Appendix B
Notes by Professor Jack Lohman, Director of the
Museum of London, to the Department for Culture, Media and Sport
on the revision of cost savings achievable through the merger
of the Museum of London and the Museum in Docklands
As the two organisations have been closely linked
since March 2003, and MiD is using MoL's accounting systems and
procedures, we have had a good opportunity to test the validity
of the assumptions made when the original schedule of savings
was produced. Some of the savings are being realised,
others with hindsight we feel to have been over-optimistic and
if implemented would have put the development of MiD at risk. One
or two seem to have been based on mistaken assumptions.
A general caveat should be made regarding the initial
savings forecast, in that perhaps it was unrealistic for an organisation
(MiD) with an annual budget of £1.5m to expect to achieve
savings of around £500,000 annually without any effect on
its overall performance.
If the full savings predicted had been achievable,
the Museum in Docklands would have been able to operate at a sizeable
surplus, which would appear to be quite unrealistic.
Details of the reasons why the savings figures have
been revised are as follows:
(1) BOARD SECRETARIAL COSTS
The costs originally estimated were based on the
MiD charitable company having its own Audit Committee, Finance
& General Purposes Committee and Remuneration and Terms of
Service Committee, as does the Museum of London. The company is
presently being run as a separate charitable company and has one
committee only, which deals with all matters relating to its management.
This arrangement would be likely to continue after any merger,
in the same way as the Museum of London Archaeological Service
(MoLAS) has its own committee. In view of the size of the MiD
company a separate Finance & General Purposes Committee and
Remuneration and Terms of Service Committee are not deemed to
be necessary. Our auditors have concluded that the Museum in Docklands
is a subsidiary of the Museum of London and therefore the Museum
of London's Audit Committee is overseeing the Museum in Docklands,
removing the need for a separate Docklands Audit committee.
Currently the Museum in Docklands has its own Board
meetings and, post merger, if the MiD company ceased to exist
these would no longer be required, giving rise to a saving estimated
at around £5,000 per annum.
(2) EXTERNAL AUDIT AND STATUTORY RETURNS
The cost savings were originally based on the Museum
of London's audit fee, but for a company the size of the Museum
in Docklands using the Museum of London's finance and payroll
systems, the annual audit fee is more likely to be in the region
of £7,500 per annum than £15,000. The projected savings
have therefore been reduced accordingly.
(3) INTERNAL AUDIT
Without the involvement of MoL in MiD's management
a company of the size of MiD would be most unlikely to have a
requirement for internal audit. Since April 2003 MiD has used
the same systems as MoL, so that its activities are covered through
the MoL internal audit programmes, and therefore no savings would
be anticipated here.
(4) DIRECTOR
We have concluded that there is a need for a full-time
Director of MiD in order to develop it to its full potential.
(5) SECRETARY
The Director will require secretarial support on
a full time basis. A small saving on salary cost has been achieved
in 2004/05, but the postholder has now resigned and will need
to be replaced.
(6) DEVELOPMENT AND MARKETING ASSISTANT
It has become apparent that MiD needs to invest in
its future development, and a full time fundraiser for MiD has
been appointed.
(7) DIRECTOR OF FINANCE & ADMINISTRATION
Costs have been incurred in 2003/04 and 2004/05 in
taking on temporary financial accountancy support to produce the
year end accounts for 2002/03 and 2003/04. The 2002/03 accounts
were difficult to prepare and the process was protracted, due
to some weaknesses in the records inherited from the previous
management. It is likely that some additional resource will be
required on an ongoing basis to deal with the annual accounts,
but efforts will be made to keep this to a minimum, and savings
of around £37,000 annually are anticipated after 2004/05.
(8) ACCOUNTS ASSISTANT
It has proved impossible to manage without significant
accounts assistant input, although this will be reduced from mid
2004 onwards, with the conclusion of work on the major HLF claims.
Estimated saving £11,700 per annum.
(9) HEAD OF PUBLIC PROGRAMMES
The public programmes work at MiD is currently funded
by the HLF, so there are no merger-related savings in this area.
(10) COMMERCIAL MANAGER
It has become apparent that MiD, as a separate site,
needs staff dedicated to developing its commercial activities.
There is no MiD commercial manager as such, though there is a
full-time assistant special events manager, and MoL has teams
of staff working on commercial hire and retail income. These
teams have had to be augmented to deal with the requirements of
MiD.
(11) IT SYSTEMS TECHNICIAN (50%)
MiD has been added to the museum's IT support contract,
at an additional cost of some £15,000 annually.
(12) CARE AND STORAGE OF COLLECTIONS
Collections care and storage costs of £150,000-£200,000
per annum would be incurred by MoL in connection with the Port
& River collections whether this was expended through MiD
or not.
Presumably the saving originally flagged up was based
on the assumption that the income generated from visitors to MiD
would be sufficient to cover the cost in full. However this income
has not been as high as previously forecast. Actual visitor income
for 2003/04 was £200k less than the MID business plan forecasts,
and visitor income for 2004/05 is likely to be down on the business
plan figure by £150k.
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