This chapter examines information received in submissions to the inquiry and during the public hearing. In general, submitters and witnesses supported the bill, with one submitter raising concerns about the disposal of Indigenous objects in NCIs' collections.
General support for the bill
The NCIs impacted by the bill unanimously supported its provisions, advising the committee that the various amendments would be beneficial in terms of increased investment flexibility and alignment among institutions and Acts, as well as enhanced operational efficiencies.
The committee also heard that the proposals were discussed over a considerable period of time, with suggestions put forward by the NCIs addressed in the bill drafted by the Department of Infrastructure, Transport, Regional Development and Communications (Department).
Ms Karen Quinlan, Director of the National Portrait Gallery of Australia (NPGA), said, for example, that the NPGA had been concerned about a lack of investment options for a number of years:
We have a foundation with a reasonable amount of money, and the investments currently are in bank deposits, so there has been a conversation that has taken place over a period of time in order to look at the possibility of investment in a better way. Let's face it, the interest rates are not great in term deposits, so it is really important right now that this change is made for us for the future.
Dr Mathew Trinca from the National Museum of Australia (NMA) said that this had also been a concern for the NMA for the past five years and added that it is not just the institutions which are calling for greater latitude around the rules governing the investment of donated money:
This is something that has been provoked by the donors themselves being concerned that we had constraints in the way that we could usefully invest their moneys to deliver a return for our institutions.
Dr Marie-Louise Ayres, Director-General of the National Library of Australia (NLA), indicated that the NLA is in a similar position and advised 'some of our donors have been absolutely horrified when they have realised how little we can earn on their money'.
Mr Kevin Sumption, Director of the Australian National Maritime Museum (ANMM), indicated that the ANMM welcomes the proposed administrative amendments which have been raised with the Department for some years:
We have been in discussion with the department, particularly about the provisions around operating plans and strategic plans which are, for us, out of alignment with PGPA Act requirements for a number of years, as well as about having more flexible approaches to the way our finances are managed by our foundation. We are really pleased to see that this bill has come forward. It has actually, from our perspective, been something we have been interested in for a number of years and it's wonderful to finally see it all happen.
Dr Ayres made similar comments in respect of the administrative amendments that would affect the NLA, noting that 'some of these issues were things that we had been directly advocating on and others are in the administrative tidy up arena'.
National Gallery of Australia (NGA) Director Mr Nick Mitzevich directly thanked the Department's Office for the Arts for its considerable consultation: 'The staff [has] been very dynamic in their responses to the issues we raised during the consultation process'.
Dr Ayres observed that there were extensive consultations on specific elements of the bill, following which the NLA then had a 'relatively short' period to consult on the bill prior to its introduction into the Parliament. She described this period of consultation as 'adequate', as did Dr Trinca who also noted:
My staff felt that there was more than enough time to respond to the proposals that were made and to then [see] some response to those that was constructive in terms of the final bill.
Types of investments and investment policies
The bill would allow the NCIs to invest 'donated revenue', or dispose of such investments, in accordance with an investment policy.
In his Second Reading Speech, the Minister stated that the proposed investment provisions would allow the NCIs:
…to seek higher returns on funds associated with [philanthropic] donations and encourage greater philanthropic giving for the long-term benefit of those institutions, their collections and the delivery of their programs and services in the national interest.
In drawing a distinction between 'donated revenue' and other revenue, the Minister informed the Parliament:
The government considers that the provisions in the bill provide a sensible balance to enable greater financial freedom to invest those funds received by donation (which present a lower risk), while retaining restrictions on revenues from business operations that have a clear connection to appropriated funds and the ability for institutions to deliver their mandated functions.
The Minister noted that NCIs have successfully attracted philanthropic donations over many years, which has helped them to develop and deliver additional exhibitions and educational programs, enhance their facilities and purchase particular items of cultural heritage and national significance for their collections.
However, he added that there is strong ongoing competition for philanthropy across many sectors and the NCIs' inability to invest beyond low-interest bearing options, as required under the PGPA Act, is deterring philanthropic donations:
The government expects this amendment will contribute to the financial sustainability of the national collecting institutions by enabling them to optimise the returns on the investment of privately donated revenue and to encourage greater philanthropic support into the future.
In addition to the proposed investment provisions, the bill would enable the NCIs to formulate an investment policy, covering: investment strategy; benchmarks and standards for assessing the performance of investments; and risk management for investments. Any investment policy would need to be published on an NCI's website for transparency purposes.
Dr Ayres informed the committee that the investment provisions will make it easier for the NCIs to attract philanthropic gifts. She shared the Minister's view of philanthropy being a 'competitive arena' and explained that the NCIs are at a distinct disadvantage compared to state-based collecting institutions:
As mostly Canberra based institutions, we do face an added layer of difficulty… We are in direct competition with state counterparts who have much more expansive investment opportunities. That's the point at which it can get quite tricky, when a donor might be thinking about giving money to a state institution that can earn a good return and, therefore, the gift lasts—or the National Library, where it doesn't.
Mr Sumption echoed these concerns:
As the Australian National Maritime Museum is one of the very few national cultural institutions staged in Sydney, New South Wales, it's very important that philanthropic donations and our ability to earn good interest or returns on those is synchronised with state institutions that are in Sydney, as most of our philanthropic donors look to that pool and they see us in that same pool. But, certainly, under the current acts, our ability to put in place investment strategies that perform as well as, if not better than, our Sydney counterparts is hamstrung.
NGA representative Mr Mitzevich agreed that the proposed investment provisions will encourage philanthropists to make donations:
…many long-term donors see the performance of the funds they are giving as a key part of nurturing confidence. If those funds are being managed effectively, if the returns are in keeping with their own personal experience and their expectations, they have a greater sense of confidence in continuing to add to the pool of funds held in trust. The power of that can't be underestimated. It also encourages donors to consider the institutions in their wills and set up private trusts in the future.
NCI representatives did not consider that the bill will make NCIs less reliant on public funding. Instead, the witnesses emphasised that it creates new opportunities to invest for the future. For example, Dr Trinca said:
…it is a practical fact now that all our institutions need to raise funds additional to those appropriated to the institutions by government. That has been the case over many successive years… Capacity to convince people about short-term gifts…is good. It's this capacity...to build longer term investment funds that then can deliver a return to the organisation and allow us to have some sense about how we derive that income and how it might be reproduced in the future. At the moment, clearly, those funds are earning next to nothing in the way that we're constrained by the existing rules. The capacity that this opens up for us to say to donors, 'We can husband or properly manage these funds over the medium term or the long term in the interests of the institution,' is centrally important if, as is the case now, we have to look to increase our own-source income to manage the work of the national institutions.
Dr Ayres and Ms Quinlan indicated that the NLA and NPGA are already considering the development of investment policies to capitalise on the new opportunities provided by the bill.
Dr Stephen Arnott, the First Assistant Secretary from the Office for the Arts at the Department, confirmed the evidence provided by the NCIs concerning the impetus for and consultation around the drafting of the bill.
Dr Arnott acknowledged philanthropic donors' desire to see donated funds invested with a 'better chance of strong returns, obviously while remaining fiscally responsible'. In this regard, he noted the role of prospective investment policies with respect to philanthropic donations, and the governing bodies' accountability under the PGPA Act for budgetary appropriations.
Ms Ann Campton, the Assistant Secretary of the Collections and Cultural Heritage Branch within the Office of the Arts, likewise stressed the accountability and transparency mechanisms proposed in the bill, including the online publication of investment policies. She observed however that these mechanisms will only be relevant if a NCI chooses to make long-term investments:
…if an institution doesn't wish to diverge from what the PGPA requires then it is not required to do this. It's only if they wish to invest otherwise, basically.
Dr Arnott advised that there has been no modelling on the extent to which the bill might increase philanthropic donations to the NCIs:
It would be quite different for different agencies… Some have significant foundations; others don't tend to invest funds. So it wouldn't be something you would be able to model across the portfolio. Each individual board, I think it's fair to say, has a strategy to increase philanthropic giving to enable them to do more in their institution.
The bill would affect various administrative amendments to address inconsistencies among the NCIs' enabling legislation, which the Minister attributed to differing drafting approaches from 1960 to 2013. He also indicated that inconsistences have arisen following the commencement of other legislation with broader application (such as the PGPA Act).
The Minister noted the benefits of the proposed standardisation:
There are gains to be made through the simplification and standardisation of certain administrative requirements, contributing to improved efficiency and productivity in government operations.
As indicated above (see General support for the bill), NCI representatives agreed that the bill would achieve these types of outcomes for the institutions.
Acquisition and disposal of collection material
In particular, submitters and witnesses supported the proposed provisions concerning the acquisition and disposal of material in NCI collections.
The bill would allow the six NCIs to dispose of material in their collections, without the need to obtain ministerial approval where the material is valued below a specified threshold.
The EM explained that financial thresholds vary across the NCIs with different amounts specified in either the enabling Acts or Regulations:
The National Film and Sound Archive of Australia Regulations 2018 and NLA Act specify an amount of $2 million, the National Portrait Gallery of Australia Regulation 2013 specifies $1 million, the NMA Act specifies $250,000, the ANMM Act specifies $20,000, and all disposals regardless of value require ministerial approval under the NGA Act.
Consequently, the bill seeks to introduce a more consistent threshold for all NCI disposals, which would be prescribed in the associated Regulations for each NCI. As stated in the EM:
It is intended that amendments to the Regulations will be pursued separately and that they would each specify a threshold of $2 million, except for the NGA where a higher $10 million threshold would be introduced to mirror its existing acquisition threshold, at or below which ministerial approval would not be required.
The EM stated that the NCIs dispose of material relatively infrequently but highlighted that the proposed provisions would act as an efficiency measure by reducing administration and better align ministerial approvals between the enabling Acts.
Indigenous cultural artefacts
One submitter—Ms Elizabeth Pearson—commented on the application of the proposed financial thresholds to Indigenous cultural artefacts. She noted that the NCIs are custodians of artefacts of significant value to First Nations Peoples in Australia because of their tangible and intangible cultural heritage. Ms Pearson argued that 'the value of [this heritage] to Traditional Owners simply cannot be accurately measured or conveyed through monetary value thresholds'. In her view:
…statutory provisions relating to the disposal of NCI artefacts [must be] culturally competent and provide appropriate recognition of and consultation with First Nations Peoples in considering disposing of items of Indigenous cultural heritage.
Ms Pearson argued that the bill should contain provisions to require NCIs to consult with First Nations Peoples when an NCI proposes to dispose of an Indigenous object within its collection.
Ms Pearson also suggested that it might be appropriate for the bill to provide for an enhanced role for the Minister for Indigenous Australians: first, to grant permission for the disposal of an Indigenous object within an NIC collection; secondly, to request an NCI to consider deaccession of an object to First Nations Peoples.
In relation to the proposed disposal threshold for the NGA, Mr Mitzevich described $10 million as a 'workable' amount:
Currently, there isn't a threshold for deaccessioning… The National Gallery certainly does not go through deaccessioning lightly. We have a deaccessioning policy and a deaccessioning process that ensure that we follow international best practice, and best practice outlined by the Indigenous road map as well… Our view is that the $10 million threshold is very workable, and it relates to the current market value of art.
Other NCI representatives similarly commented on their existing internal policies and processes for deaccessioning objects within their collections. The NCIs emphasised that these mechanisms are robust and are not entirely based on monetary considerations. Mr Mitzevich, for example, said:
…the National Gallery of Australia has a very clear deaccessioning policy that outlines the processes and the reasons for deaccessioning, artistic merit and cultural significance being two of the most important. The deaccessioning policy and then the deaccessioning procedures clearly outline a range of measures that go beyond financial value. Essentially, when one goes through a deaccessioning process, the financial measures are really immaterial; it's about the greater good of the national collection… There is no need for legislation because the internal deaccessioning policies of the National Gallery of Australia and our colleagues really cover those issues adequately.
Similarly, Mr Sumption stated that the ANMM:
…has a very detailed deaccessioning policy that is also underpinned by independent arm's length assessment outside the museum… Whilst we do take into account the financial value of the material that's being looked at for deaccessioning, it is one of many factors. The cultural significance is by far and away the most important, and a prerequisite for all deaccessioning for us is extensive consultation not just with the parties who may have initially donated that material but also with parties who may be interested in taking that material up or, most importantly, with parties who are culturally attached to that object.
The NMA's Dr Trinca emphasised that the national collections are founded on the criterion of significance: 'Significance can be established out of cultural significance, historical significance, scientific significance, research value; a whole range of factors might be considered in establishing significance'.
In respect of Indigenous cultural objects, Dr Trinca said:
…in 2015 we established Indigenous cultural rights and engagement principles after a long negotiation with Indigenous communities across the country… Any prospect of the deaccessioning of material from the national historical collection must necessarily invoke the provisions of that wider Indigenous cultural rights and engagement policy and the principles that underwrite it.
Dr Ayres advised that the NLA is formulating a coherent deaccessioning policy and both Ms Quinlan and Ms Eyers expressed a high level of confidence in the NPGA and National Film and Sound Archive of Australia's approach to deaccessioning.
The bill would repeal and substitute provisions to allow the six NCIs to acquire material for their collections, without the need to obtain ministerial approval for material whose value does not exceed a specified threshold.
The EM explained that, similar to NCI disposals, the restrictions on financial transactions for NCI acquisitions vary in terms of where the amounts are specified:
Of the six NCI Acts, two do not specify any thresholds in the Act itself, only in Regulations. The remaining four Acts specify amounts in the Acts but also specify higher amounts in the Regulations. The Bill seeks to standardise how thresholds are provided across the Acts and therefore would remove specified thresholds from the four Acts and provide for them to be prescribed in the respective Regulations to align with more recently drafted Acts. It is anticipated that specifying thresholds in the Regulations, rather than the Acts, would facilitate the updating of threshold amounts over time.
The EM also clarified that, with one exception, ministerial approval is currently required for all NCI acquisitions above $2 million across the enabling Acts or associated Regulations:
With the exception of the NGA Act, for which Regulations would be made to provide that the collection material acquisition and disposal thresholds for entering contracts would be $10 million to reflect the nature of the collection, the Regulations would be remade to provide a threshold of $2 million across each of the Acts, at or below which approval by the Minister would not be required.
The EM expressly noted that the proposed financial thresholds would not apply to the acquisition and disposal of investments made in accordance Schedule 1 of the bill:
Given the responsibility of governing bodies to manage investment activities within the parameters of the investment policy required under the Bill, and that only donated revenue can be used, and therefore low risk to the operations of NCIs, a threshold for ministerial approval for transactions related to investments is considered contrary to the intention of the newly introduced investment provisions.
Departmental representatives confirmed that the bill would create thresholds for a range of financial transactions, including disposals and acquisitions. Further, as the thresholds would be set out in Regulations, they would be disallowable under the Legislation Act 2003.
Dr Arnott explained that the value of each collection item, and therefore whether it exceeds a threshold and requires ministerial approval, is determined by a valuation of its fair market value. Ms Campton clarified that this involves more than one quote.
Dr Arnott observed that the Regulations do not currently cover the valuation process and it would not be a matter that the Department would consider needs to be addressed in legislation:
…the institutions take responsibility for the value of the works that they either procure or deaccession. Given that the accountable authority is the board of that institution, obviously they need to assure themselves that they're paying an appropriate price for any works acquired. As [the NCIs] explain with their deaccessioning policies, because they have detailed policies around collection acquisition as well, it's not something that is needed in legislation.
The bill would repeal and substitute provisions to allow the Minister to give written directions to the NCIs' governing bodies. The EM explained:
There is inconsistency across the enabling NCI Acts in relation to the power of the Minister to issue a written ministerial direction to a governing body. The ANMM, NFSA, NMA and NPGA Acts allow this, but the NGA and NLA Acts do not. While this is a rarely used provision, there is merit in there being a consistent power available to issue directions.
NGA and NLA representatives stated that they were neutral or had no concerns about the introduction of a ministerial direction in their enabling Acts. Dr Ayres said, for example:
I recognise that this is aiming to achieve consistency. I understand, of course, that the directions can be of a general nature only and have to be tabled in parliament. My understanding is that there have never been ministerial directions applied in the portfolio, so that provided me and my chair with a level of comfort around this new provision… So we're neutral on this proposal.
Departmental representative Dr Arnott advised that 'it's common practice to have a ministerial directions power in this type of legislation. It's common across the arts portfolio, including for non-national-collecting-institution agencies'. Notwithstanding, he added that, since 2004, 'I'm not aware of an arts minister ever issuing a formal direction to one of the arts agencies'.
Ms Campton noted that any ministerial direction would be subject to transparency measures: first, as a legislative instrument it would be presented to Parliament; secondly, it would be included in a NCI's annual report.
Dr Arnott further noted that a ministerial direction would have to be for a general purpose only: 'a direction about a particular case or a particular issue is not what the ministerial directions power is intended for'.
The committee heard that the proposed legislation was developed collaboratively by the Department and the NCIs which would be affected by the bill, to address a long-standing financial concern and minor administrative matters among enabling Acts and the PGPA Act. Accordingly, there is unanimous support for the bill.
The committee notes that a key objective of the bill is to encourage philanthropic donations to the NCIs. The committee supports enabling donors to contribute to NCIs on a level playing field with their state and territory counterparts. The committee also supports granting NCIs the independence and flexibility to manage and maximise donations now and into the future.
The committee is satisfied that the appropriate accountability and transparency measures are in place and that other forms of NCI revenue—such as moneys appropriated by the Parliament and own-source revenue from retail and commercial activities—will not be affected by the proposal.
With respect to the minor administrative matters, the committee notes that the bill would address inconsistencies to simplify and standardise provisions across the six enabling Acts and the PGPA Act. The committee agrees with the NCI representatives that this will improve efficiencies and further notes that the bill will update, and facilitate the future updating of, financial transactions thresholds for NCIs.
In the committee's view, the bill promotes the long-term sustainability of the NCIs and enhances the preservation of Australia's cultural heritage for the benefit of all Australians.
The committee recommends that the Senate pass the bill.
Senator the Hon David Fawcett