 April 2020, eight months after the implementation of the 2019 Property Strategy, but minutes from that meeting had not been circulated.

4.8 In seeking the CSIRO Board’s endorsement of the 2019 Property Strategy, the CSIRO noted learnings on its divestment of its Highett site with respect to planning, consultation and remediation. The Board was advised that ‘having longer lead times, sound decision making frameworks and better planning has assisted in minimising these issues to some degree’ for the divestment, that had been identified in 2012 Property Strategy. The CSIRO has advised the ANAO that the detailed planning for the divestment of its Marsfield (2021–22 divestment) and Aspendale (2024–25 divestment) sites will commence in the 2020-21 financial year.

4.9 The 2019 Property Strategy has not been informed by lessons learned from analysis or modelling of the 2012 Property Strategy (such as the geographical information systems modelling noted in reporting to the CSIRO Board on the 2010 National Footprint Project that aligned CSIRO’s existing footprint with science business unit need) and a review of the implementation of the 2012 Property Strategy or 2015 Property Plan.

4.10 Two areas that are absent from the 2019 Property Strategy are the focus and targets on reducing footprint and operating costs. Table 4.1 shows the priorities identified in 2019 compared to principles in 2012 and business needs in 2015.

4.11 The 2019 Property Strategy noted that CBIS would investigate on an ongoing basis further performance measures and reports. Table 4.2 shows the CSIRO performance metrics outlined in the strategy.

Table 4.2: CSIRO 2019 Property Investment Strategy performance metrics

Source: CSIRO analysis of information.

4.12 The 2019 Property Strategy did not include any associated quantifiable targets to measure the CSIRO’s performance, including against its priorities. The CSIRO advised the ANAO on 20 May 2020 that quantifiable targets were presented to the Board on 30 April 2020.

Has the CSIRO consulted appropriately, including across its business units (science and corporate), when developing its 2019 Property Strategy?

4.15 On 4 February 2019, the CBIS began its consultation process, providing its draft 2019 Property Strategy to representatives from other business units (Research Operation Managers (ROMs)) before being finalised. ROMs met on 11 February 2019 to discuss the draft 2019 Property Strategy and provided their feedback (see Box 3). The final draft of the strategy was provided (for information) to the ROM’s on 9 April 2019 before being considered by the CSIRO Executive the same week.

Source: ANAO analysis of CSIRO information.

4.16 CBIS State Managers also provided feedback on the draft 2019 Property Strategy, with concerns being raised around the aim/vision not being sufficiently future focussed with respect to capital planning and operating costs and reflective in terms of considering the impact of past consolidation of property.

4.17 The CBIS informed the CSIRO Executive that it:

worked closely with Site Leaders, ROMs, relevant Business Unit Leaders and CBIS managers to identify infrastructure priorities now and into the future. As a key stakeholder, CSIRO Finance have been heavily engaged in this development of this Strategy.

4.18 Planned wider consultation including with the CSIRO’s Ministerial Parliamentary Liaison Office (noted by the CSIRO Executive to its Board in April 2017) to ‘… clearly understand and determine the political and policy implications of any planned consolidations or divestments’, did not occur.

4.19 Detailed planning and cost analysis was not included in the 2019 Property Strategy and its related implementation plan, despite the CBIS receiving feedback from ROMS identifying it as an issue.

4.20 The CSIRO developed a communications plan to support its 2019 Property Strategy, providing some detail on how the CSIRO intended to communicate with its affiliates, business areas and staff.

Appendix 1 Entity response

CSIRO overall response to the ANAO Report

As Australia’s national science agency, CSIRO recognises the importance of strong strategic oversight and operating effectiveness for our research facilities, sites and infrastructure to the delivery of benefits for the nation, our people, the economy and the environment.

CSIRO manages a significant proportion of Australia’s state-of-the-art science infrastructure and biological collections as well as a complex portfolio that includes 57 domestic sites, three international facilities and more than 950 buildings. These sites and facilities underpin and enable the efforts of our scientists who are solving Australia’s greatest challenges through innovative science and technology.

CSIRO’s Property Strategy has evolved significantly in the past decade to enable it to: provide high quality facilities; develop dynamic work environments and collaboration hubs; to meet legislative and compliance obligations; and to contain repairs and maintenance costs across ageing infrastructure in many locations.

CSIRO’s 2012 Property Strategy evolved in response to changes in science priorities and infrastructure needs. In 2015, machinery of government changes resulted in CSIRO taking on an additional five sites. In addition, properties identified for divestment in the 2012 Property Strategy required extensive remediation works that significantly delayed their sale. While CSIRO consolidation and divestment activities have reduced our building footprint by more than 10 per cent over the past 8 years, factors such as those above have delayed the footprint reduction targeted in the 2012 Strategy.

While this audit is focussed on CSIRO’s 2012 Property Strategy, our most recent Strategy was issued in August 2019. It highlights that CSIRO is one of the largest government property holders with a portfolio valued at over $1.6 billion. The operating cost across the portfolio (owned and leased) is approximately $120 million per annum. Within this complex system, we are aiming to encourage an innovative working environment for our people, customers and stakeholders, including:

• facilitating collaboration and network development;
• ongoing support for and establish of innovation hubs for SME engagement;
• a vibrant, safe and secure working culture;
• flexible property and facilities that can adapt to meet the evolving and future science needs; and
• environmentally sustainable facilities that continue to lower our emissions and improve our environmental outcomes.

The 2019-29 Property Strategy provides a planning framework articulating investment and divestment principles for decision making to ensure that the property portfolio provides fit-for-purpose infrastructure to support world-class science that is efficient, affordable and sustainable. It is also structured to accommodate future changes which will impact the operating environment of the portfolio such as the implementation of the Decadal Science plan, emerging priorities and other customer focussed initiatives.

CSIRO acknowledges the adverse findings included in the report and the need to ensure we address the shortcomings identified. In particular, we will review recent divestment projects with a view to improve our understanding of the challenges and improve our processes going forward. Also, with the benefit of the learnings from this audit, CSIRO will strengthen its governance, risk management, performance measurement and reporting arrangements as it works to successfully implement the 2019-29 Property Strategy.

Appendix 2 Capital investment works completed/in progress — 2012 Property Strategy, 2015 Property Plan and 2019 Property Strategy

Appendix 3 CSIRO organisational structure, February 2020

 

 

Note a: Not depicted are the Science Industry and Endowment Fund and subsidiaries of CSIRO.

Note b: The Data61 leader is a member of the executive team in an ex-officio role.

Source: Analysis of CSIRO information.

Appendix 4 Timeline of Ginninderra site sale, 2015–19

 

 

Source: ANAO analysis of CSIRO documents.

Appendix 5 Decision-making framework for strategic capital investments

 

 

Source: CSIRO 2019–29 Property Strategy.

Description of decision-making framework

Source: CSIRO 2019–29 Property Strategy.