Monday, August 24, 2009

Museum Expenses: Time to Cross Our Fingers

On August 10, 2009, the Canadian Taxpayers Federation (CTF) met with the CFO and COO with the Canadian Museum for Human Rights. A number of interesting details came to light.

First, while the museum's cost overrun figure has publicly been reported at $45 million, the CTF learned the original overrun figure sat at $58 million. To get the overrun figure down to $45 million, a number of changes were made to the project.

Secondly, the CTF asked if the officials were aware of any repercussions or pay cuts to staff as a result of the cost overruns. The museum's officials responded that they weren't aware of any.

Finally, while the museum is covered under federal access to information legislation, the fundraising body for the museum - the Friends of the Canadian Museum for Human Rights - is not. That means that unless a government body makes a formal announcement about its donation to the project, taxpayers will only find out about the contribution if it is leaked or uncovered through information requests. Such was the case when it was discovered that Manitoba's crown corporations had secretly made donations towards the project.

Given the massive cost overruns for the project, it is truly appalling that heads did not roll at the federal government after the debacle was discovered. After all, consider what federal bureaucrat Lyn Sherwood told Senator Cowan during a March 3, 2008 Senate Committee on Human Rights hearing.

Senator Cowan: This is not one of those projects where the federal government is left to pick up anything over and above the $165 million that is contributed by other parties, is it?

Ms. Sherwood: The total budget is $265 million. You are putting your finger on a very real risk in the current environment, which is the impact of inflation on construction budgets. That has been factored into planning and is one of the reasons for the urgency of this bill because at the moment the purchasing power of that $265 million is being eroded at the rate of between $800,000 and $1.5 million per month.

Using Ms. Sherwood's high end figure for inflation costs ($1.5 million per month), the project should have been only $22.5 million higher by May 22, 2009; the day the overruns were announced. However, as noted earlier, the project was actually $58 million higher than expected. In other words, Ms. Sherwood was only off in her estimate by 157% or approximately $35.5 million.

Imagine that - federal bureaucrats make a $35.5 million budgetary mistake and no one is held accountable for the blunder. Only in government.

The museum's officials told the CTF they don't have any expectation for cost overruns in the future. However, given the last price tag for the museum was off substantially and no elected official seemed to care, it seems like we'll just have to sit back and cross our fingers.

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