Background

This audit examined Artbank, an Australian Government arts support programme within the Department of Communications, Information Technology and the Arts (DCITA). In the DCITA 2004–2005 Annual Report, Artbank is described as an art rental scheme aimed at ‘encouraging and supporting contemporary Australian artists by acquiring their work and stimulating a wider appreciation of Australian art by making it available for display in public places'.¹ After twenty-five years in operation, Artbank maintains the original intent and purpose of Artbank as established in 1980.

Artbank is the largest Australian contemporary art rental scheme. In the year to 30 June 2005, Artbank had gross revenue of some $2.3 million and spent approximately $635 000 on acquisitions. The collection of over 9 300 works is valued at approximately $24 million and represents the work of over 3 000 artists and crafts people.

Audit objectives

The objectives of the audit were to provide assurance that Artbank was effectively meeting its charter of: acquiring art by contemporary artists; expanding the number of public places that Artbank's collection is rented and displayed; and managing its collection and rental scheme. The audit also examined Artbank's governance arrangements, and its programmes for marketing, client development, performance management, budgeting, debt management and also sought client feedback on Artbank's operations via a survey.

Key findings

Organisational Structure and the Status of Artbank (Chapter 2)

The Australian Government has implemented a legislative framework that assists in defining the responsibilities of chief executives and their staff, namely the Financial Management and Accountability Act 1997 (FMA Act) and the Public Service Act 1999 (PS Act). The ANAO examined Artbank's governance arrangements and their alignment with the current legislative accountability frameworks.

Artbank was established by a Charter of Operations (the Charter) that was signed by the Minister responsible at that time. The current Charter was last reviewed and approved by the then Minister in 1991. The Charter sets out Artbank's role, and establishes a Board and its functions. Presently, the Board's role is defined in the Charter as being advisory in nature.

The ANAO concluded that although the principle functions of the Board were advisory, some provisions specified in the Charter may suggest a broader governance role in relation to Artbank's policies and administration. In other words, these provisions in the Charter could imply a wider authority for the Board than is provided for in the current legislative framework. Moreover, the Charter may create uncertainty in relation to clear lines of accountability because it is not aligned with the current legislative framework.

Ideally, the Charter should have been redrafted when the new legislative framework was enacted to ensure that its contents were in accordance with the legislative framework, including DCITA's Chief Executive Instructions.

The ANAO recommended that the Charter be redrafted so that it aligned more closely with the broader legislative and governance frameworks currently in place.

Acquisition of Artworks (Chapter 3)

Artbank, as a programme of DCITA, is subject to the Commonwealth Procurement Guidelines (CPGs).² The CPGs establish the core procurement policy framework. Artbank's Charter outlines its acquisition policy and in addition Artbank has developed a set of art acquisition criteria.

Acquisition policies generally define the particular emphasis of a collection, distinct from other collections. The ANAO concluded that Artbank was meeting its acquisitions policy as stated in its Charter.

Artbank's art acquisition criteria underpin the acquisition policy. It is these criteria that are applied when making decisions to purchase artworks. The ANAO considered that these criteria were rather broad. However, the ANAO was informed by Artbank that undocumented criteria were also applied when making acquisitions. The ANAO recommended that Artbank's acquisition criteria could be improved by articulating the full set of criteria currently applied.

The ANAO also recommended that Artbank improve its documentation surrounding acquisitions and submissions, including how the artwork meets the acquisition criteria.

The ANAO observed that Artbank purchases the majority of artworks directly from galleries. As an institutional buyer Artbank could attract discounts from galleries. However, Artbank rarely accepted or pursued discounts on the purchase price. If discounts were accepted, there would be more money to spend on other acquisitions and hence greater value for money.

While acknowledging the administrative efficiencies of purchasing primarily from galleries, not all contemporary artists are represented by galleries at any stage of their career. Artbank could consider pursuing more direct approaches to artists either through a set period for submissions, an annual round similar to the Artbank Canada approach and/or a competition. Each of these approaches would enable Artbank to test the market for artworks, while simultaneously raising its profile to artists and potential clients. The ANAO recommended that Artbank, as an art supports programme, could pursue alternative acquisition strategies to engage directly with artists for part of its acquisition budget.

Collection Management (Chapter 4)

Collection management is a key mechanism for the care and control of the collection. The unique function of renting art places additional pressures on Artbank's collection management compared to conventional collecting institutions. In September 2005, Artbank had 6 080 artworks, representing 65 per cent of the total collection, rented out to clients. The constant flow of stock transfers, new acquisitions and de-accessioned items continually challenges Artbank's collection management procedures and practices.

The ANAO observed that Artbank's performance in the area of collection management was strong. This view was based on audit observations during the audit of National collections undertaken for the audit of Safe and Accessible National Collections (Audit Report No.59 2004–2005). In particular, the care and maintenance of the collection were well performed, documented and appropriate to a rental collection.

As part of its review of Artbank's collection management procedures, the ANAO observed that Artbank examined the collection for artworks that were no longer suitable for the collection. For example, artworks were chosen for deaccessioning when the artwork had not rented for a period of years. In addition, artworks that were damaged, lost or stolen and were no longer available for rent were written off. With respect to non-significant works in the collection, Artbank demonstrated an active approach to maintaining the integrity of the collection through its deaccessioning programme.

In an historical case study, the ANAO demonstrated how a potentially significant artwork left public ownership in 1992. The case study highlighted that there is still a need for guidance on how significant artworks should be disposed of and, indeed, clearer stipulation on when an artwork becomes significant and is no longer suitable for the rental collection. The ANAO recommended that DCITA develop a consistent framework to classify significant artworks (cultural assets) and govern their deaccessioning.

Client Satisfaction and Management of the Art Rental Scheme (Chapter 5)

The ANAO engaged Orima Research, specialist survey and analysis consultants, to construct and monitor an online survey of Artbank's clients to gauge the overall satisfaction levels with Artbank's services. Artbank had never undertaken a formal survey of its clients to measure client satisfaction, although it did collect anecdotal comments from clients, particularly when they ceased renting artworks. A total of 368 clients were contacted by email and 137 responded, which equates to a 37 per cent response rate. The respondents rated Artbank's services highly, with 97 per cent of the respondents indicating that Artbank's overall service was either good or very good. The survey results were a strong indication that the scheme is well run from a client perspective. The ANAO recommended that Artbank use survey work every 2-3 years to ensure that it continued to meet client needs.

The ANAO also reviewed elements of the management of the rental scheme such as, rental agreements, budgeting arrangements, financial monitoring processes, marketing approaches and debt management procedures. The rental agreements clearly outlined the parties' obligations and responsibilities, including the handling of artworks, insurance, transportation, and collection of rental receipts. Currently, the rental price for artworks is based on a sliding scale, using a percentage of their current value. These rates are, however, capped at $5 000 per annum for a single item and reflect what the market will bear based on Artbank's observation of rental trends.

The ANAO considered that Artbank employed sound procedures and processes surrounding art rental invoicing, payments for art purchases and bad debts recovery. In addition, the ANAO observed that Artbank had a targeted marketing approach to maintain and grow its rental clients.

Artbank has captured digital images of its entire collection (over 9 300 works). The Artbank website also contains digital images of the work of 53 artists for promotional purposes. These images and the accompanying information on the 53 artists, however, are not useful for potential and current clients to view Artbank's collection and to access the potential rental availability of individual works.

Artbank advised that it has a non-exclusive license to use digital images, with no fee payable, for 73 per cent (6 794 artworks) of the collection. These images could form a basis for a searchable database for potential and current clients to peruse on the Internet. A searchable database on the Internet would also be consistent with Government policy for broader access to its collections. In keeping with the principles outlined in the ANAO Better Practice Guide—Internet Delivery Decisions, April 2001, an appropriate business case should be prepared to assess the merits of establishing such a database. Against this background, the ANAO has recommended that Artbank consider enhancing its Internet presence by implementing a searchable database of its collection, artwork availability and other information to assist clients, particularly those unable to physically visit the showrooms.

Audit conclusion

The ANAO concluded that Artbank, as an arts support programme, was meeting its Charter by acquiring art by contemporary artists and placing them for rental and display in public places. Artbank demonstrated particular strengths in managing the collection and rental scheme. The client survey revealed a high level of satisfaction with Artbank's services and provided some valuable feedback on the running of the scheme.

The ANAO identified a number of opportunities for improvement in Artbank's governance arrangements and operational matters. The ANAO found that the current accountability arrangements need to be brought into line with legislative requirements and DCITA's CEIs. The ANAO recommended some suggestions for improvements to Artbank's acquisition criteria, their approach to acquiring artworks and the documentation surrounding acquisitions. The ANAO also recommended that Artbank considers implementing a searchable collection database on the Internet, the regular use of survey work to monitor client satisfaction, and that DCITA develop a framework to classify cultural assets and govern their deaccessioning.

Response to the audit

DCITA response to the audit is provided below:

Recommendations 1–7

The Department agrees with the recommendations.

The Department has commenced redevelopment of the Artbank Charter in line with Recommendation 1. A number of acquisition-related policies are also under development and, following completion of the Charter, will be finalised and submitted for Ministerial approval. The options for alternative acquisition strategies put forward by ANAO will be considered as part of this policy development process. The Department is in the process of implementing Recommendation 3 b) to report purchases over $10,000 in AusTender.

Footnotes

1 Department of Communications, Information, Technology and the Arts, Annual Report 2004–2005, Canberra, 2005, p. 55.

2 Department of Finance and Administration, Commonwealth Procurement Guidelines, Financial Management Guidance No.1, Canberra, 2005.