November 25, 2018
by Don Gilling
At the height of the Watergate scandal, when the story had seemed to stall, Deep Throat told Bob Woodward that to understand what was going on he needed to “Follow the Money.” In similar vein, if we are to understand the experience of Archives New Zealand and the National and Turnbull Libraries under the control of the Department of Internal Affairs, it helps to follow the money.
In 2010 Cabinet approved a proposal to incorporate Archives New Zealand and the National Library (which includes the Turnbull Library) into the Department of Internal Affairs. It was justified on essentially financial grounds. It was claimed that the incorporation would enable the futureproofing of both entities by placing them on a much larger corporate platform, which would lead to lower corporate overheads. More importantly, the Cabinet Paper that advocated the incorporation promised that the statutory functions of both agencies together with appropriate financial safeguards as to their independence would be maintained even while cost savings and economies of scale would be achieved.
Amongst those safeguards was the promise, in June 2010, by the Minister responsible for the three agencies, that separate Budget Votes and Ministerial roles would continue.
Within a year of the incorporation these financial transparency safeguards were dispensed with. The consequence is that information on the expenditure of Archives and the National and Turnbull libraries is no longer separately disclosed in the Internal Affairs Annual Report, but is lumped together with other areas of spending and buried within different categories of output.
The Watergate Special Prosecutor had to go to Court to obtain the tapes that would reveal Nixon’s guilt; I had to use the Official information Act to obtain the evidence necessary to evaluate the incorporation of the Archives and Library into Internal Affairs. What I found was this:
- Before the incorporation into Internal Affairs, the National Library’s total Annual Operating Expenditure was $72 million. But by 2018 it had dropped to $62.7 million. Over the period 2013 —2018, it has DECLINED 9.0%, in sharp contrast to the 12.4% INCREASE in Vote Internal Affairs since 2013. Meanwhile, consumer prices — an indication of the underlying cost rises from inflation — ROSE 12.9%.
- Over the same period, Centrally Managed Costs, which are imposed on the Library by Internal Affairs, and which include property costs, ICT costs, and Corporate Support, INCREASED by 25.7%, with the yearly remuneration of the CEO of Internal Affairs INCREASING by 49%.
The claim, therefore, that incorporation would lead to lower overheads has certainly not been borne out. The importance of central costs is shown by the fact that in 2018 these costs accounted for 42.3% of the total Annual Operating Expenditure of the National Library.
- In contrast, the operating expense of the National Library (i.e the funds under the control of the National Librarian, which do not include Internal Affairs’ centrally imposed costs) amounted to $30.1 million in 2018. Over the period 2013 — 2018 this DECLINED by 24.8%.
- In 2018, the Capital Charge levied on the National Library, together with Depreciation and the allocation of central costs, accounted for 51.9% of the Library’s total expenditure.
The Capital Charge is a central cost levied by The Treasury on all government agencies for the use of assets. It is designed to encourage efficiency in the use of assets and/or the divestment of assets not essential to the operations of the agencies. This makes no sense, of course, in the case of Libraries and Archives, whose purpose is to collect, protect, preserve and build up their asset base. Illogically, it is applied to the National Library and the Archives.
- The Turnbull’s Annual Operating Expenditure, excluding the allocation of central costs which are borne by the National Library as a whole, amounted to $6.5 million in 2018. Over the period 2013 — 2018 this expenditure has DECLINED by 9.7%.
- The smaller sum of monies under the direct control of the Turnbull Librarian, have DECLINED by 3.6% over the period 2013 — 2018.
- In 2013, spending on the Turnbull made up 10.2% of the Government’s Budget Vote for the National Library. But by 2018, the Turnbull’s share of the National Library cake had dropped to 9.8%.
- Archives New Zealand have also suffered from declining budgets. Between 2013 and 2018, the Operating Expenditure component of the Archives budget DECLINED 18.7%, while the monies under the direct control of the Chief Archivist DECLINED by nearly 30%. Further stress on the Archives budget has come from the INCREASE in Corporate overheads of 279% over the period 2013 — 2019.
In the case of the Libraries the significance of Centrally Managed Costs, and particularly the inclusion therein of Corporate Support (whatever that may mean), lends considerable weight and support to the following points made in the Friends of the Turnbull Library’s submission to the Ministerial Review Group looking at whether to remove both Libraries and Archives from under the Internal Affairs umbrella:
(14) Recent pronouncements by both Minister and Senior DIA managers have suggested that a continuation of the present legal and structural arrangements is necessary because the DIA “needs the money.” This is disturbing since it implies that monies have been, and may in the future, be transferred, by various creative accounting means such as overhead re-allocations, away from the Libraries to other DIA functions and activities in possible breach of the Public Finance Act.
Alternatively, the argument may be simply that the DIA needs a bigger budget and more business units in order to spread the corporate overhead more widely. But this raises the real possibility that Libraries are, in effect, paying for the overhead generated by say Passports or Dog Control. The absence of a clear and specific appropriation for Libraries, therefore, means that there is insufficient transparency, as well as no public assurance, or safeguards, as to the financial independence and finances of the National and Turnbull Libraries.
On a broader canvas, the following comment made by the Turnbull Librarian, in his submission to the Ministerial Review Group, is particularly pertinent:
Operational resourcing — ongoing operational funding cuts over the last several years have left the National Library, and the Turnbull within it, severely weakened and demoralised. These are now manifesting in staff cuts and service closures. This is an area of immediate concern, and rates as the most urgent challenge.
These comments are also echoed in the National Librarian’s submission when he says
“After seven years of financial pressure and staff reductions, stakeholders and staff of the Library now strongly believe that, despite the Library’s best efforts, we are failing to perform properly in each of our three statutory roles.”
Following the money, therefore, shows that the central promises of 2010 have not been kept. Declining expenditure is evidence of deliberate under-funding, not the achievement of cost efficiencies. The Libraries and the Archives have not been “futureproofed”, statutory functions are increasingly at significant risk, and important safeguards have faded away.
Resourcing them properly, and turning the National and Turnbull Libraries into an Autonomous Crown Entity, under the control of an independent Board of Trustees, would go a long way to restoring necessary safeguards and public trust. The new legal status would also allow the public, in effect, to shape, build and ultimately control our documentary heritage and taonga, for the benefit of current and future generations of New Zealanders.
And making the Chief Archivist an Officer of Parliament would give them sufficient authority to fully control and shape proper archival processes and support their constitutional role as the keeper of the public record.
This article was first published in the Briefing Papers and is reprinted with permission.
Dr Donald Gilling has taught at Universities in Australia, England and New Zealand, and for nine years was Professor of Accounting and Finance at the University of Waikato. He holds Fellowships in both Professional Accounting Bodies in Australasia and is the author of over 90 papers in academic and professional journals, covering topics in public finance, accounting and auditing, and the economics of education. He has acted as an expert witness in a number of applications for Judicial Review of the operations and decision making of government and public bodies. He has been a member of the committee of the Friends of the Turnbull Library for nearly 20 years.