David Beckham fiasco at Mt Smart Stadium: 'tension' in the public sector operating commercially

The LA Galaxy/Oceania All Stars football match in December 2008 was the "wrong event, at the wrong time" according to a report by the New Zealand Auditor-General's Office.

Auckland Regional Council (ARC) lost $1.88 million in hosting the event at the Mount Smart Stadium when far fewer people purchased tickets to the match than the Council expected. The Chairman of the Council subsequently asked the Auditor-General to review the Council's handling of the event.

The recently released findings of the review have been explained by Phillippa Smith, the deputy controller and Auditor-General.

Smith stated, "we conclude that, despite the efforts of the council officers involved, the loss occurred because the LA Galaxy/Oceania 'All Stars' match was in essence the wrong event, at the wrong time, for the wrong price.

"The council has come to largely the same conclusion."

Smith added that the review had found that the council lacked systems for monitoring and overseeing such events and the Mt Smart operation "is something of an orphan in the council structure".

"It does not fit well with the council's other functions and operations, and the council had not, at the time, considered or agreed on suitable governance and business models for it."

The council wanted Mt Smart Stadium to operate commercially but the decision to promote the LA Galaxy event was made without a formal business strategy or a clear policy about the level of commercial risk that the council was willing to assume, Smith continued.

"We are satisfied that the council has correctly identified the problems with its governance and management of Mt Smart Stadium, and that it is taking appropriate steps to address those problems. Therefore, we have not made any specific recommendations for the Council. However, we trust that this report will provide some useful guidance for all public entities - especially those with commercial operations."

A key message within the report, which has wide-reaching implications for commercial operations undertaken by the public sector, was contained in its last two paragraphs, which read:

"There is a tension inherent in operating commercially in the public sector.

"Public officials must ensure that publicly owned assets are used effectively and efficiently for the benefit of the community (which might include earning income from those assets) and without waste or extravagance.

"The obligation to use the facility efficiently means that the entity cannot decline to carry out commercial activities. Yet business opportunities rarely come without risk. The public sector commercial manager needs to balance the need to exploit business opportunities and take on business risk with the obligations of being a steward of public assets."

The event's losses led to the resignation of two senior ARC executives in April last year, Parks General Manager Lance Vervoort and Mt Smart Stadium Group Manager John Lynch leaving their posts.

For more information go to www.oag.govt.nz/2010/la-galaxy/

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