25 Aug, 2008
Tourism Australia Performance Audit Boosts Cause of Transparency in Tourism
The cause of transparency and good governance in travel & tourism organisations worldwide has taken a huge step forward with the publication of an Australian government audit of about A$184 million worth of marketing service contracts by Tourism Australia, as well as conflict of interest issues amongst its board of directors.
Although the audit notes that TA, the country’s national tourism body, has generally complied with financial regulations and that the delivery of services by its providers has been satisfactory, it faults a number of areas related to key performance indicators and evaluation of results. TA has acknowledged the findings and promised to rectify the deficiencies.
The audit [www.anao.gov.au/uploads/documents/2008-09_Audit_Report_02.pdf], should be must-reading amongst Asia-Pacific tourism organisations, many of which are suffering the consequences of operating in an environment with lax checks and balances and processes of accountability.
The Tourism Authority of Thailand has already been embarrassed by revelations of an investigation into former governor Mrs Juthamas Siriwan’s alleged links with funding of a film festival.
The Bangkok-based Pacific Asia Travel Association (PATA) is also facing pressure to show more transparency and accountability after media investigations have uncovered numerous instances of poor governance.
The Australian audit was designed “to assess the effectiveness of Tourism Australia’s governance arrangements, the management of marketing contracts, and how the agency measures its performance.”
It “reviewed Tourism Australia’s procurement processes for selecting service providers; management of service provider contracts; and governance framework, including planning, performance management and reporting.”
The audit noted that Tourism Australia’s three major contracts consumed approximately 35% of its annual budgets of $167.8 million in 2005–06 and $158.6 million in 2006–07. It also found that there have been four internal audits and four external reviews of different aspects of the contracts since they were executed in 2005.
The audit acknowledged that TA is operating in a commercial and competitive global environment and that its marketing and media contracts are fundamental to the success of its strategies and initiatives.
However, it says, although the media placement and creative development contracts accurately reflected the services to be provided, they “did not include performance information that would enable Tourism Australia to evaluate the effectiveness of the services provided even though, as part of a review of the draft contracts, this was recommended.”
It said that previous reviews had covered quality of service delivery and whether the services provided were appropriately billed and had not already been paid under the retainer fees but “did not include an assessment of whether the objectives of the contract had been achieved or the various projects undertaken within the contracts were effective.”
Concluded the audit, “Tourism Australia does not systematically evaluate the effectiveness of its projects and, currently, is unable to demonstrate what impact these projects have had on their target markets.
“The lack of evaluation also means that Tourism Australia is not identifying the factors impacting on the success, or otherwise, of the projects or lessons learned that could be incorporated into future projects. The effectiveness of each project is central to how Tourism Australia assesses its overall performance in meeting its outcome and statutory objectives.”
The audit noted that since July 2007, Tourism Australia has improved its financial management processes and now requires expenditure for all major contracts to be authorised by the appropriate delegate when each marketing region draws against their allocated budget.
“As part of this change, the financial thresholds for authorisation have been aligned to the thresholds for exercising delegations. This process was implemented to allow more transparent tracking of project expenditure and is supported by the Australian National Audit Office.”
The most damning conclusions related to procedures related to potential conflicts of interest, especially among the board members.
Says the audit, “The Board, and more particularly, the Chair, has responsibility for strategic direction, good corporate governance, effective risk management, legal compliance, appropriate structure, management of the interests of stakeholders and the wider public interest.”
As the board is composed mainly of people with expertise in tourism or hospitality, the audit said, “in discussions with industry, and through survey responses from STOs (state tourism organisations), a number of stakeholders expressed the view to the Australian National Audit Office, that the perceived conflicts of interest of Board members are a major risk to Tourism Australia’s reputation.”
It said there is also a “perception (among) stakeholders that a relationship exists between business interests, shareholdings, and Board approvals and decisions.”
The audit added, “It is therefore important, particularly in the competitive tourism industry, that the decisions of the Board are transparent and that any perceived or actual conflicts are being (and are seen to be) appropriately addressed.
“The Board did not adhere to the procedures outlined in its Charter for managing potential conflicts of interest and revised the Charter to reflect its practices rather than procedures being changed to meet the Charter’s requirements.”
The audit was sent to Tourism Australia for a comment before publication. It shows that TA agreed with all the conclusions and has subsequently taken steps to tighten its financial controls, governance procedures and measures to ensure better performance indicators in marketing and advertising contracts.
The audit cost the Australian taxpayer A$369,370.
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