The Australian Institute of Marine Science's Management of its Co-investment Research Program
The objective of the audit was to assess the effectiveness of AIMS administration of its co investment research program.
Australia's marine assets are a source of national wealth, supporting key industries such as marine tourism, offshore oil and gas, aquaculture and fisheries. Australia's marine industries contributed around $38 billion to the Australian economy in
2006-07, a 42 per cent increase over the last five years. One of our most highly valued marine assets, the Great Barrier Reef, contributed over $5.4 billion. It has been estimated that Australia's marine industries employ over one million persons, earn almost $20 billion in exports each year and contribute $6 billion in taxes.1
Australian Institute of Marine Science
The Australian Institute of Marine Science (AIMS) was established in 1972 under the Australian Institute of Marine Science Act 1972 in recognition of the importance of marine assets, especially the Great Barrier Reef, to Australia. AIMS mission is to conduct innovative research that advances understanding of our oceans and coastal ecosystems, facilitates good stewardship of marine resources and supports sustainable wealth creation opportunities from marine resources. AIMS research function is divided into five research teams. The total number of scientific and support staff employed by AIMS at 30 June 2008 was 180.2
The Australian Government has committed to provide $110.6 million in appropriation funding over the four year period 2007 to 2011. The AIMS research plan covers the same period.
The objective of AIMS research plan is to establish a research program to assist it achieve its strategic science objectives. AIMS sets its research priorities by analysing government, industry, community and science needs to identify where it can make the greatest difference.
AIMS research projects are divided into two categories, ‘appropriation funded projects' and ‘co investment projects.' The majority of AIMS projects are co investment projects.
Co-investment research projects
Co-investment projects involve research where the costs are shared between AIMS and its co-investment partners in order to deliver scientific findings. Co investment projects, together with their collaborative networks, have the potential to provide a greater impact due to the greater resources applied when AIMS works with partners. AIMS considers that co investment provides the opportunity to access a broader base of scientific knowledge, and to conduct more scientific research than could be done on its own. In addition, co investment generates additional revenue which assists AIMS to pursue further research.
At the time of the audit, AIMS had 67 contracts with external parties covering 96 separate co-investment projects. AIMS expects to receive more than $20 million in revenue from its co investment partners in 2008–09 to supplement its $27.6 million in appropriation funding. AIMS objective over the forward estimates period is to maintain co investment revenue at around 25 to 30 per cent of its budget.
Audit objective and scope
The objective of the audit was to assess the effectiveness of AIMS administration of its co investment research program. The audit reviewed AIMS:
- policies and guidelines for the approval of its research;
- project management systems and structures; and
- reporting against its research objectives.
The audit assessed AIMS approval, management and reporting of its co-investment research program, and supporting administrative, financial and information systems. The audit examined a sample of 35 co investment research projects. The audit did not assess the quality of scientific analysis or outcomes. However, it addressed AIMS assessment of its research task outcomes.
Key findings by chapter
Support for project management (Chapter 2)
AIMS has project management policies and guidelines on some aspects of its co investment projects. Incorporating template guidelines into its existing project policy and guidance on the approval, management and reporting of projects, and maintaining a single reference point where this documentation could be more easily accessed would provide staff with additional practical assistance to manage research projects.
Two centralised project support areas assist project managers by providing support on commercial, procurement, intellectual property, management and reporting issues. AIMS does not have a specialised project management information system, although it has two systems that support the management of its projects. One system reports each project's finances, while the other tracks project milestones and reports project status. These systems help AIMS to track and assess its projects' progress in a consistent manner.
The approval of AIMS co-investment research projects (Chapter 3)
AIMS develops its strategic directions in close consultation with its partners and stakeholders. It has a Strategic Science Team to facilitate this consultation and make recommendations to the Management Group about future research. AIMS is represented on the management boards of four co investment entities, which provides it with the opportunity to identity and consider its partners' and stakeholders' needs before approving co-investment projects. The Council documented the benefits to research users before approving projects, however the benefits to research users were not as clearly documented for projects under $500 000 which are approved by the CEO.
The selection of projects examined included the following aspects in their approval documentation:
- measurable objectives which are agreed with partners and stakeholders and have a schedule for completion;
- project objectives which are linked to key result areas and strategic directions;
- a summary of the likely financial and resource impacts of research proposals; and
- assessments regarding the value and benefits of research to AIMS for projects over $500 000 in value.
For projects that were approved by the Chair or the Council, AIMS clearly and succinctly summarised its reasons for approving research proposals against pre determined criteria. However, its reasons for approving research proposals under $500 000, which are approved by the CEO, were not as clear. AIMS would benefit from assessing projects approved by the CEO against the same criteria used by the Council to improve the transparency of the reasons for approving projects, and to provide greater assurance that projects which are likely to provide the greatest value are approved.
The management of AIMS co-investment research projects (Chapter 4)
AIMS had project plans for each of the co-investment projects examined. Project plans included task objectives or activities which described the major project deliverables. AIMS included project budgets in its plans which included its financial contributions and those of its co investment partners. This assists AIMS in monitoring each project's progress against expectations.
AIMS has a risk management plan which sets out its key objectives and principles regarding the management of risk. Key risk areas have been identified in a risk register, which highlights the risk associated with maintaining and expanding its co-investment revenue as significant. Risk management guidelines are also included in its Budget Manual which requires project risks to be documented and the action taken to minimise them. However, except for one large project, AIMS had not documented its own risk assessments for the projects examined, although, it did participate in the development of two documented risk assessments as part of its involvement in projects with co-investment entities. AIMS had not documented its risk assessments for the other projects examined, even though it advised that discussions on risk took place for all its projects requiring Chair or Council approval. There would be benefits for AIMS if it documented project risk assessment for its co investment projects where the scale, length, cost and/or complexity of projects warranted.
The projects in the audit sample each had a contract that included the responsibilities of AIMS and its partners. AIMS use standard form contracts to determine the terms and conditions of its relationships with its co investment partners, and include its procedures for processing contract variations in its contracts. Of the projects examined, four projects were subject to a contract variation and each variation was made in accordance with the procedures outlined in contracts.
AIMS internal financial policy, processes and controls supporting the projects examined were sound, and there was adequate segregation of duties with regard to raising invoices and receipting monies. Payments made, revenue collected and costs recovered were in accordance with AIMS legislation, the CAC Act and AIMS procedures.
AIMS monitored and reviewed the progress of each project in the audit sample using its On-line Milestone Reporting System. AIMS also reports on the scientific activity in each of its research teams to the Management Group. In addition, it reports project activities against each of its key result areas and variances between project milestones and achievement to the Management Group and the Council.
AIMS and its partners' reporting requirements are outlined in project contracts. The form, level, detail and frequency of the reporting differs depending on the partner involved in each project. This reporting provided AIMS and its partners with a description of the status of each project and any issues impacting on project progress.
The reporting of AIMS co-investment research projects (Chapter 5)
AIMS and its co-investment partners report project progress and performance to each other on a regular basis. The terms of this reporting are in contracts. In addition, the review of seven completed projects in the audit sample revealed that AIMS provides its final project reports to its co-investment partners, and this includes information on its performance against project objectives. Also, at the end of its 2003–06 funding agreement a lapsing program review was conducted which assessed the appropriateness, efficiency and effectiveness of its marine science. The ANAO considers that AIMS had sound mechanisms to report its research performance to its partners, stakeholders and Parliament.
At each project's completion, AIMS produces and distributes a final report to its Management Group, partners and stakeholders. The final project report includes information on each project's performance and outcomes. This allows AIMS to draw conclusions about the effectiveness of each project and whether projects met the expectations of its partners and stakeholders.
AIMS does not have a post project review policy which requires it to review each of its co-investment projects, although it does evaluate its research teams' performance. AIMS evaluation of research team performance includes an assessment of each project's performance. This helps AIMS to measure the effectiveness, outcomes and benefits of its projects and is an appropriate approach.
AIMS external expert reviews used a consistent international methodology for scientific review which provided it with a sound basis to ascertain its performance against scientific research standards. While acknowledging its limitations, a report AIMS commissioned helped to inform its partners and stakeholders about its possible economic impact.
The report made two recommendations. One was aimed at improving AIMS transparency of its reasons for approving projects below $500 000 in value, and providing greater assurance that these projects were likely to provide the greatest value. The second recommendation sought to improve the identification, assessment, monitoring and review of project risks by documenting them where the scale, length cost and/or complexity of the project warranted
Summary of AIMS response
AIMS welcomes the ANAO performance audit and acknowledges the ANAO's overall conclusion that the AIMS administration of its co-investment research program is effective. AIMS accepts the two ANAO recommendations. AIMS strives to ensure a culture of continuous improvement and this report provides useful input to the improvement of the management systems that support AIMS research. The audit identified specific improvement opportunities, all of which can be implemented over the next twelve months. Some have already commenced and action plans, with clear implementation timelines, are currently being developed for the others.
Over the last 10 years AIMS has undergone considerable change and more recently significant growth of its external sourced research funding. A direct result of these changes has been a significant increase in project complexity. Aspects such as financial structures, collaboration partnerships, intellectual property ownership and others have all increased in complexity. Furthermore as AIMS leverages its government appropriation funding to increasing levels, it is important that it makes appropriate collaboration decisions to maximise the impact of its research. AIMS has been making significant changes to its systems and processes to keep them aligned with the changing needs of the organisation, however it does recognise that not all have kept pace. In some areas less formal processes may have historically been appropriate but now require a more formal and documented approach. Furthermore the complexity of the current operating environment does necessitate improved decision making risk management practices and AIMS will be adopting these as a matter of priority.
AIMS thank the ANAO for undertaking the audit which was completed in an inclusive and professional manner. The lessons learnt from the audit will greatly assist AIMS as it responds to the challenge of meeting its stakeholder's needs and achieving its mission to generate and transfer the knowledge to support the sustainable use and protection of the marine environment through innovative, world-class scientific and technological research.
Since its establishment in 1972, AIMS research has contributed to maintaining healthy oceans, environmental protection and sustainable marine industries. AIMS contributions in these areas are influenced by its ability to leverage the Commonwealth's investment in order to achieve enhanced research outcomes in the national interest.
AIMS leverage of government investment is underpinned by AIMS collaborative research strategy, which includes co-investment relationships to enhance scientific outcomes. Currently, co-investment research projects represent more than 70 per cent of its projects, with the remaining projects funded solely through appropriation funding. Co-investment assists AIMS to enhance its capacity to address complex marine science questions by building relationships with organisations which have complementary capabilities.
Overall, the ANAO concluded that AIMS administration of its co investment research program is effective. AIMS utilises a range of sound project management techniques to manage its co-investment research projects. This includes the implementation of project approval processes, project plans, financial controls and clear monitoring and reporting arrangements. However, there are areas for improvement. These include more clearly documenting the reasons for project approval, and project risk assessments.
In its administration of its co-investment research program, AIMS has developed a range of project management policies and guidelines. However, existing policy and guidance does not set out expectations regarding the ongoing management and reporting of projects. AIMS reduces the risk associated with not having documented guidelines by using templates for many of these processes which assists it to apply a consistent approach to these functions.
The basis for the approval of projects below $500 000 in value was not readily apparent because approval documentation did not summarise the benefits in terms of scientific impact, partner and stakeholder needs and value for money. Clearer documentation of the reasons for project approval would aid transparency and accountability.
Project approval documentation for research projects above $500 000 in value provides reasonable assurance that projects which represent the best value are being approved. Generally, project risk assessments are conducted for these projects, but are not clearly documented nor updated to assist in the ongoing management of risks. Periodic reviews of project risks would better inform AIMS regular monitoring and review of projects by ensuring performance measures remained relevant.
Internal financial processes and controls are sound and payments made and revenue collected are in accordance with relevant legislation. Project performance is reported regularly, both internally to AIMS Management Group and Council, and externally to its partners, stakeholders, Government and Parliament. In addition, AIMS commissioning of external reviews which applied a consistent international methodology for scientific review, provided it with a sound basis to ascertain its performance against scientific research standards.
1 Australian Institute of Marine Science, Strategic Directions, p. 5, available from <www.aims.gov.au/pages/strategic-directions.html> [accessed 10 December 2008].
2 Australian Institute of Marine Science, Annual Report 2006–07, 17 September 2007, p.3, available from <www.aims.gov.au/publications> [accessed 10 December 2008].