Nothing to show for $3m art gallery plans

THE disastrous and aborted plans to expand Newcastle Art Gallery have cost ratepayers more than $3million without so much as a brick being laid.

A financial audit of the project, released publicly last night for the first time, reveals that senior council staff approved major variations worth almost $700,000 to design contractors without any authority to do so.

It also reveals massive inefficiencies, breaches of state and federal reporting legislation and a calamity of errors which Newcastle council general manager Ken Gouldthorp described as being ‘‘among the worst-managed projects’’ he had ever seen in local government.

Even more startling, it emerged last night that design sketches supposed to have been delivered to the council in 2012,  arrived only  two weeks ago. 

This came despite several senior council staff preparing an application for state funding a year ago saying the project was ‘‘shovel ready’’. In fact, it never was, and still isn’t. The Newcastle Herald has learnt that this was the major reason the state government refused to contribute the $7million needed to get the project under way.

The audit, carried out by independent audit company O’Connor Marsden on behalf of the council, paints an absolute disaster for ratepayers and also for backers of the gallery’s expansion.

Among its key findings, an architect’s contract price of $839,095 blew out to more than $1.5million with the extra bills freely signed off  by two council staff who allegedly failed to inform anyone.

In one case, the council’s former future city director Judy Jaeger signed off on a $418,328 contract variation in one hit. Ms Jaeger was sacked in March over the Brett Whiteley sculpture affair, along with gallery director Ron Ramsey.

Such a cost overrun is not only required to be reported to the elected council and general manager but also the Division of Local Government which needs to be notified if tender cost blow-outs exceed $150,000.

The audit alleges that Mr Ramsey  authorised  payments outside his jurisdiction.

All up, and five architects later, 21 cost variations were approved at a total of $698,202, taking the 2012 contract out to a staggering $1,528,297 for sketches which  arrived at the council only  two weeks ago.

In total, the audit found that the cost of design elements to date is close to $2.6million, plus a ‘‘conservative estimate’’ of $500,000 for council staff time.

The audit also questioned how the art gallery project became the council’s top priority when a community survey undertaken in 2011 ranked it ninth out of nine major projects the community wanted.

The Newcastle Herald also understands that the art gallery was the only major project among the key performance indicators put into the contract of the council’s former general manager Phil Pearce.

Mr Gouldthorp was asked about what he knew of the $418,328 cost variation signed off on by Ms Jaeger ‘‘on his watch’’.

‘‘The reality is it was never reported to me,’’ he said. ‘‘Quite frankly, until the audit, I didn’t know. This project was significantly mismanaged. In fact, it was among the worst-managed projects I have ever seen in local government.’’

Lord mayor Jeff McCloy was equally scathing.

‘‘The drawings were complete for a $30million gallery but the council only had $21million, and in the end we only got two sketch plans,’’ he said. 

‘‘How do you go to a state government and ask for $7million? It’s absurd.’’

Greens councillor Michael Osborne said that while he believed ‘‘Newcastle deserves an art gallery extension’’, the council’s handling of the matter was ‘‘outrageous’’ and ‘‘extraordinary’’.

‘‘Changing a sub-contractor’s role from minor to major is outrageous,’’ he said. ‘‘It’s even more outrageous that as an elected council we didn’t know about it.’’

The council voted unanimously to note the audit report last night, effectively conceding that the damage had been done and no costs could be recovered.

It left Cr McCloy to lament: ‘‘It’s so disappointing that the two people who wanted that art gallery extension more than anyone – Ron Ramsey and Judy Jaeger – were so instrumental in its demise.’’

The Herald was last night unable to contact either Ms Jaeger or Mr Ramsey, who is understood to be in New York.

Mr Ramsey has made no direct comment about his sacking, but in an interview with the Herald last month said ‘‘we worked with award-winning architects to develop a perfectly feasible plan for the gallery development’’.

Directly after her sacking, Ms Jaeger insisted she had ‘‘always acted with integrity and transparency’’. ‘‘I vehemently refute any suggestion that I have acted in breach of any fiduciary or other duties in my role as director,’’ she said.

PLANS: One of the concept drawings for the gallery extensions.

PLANS: One of the concept drawings for the gallery extensions.

Audit into Newcastle City Council’s handling of the art gallery extension project by O’Connor Marsden auditors, commissioned by Newcastle City Council

Former art gallery director Ron Ramsey and the council’s future city director Judy Jaeger signed off on 21 cost variations in design work totalling almost $700,000, allegedly without the jurisdiction to do so.

In one instance, Ms Jaeger approved payment for a $418,000 cost blowout, allegedly without referring it to the council’s general manager or elected council.

The total cost of design elements alone is close to $2.6m, plus an estimated $500,000 in council staff time, without a brick being laid.

Between 2005 and 2012, the project had five different architects and six project managers.

The original architect’s contract approved by the elected council was $839,095 to design a $14m art gallery extension. Ms Jaeger and Mr Ramsey let the initial design contract for $889,495, $50,400 more than was approved. A sub-contracted architect, budgeted for $12,000 in design fees, earned an additional $46,200, while an unbudgeted third consultant earned $13,200.

Design time was set at four to five months from May 2012. Council received the sketches only two weeks ago.

The council applied to the state government for $7m in funding in September 2012 saying the project was ‘‘shovel ready’’. It wasn’t, and still isn’t.

The contract for the $7m in federal funding stipulated that construction needed to start within six months of the funding agreement, essentially before the new council was elected. It still hasn’t been started, resulting in the loss of federal funding.

A community survey undertaken in 2011 saw ratepayers put the art gallery expansion last on a list of nine major project priorities. But the project somehow found its way to the top of the list.

Quarterly reporting on the project was ‘‘vastly inadequate’’, ‘‘probity plan was not developed’’, the ‘‘level of reporting should have been more detailed’’ and ‘‘there was no reporting to council on cost variations’’. The auditor described these as an ‘‘unacceptable risk’’, not transparent and lacking in accountability.


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