Ws 4wd Final Report 7 Nov 2010
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Transcript of Ws 4wd Final Report 7 Nov 2010
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Reviewof
the
4WD
AdventureShow
Onbehalfof
FourWheelDriveNSW&ACT
Inc.
7NOVEMBER2010
WAYNE SMITH & Co
P.O. Box 1590
Potts Point N.S.W. 1335
Phone 02 9332 1499, Fax 02 9332 1688Email [email protected]
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CONTENTS ReviewofThe4WDadventureSHOW onbehalfofFourWheelDriveNSW&ACTInc......................................3
Background....................................................................................................................................................... 3
Instructions....................................................................................................................................................... 3
ReviewProcess................................................................................................................................................. 4
GovernanceandProbity................................................................................................................................... 5
Minutes........................................................................................................................................................ 6
Dutyto
exercise
reasonable
care
and
skill
...................................................................................................
8
Careanddiligencecivilobligations............................................................................................................ 9
Obligationtopreventinsolventtrading....................................................................................................... 9
Contractswithofficeholders..................................................................................................................... 11
Conflictofinterest...................................................................................................................................... 11
ObligationtodiscloseconflictofinteresttotheAnnualGeneralMeeting(AGM)....................................12
FinancialResults
.............................................................................................................................................
13
ReportoftheAuditorsReview ofthefinancialstatement........................................................................ 14
Continuingliabilities................................................................................................................................... 15
Separationof functionsinternalcontrol................................................................................................. 15
Whatwentwrong?......................................................................................................................................... 16
EventHistoryConceptualisation&LeadTime........................................................................................ 16
Event
History
Lead
Time
in
Relation
to
Sponsors:
....................................................................................
17
EventHistoryLeadTimeinRelationtoExhibitors:.................................................................................. 18
EventHistoryLeadTimeinRelationtoTicketSales:............................................................................... 18
EventHistory:BenchmarksandAssumptions............................................................................................ 19
EventHistory:BudgetOversight................................................................................................................ 20
EventHistory:GateReceipts&StaffingOversight..................................................................................... 24
ConsiderationsRegardingFutureEvents....................................................................................................... 24
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Aboutthecompilersofthisreport................................................................................................................. 26
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REVIEW OF THE 4WD ADVENTURE SHOW ON BEHALFOF FOUR WHEELDRIVENSW&ACTINC.
BACKGROUNDFourWheelDriveNSW&ACTInc.(theAssociation)isthepeakbodyrepresenting974WD
clubsinNSWandtheACT.
TheAssociationheldtheThe4WDAdventureSHOW betweenFriday27Augustand
Sunday29August,2010.Theshowincurredafinanciallossof$246,934andtheexecutive
CommitteehaveretainedWayneSmithandCotoconductareview.
INSTRUCTIONS WayneSmith&Cowasappointedtoprovidetotheexecutivecommitteeanauditreview
andreviewofoperational mattersandreportonthe4WDadventureshow(show)heldat
theSydneyDragway,EasternCreek,NSWbetween 27Augustuntil29August,2010.
Ourframeworkofreference:
ReviewObjectives:1. Provideanauditreviewontherevenueandexpenditurestatementofthe
Associationrelatingtotheshow.
2. Provideanopinionoftheprobityrelatingtotheengagementof contractorsand
serviceproviderstotheshow.
3. Reportontherelationshipbetweenthebudgetandfinancialresultsachieved.
4. Reportonanyothermattersrevealedduringthereviewwhichmayofferassistance
totherunningoffutureshows.
ReviewScope:Toachievetheseobjectivesthefollowingarethemaincomponentstothisreview.
Conductafinancialauditreviewoftherevenueandexpenditurerelatingtothe
show.
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ExaminationoftheAssociationinrelationtotheAssociationsIncorporationAct1991(ACT)andinparticulartheprovisionsrelatingtoenteringintocontractson
behalfoftheAssociation,accountingandmanagement.
Examinationoftheprobityinrelationtotheawardingofcontractsandengagement
ofserviceproviderswithinthecontextoftheAssociationsobligationsofthe
legislativeframeworkoftheAssociationsIncorporationAct1991(ACT)andbestpractice.
ExaminationofthebudgetaryprocessadoptedbytheAssociationandthe
relationshipbetweenthisprocessandtheprojectmanagementoftheshow.
Provideareportofourfindingsincludingananalysisofthebudgetedrevenue
shortfallstogetherwithrecommendationsforimprovementinfutureevents
organisedbytheAssociation.
ThescopeofthereviewdidnotincludeanauditoftheAssociationsassetsandliabilities,
accordingly,wedonotexpressanauditopiniononthem.Wearenottheappointed
auditorsoftheAssociationandourreportisaspecialpurposereportandisnotareportof
thetyperequiredbySection72oftheAssociationsIncorporationAct1991(ACT)This
report
does
not
constitute,
and
is
not,
legal
advice.
Comments
made
are
by
way
of
observation.ItisrecommendedthatCounselberetainedinrespecttosomeoftheissues
identified.
Wedisclaimanyassumptionofresponsibilityforanyrelianceonthisreviewtoanyperson
otherthanFourWheelDriveNSW&ACTInc.
REVIEW PROCESSTheprocesshasinvolvedreviewingvariousreportspreparedbytheshowmanager,
relevantlegislation,interviewswiththeExecutive,ShowManagerandselectedShow
Committeemembers,financialrecordsincludingselectedinvoicesandreceiptstatements
andotherdocumentsrelatingtotheshow.
ThescopeofthereviewdidnotincludeanauditoftheAssociationsassetsandliabilities.
Therevenueandexpenditurestatementhasbeenexaminedinrelationtotheapplicable
accountingframework.
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Weacknowledgetheassistanceandcooperationprovidedbytheexecutive,show
committeemembersandtheshowmanager.
Thepropriety
of
decisions
made
and
the
integrity
of
the
members
of
the
committee
and
showsubcommitteearenotdisputed.Thereisnoevidenceofanyuntowardbehaviourby
thecommitteemembers,andtheyaretobecommendedforthehonestyand
straightforwardanswerstheygavetoallquestionswhichwereaskedofthemduringthe
courseofthisreview.
GOVERNANCE ANDPROBITY TheFourWheelDriveNSW&ACTInc.hasbeenincorporated undertheAssociationsIncorporationAct(1991)oftheAustralianCapitalTerritory(theAct)anditissubjecttotheprovisionsofthatAct.
DELEGATIONBY COMMITTEETOSHOW SUB COMMITTEE
UndertheActthecommitteeofanincorporatedAssociationhasthemanagementofthe
Association(Part4s60).
ThepowertodelegatetoasubcommitteeiscontainedinPart1.3clause21ofthe
Associations
Constitution.
All
acts
or
things
done
or
suffered
by
the
subcommittee
in
the
exerciseofthedelegationhasthesameforceandeffectasifdonebytheExecutive
Committee.
TheCommitteeestablishedasubcommitteewithdelegatedpowerstooverseethe
runningoftheshow.NotwithstandingthisdelegationtheConstitutionoftheAssociation
providesthattheCommittee,retainedtherighttoexerciseanypowerdelegated.
Theshowsubcommitteewasestablishedbytheexecutivecommitteeon4February,2010.
Themembersofthesubcommitteewere:
ChairpersonGregRedfern
EventManagerGregEbling
MarketingandPRMichelleSahayan
FinanceOfficerRonOwen
ExecutiveCommitteeRepresentativeRogerSheath
AtthemeetingoftheExecutiveheldon 8thMarch,2010thefollowingtermsofreference
andfunctionsweredelegatedtotheShowSubCommittee:
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Objectives:1. Topromote4WDactivitiesandinterestsinSydney®ionalNSW.
2. Provideanopportunityforaffiliatedclubstopresentthebenefitsoftheirclub
membershipandincreasemembership.
3. TofillavoidintheSydneymarkettopromote4WDinterests.
4. TobetheprimemarketingopportunityfortheAssociationasrequiredbythe
ManagementPlantofocusonevents.
5. ToprovideatemplateforthefutureshowswithinNSWasrequiredbythe
ManagementPlan.
6. Tomakeavailableanopportunityfortheclubstoparticipateintheshowand
providesourceoffundraisingbyvoluntaryservice.
7. TopresenttheAssociationwithapossibilityofgeneratinganincomesourceto
provideprogrammesbeneficialtomembers.
Duties:1. ToplanandpresentaqualityshowthatmeetstheobjectivesoftheAssociation.
2. Tosecuretheresourcestoensurethesuccessoftheshow.
3. Toprovidemonthlysummariesastothefinancialstatusoftheshowtothe
ExecutiveCommittee.
4. Tomakerecommendationstoexecutivecommitteeonlongtermcommitments
requiredtoachievesuccessoftheshow.
5. ToprovidedetailedIncomeandExpenditure,AssetandLiabilityreportsin
accordancewithrecognisedaccountingpractices.
6. ToprovideregularupdatesonprojectprogresstoAssociationMembers.
MINUTES
TheAssociationsIncorporationAct(1991)issilentinrespecttoprovisionsonkeepingminutes.TheAssociationsconstitutionatsectionatPart1.3s17(3)providesthatthe
secretaryshallberesponsibleforkeepingminutesofallcommitteeandgeneralmeetings.
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Althoughnotspecificallymentionedminutesofsubcommitteemeetingsarealsorequired
asasubcommitteeissubsetordelegationof themanagementcommittee. Inouropinion
theminutesofboththeexecutivecommitteeandsubcommitteeprovideinsufficient
detailof
discussions
of
considerations
leading
to
key
decisions
especially
in
relation
to
the
decisiontoproceedwiththeshow.
MINUTESOF THESHOWSUBCOMMITTEE
Theshowsub committeemetseventimesbetweenApril2010andAugust2010.In
additiontothesubcommitteemembers,attendanceatthesemeetingsoftenincluded
representativesfromserviceandinfrastructureproviders.
The
minutes
of
the
sub
committee
evidence
that
the
committee
discussed
and
actioned
a
widerangeofdirectlyrelatedactivitiesandlogisticsupportrequiredfortherunningofthe
show. Theminutescontainreferencetothetopicsunderdiscussionbutareshortand
providelittleornodetailofanydiscussiononthosetopics.
Theminutesrevealthatfinancialreportsweretabledordeliveredtosixofsubcommittee
meetings.Howevertheminutesdonotrevealwhatdiscussiontookplaceorwhatdecisions
weremadeinrelationtothosereports.Themeetingheldon5Julyisanexceptionwiththe
commentweareontrack. Noneofthefinancialreportsareattachedtotheminutes.
MINUTESOF THEEXECUTIVECOMMITTEE
Theminutesoftheexecutivecommitteearemoredetailedinrelationtothediscussionson
theshowthanarethesubcommitteeminutes.Howevertheyhavenumerousreferences
toreportsbeingdiscussedortabledandinmanyinstancesthereisnoindicationofeither
thecontentofthereportoranydetailofthediscussiononthereports.Thereportshave
notbeenattachedtotheminutes.
Wehavebeeninformedthatoneofthereasonthattheminutesarelackingdetailis
becausethey
are
made
available
to
the
members
on
the
Associations
website
and
that
it
is
notappropriatetomakepublicthecontentofitemswhichmaybeconsideredcommercial
inconfidence. Weareoftheopinionthattheminutesrequiredtobekeptasapermanent
recordoftheAssociationshouldcontainmoredetailandshouldnotbecensoredinthe
firstinstance.Thecopiesoftheminutesmadepubliclyavailablecouldberedactedto
eliminateanyliabilitywhichmaypotentiallyarisefrompublicationofcommercialin
confidenceitems.
Althoughitisoftenimportantfortheminutestobebriefandconcentrateonmaterial
issues
rather
than
being
a
verbatim
report,
the
minute
taker
should
have
sufficient
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understandingofthesubjectmattertoachievethebalancerequiredofgoodsecretarial
practice.
Itis
often
common
for
adherents
to
the
"less
is
more"
approach
to
include
certain
facts:
for
example,thatfinancialreportswerepresented,orthatalegalissue(suchasapotential
conflictofinterest)wasdiscussed,orthataparticularaspectofanissuewasduly
considered,withoutpresentinganydetailofthediscussion.
However,theminutesareimportantlegaldocumentsandareprimafacieevidenceoftheexecutivedischargingtheirlegalobligationsandduties.Anyfailuretorecordthedetailsof
thediscussionatthemeetingswhichleadtothedecisionbeingmadeortokeepacopyof
thereportsattachedtotheofficialminutesreducestheevidentialbenefitavailablein
defenceofdecisionstakenbytheexecutive.
Bywayofexampletheminuteswillassistcommitteemembersinshowingthattheyhave
mettheirobligationsanddutiesassetoutbelow.
LEGALOBLIGATIONSTHATEXECUTIVECOMMITTEEMEMBERSSHOULDBE
AWAREOF
Committeeofmanagementmembersshouldbeawarethatwhileofficeholdersmayhave
certainareasofresponsibilityoroversight,allcommitteeofmanagementmembershavea
generalduty
to
be
aware
of
the
affairs
of
the
Association.
For
example,
just
because
an
incorporatedAssociationhasaTreasurer,doesnotmeanthatallothercommitteeof
managementmembersdonothavetobeawareofthefinancialpositionofthe
organisation.
DUTYTOEXERCISEREASONABLECARE AND SKILL
AmemberoftheCommitteeofManagementisrequiredtoactwiththeskillandcareful
attentionthatareasonablepersoninasimilarpositionwouldbringtotherole.
InrelyingoninformationoradvicefromamanagerorcontractoroftheAssociationthe
membershouldmakesuretheyaresatisfiedthatitisreasonabletorelyontheinformation
oradvice.Ifthememberisnotsatisfiedwithinformationprovidedtheyshouldmake
furtherinvestigations.
Thisobligationtounderstandandassessinformationbythemember(ratherthanjustrely
ontheadviceofthetreasurerormanagerforexample)appliestofinancialreportsaswell
asmoregeneralinformationabouttheAssociationsactivities.
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CAREAND DILIGENCE CIVIL OBLIGATIONS
Anexecutivemembermustexercisetheirpowersanddischargetheirdutieswith
reasonablecare
and
diligence.
Ifanexecutivememberorotherofficermakesabusinessjudgement,theywillbedeemed
tohavemettheaboverequirementsinrespectofthejudgementifthey:
makethejudgementingoodfaithandforaproperpurpose;
donothaveamaterialpersonalinterestinthesubjectmatterofthejudgment;
informthemselvesaboutthesubjectmatterofthejudgementtotheextentthey
believeisreasonable;and
believethejudgementisinthebestinterestsoftheAssociation.
OBLIGATIONTOPREVENTINSOLVENTTRADING
GiventhepresentfinancialpositionoftheAssociationitisprudentforthemembersofthe
executivecommitteetobeawareof mattersrelatingtoinsolventtrading.
Aspartofthedutytoexercisereasonablecareandskill,itisgenerallyacceptedthatthe
ExecutiveCommitteemembershaveanobligationtopreventtheincorporatedassociation
fromtradingwhileinsolvent. ACommittee membermaybeinbreachoftheirlegalduties
iftheyletanincorporatedassociationcontinuetooperatewhileinsolvent.
Anincorporatedassociationshouldnotincuranynewdebtsifitisunabletomeetits
existingdebts.Ifthecommitteesuspect,orhavereasonablegroundstosuspect,thatthe
Associationcannotpayitsdebtswhentheyfalldue, professionaladviceshould
immediatelybeobtained.
ThetestistheAssociationwillbe'insolvent'ifitcannotpayitsdebtsasandwhentheyfall
due.
Ifanincorporatedassociationcontinuestooperatewhileinsolvent,thecommittee
memberscould
be
personally
liable,
even
though
the
organisation
is
incorporated
and
generallyhaslimitedliability.
Formanyincorporatedassociations,insolvencymayoccurduetoitbeingtechnically
withoutthecapacitytopayitsdebtsforashortperiodoftimepriortoreceivingan
injectionofcapitalintheformof aloanofgrantfromanassociatedorganisation,for
example.
InSandellvPorter[1966]115CLR666,theCourtheldthatinsolvencyisdeterminedbyconsideringallofthecircumstancesofthedebtorsfinancialposition.Itisthefinancial
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positioninitsentiretythatmustbeconsideredandinsolvencyshouldnotbedrawnsimply
fromevidenceofatemporarylackofliquidity.1
TheCourt
confirmed
this
position
in
LewisvDoranwhenreferringtotheenactmentofs
95AoftheCorporationsAct.TheCourtsaid:2s95Aisunequivocallyandemphaticallyclearthatinsolvencyis,firstandlast,a
questionoffacttobeascertainedfromaconsiderationofthecompanysfinancial
positiontakenasawhole.Inconsideringthecompanysfinancialpositionasa
whole,theCourtmusthaveregardtocommercialrealities.Commercialrealitieswill
berelevantinconsideringwhatresourcesareavailabletothecompanytomeetits
liabilitiesastheyfalldue,whetherresourcesotherthancasharerealisablebysale
orborrowinguponsecurity,andwhensuchrealisationsareachievable.SouthernCrossInteriorsPtyLtd(inliquidation)vDCT(2001)53NSWLR213at224.3
Itgoestoofartosaythatinsolvencyexistsmerelybecausethereisaninsufficiencyoffunds
ataparticularpointintime.Thiscircumstancemayexistmerelyduetoatemporarylackof
liquidity,whereasinsolvencyisconfirmediftheinsufficiencyrepresentsanendemic
shortageofworkingcapital.
Moneysthatcanbesecuredbyapledgewithinareasonablyshortperiodoftimewillalso
dischargeanincorporatedassociationsliabilitiesinordertoshowsolvency.4
Ifanincorporatedassociationisabletoshowthatithascapitalcomingintoitwhichcanbe
regardedasimmediatelyrealisableorobtainable5 andnotintheindeterminatefuture,
then,coupledwithaconsiderationofthenatureofitsassetsandthenatureofitsbusiness,
itislikelythataconclusionofinsolvencywillbeprevented.6
WehavebeeninformedthatrelatedAssociationshaveorareintheprocessofprovidinga
pledgetomakeuptheAssociationsfinancialshortfall.Itisourrecommendationthatinthe
absenceofimminentreceiptofthesefundsawrittenpledgeshouldbeobtained. Should
1SandellvPorter[1966]115CLR666,670perBarwickCJ.
2LewisvDoran(2004)208ALR385,408.
3HymixConcretePtyLtdvGarrity(1977)2ACLR559.
4LaneRowinPtyLtdvPerovich[2007]FMCA1429.
5HymixConcretePtyLtdvGarrity(1977)2ACLR559.
6ReesvBankofNewSouthWales(1964)111CLR210,229.
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eitherthefundsorthepledgenotbeobtainedwithinareasonabletimewerecommend
thatlegaladvicebesoughtinrelationtosolvencyoftheAssociation.
CONTRACTSWITH
OFFICE
HOLDERS
WenotethattheminutesoftheExecutivecommitteedated18January2010recordthat
RogerSheathwasappointedtoassistGregEbelingasanadministrativeassistant anda
jobdescriptionistobedrawnup.Theminutesimplythatthiswasanemployedposition.
Shortlyafterwardsadraftcontractwaspresentedhoweverthiswasneverexecuted.
OurinterviewswithRoger,GregEbeling andemailsfromGregRedfernwehaveperused
supportthatRogerwasengagedasanindependentcontractorastheProjectManagerof
the
show
and
was
required
to
provide
the
project
services
and
tasks
as
set
out
in
the
draft
unexecutedcontract.
CONFLICTOFINTEREST
TheappointmentofRogerwhileacontinuingmemberoftheExecutiveandtheShowsub
committeeplacedhiminaconflictofinterest.WemightaddthatGregEbelingwasalsoin
aconflictofinterestbyvirtueofthecontractheheldasShowManagerandhis
appointmenttotheshowsubcommittee.
Itisaconflictofinterestif, amemberoftheCommitteeofManagementhasaprivate
financial(pecuniary)interest,directlyorindirectly,inacontractthattheorganisationis
consideringorentersinto.ThisdoesnotmeanthattheAssociation cannothavebusiness
dealingswithcommitteemembers.
Itshouldbestressedthatpotentialorrealconflictsofinterestcanoccuratanytime,and
indeedareanormalpartofapersonsexistencewithinanorganisation.Suchconflictsare
notnecessarilyacommentaryontheindividualinvolved.Itishoweverimportantthat
individualsbe
given
the
opportunity
to
be
sensitised
to,
and
express,
potential
or
real
conflictsofinterest.
Thepresenceofaconflictofinterestdoesnotnecessarilyimplyanyimpropriety.
Section65oftheTheAssociationsIncorporationAct(1991)providesthatifamemberofthecommitteeofanincorporatedAssociationhasanydirectorindirectpecuniaryinterest
inacontractorproposedcontracttowhichtheAssociationisormaybeaparty,the
committeemembermustdisclosethenatureandextentoftheinteresttothecommittee.
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Itisinherentbytheminutesoftheexecutivethatthisconflictofinterestwasknowntothe
executivecommitteeatthetimeoftheengagement,henceconstructivenotice,ifnot
actualnoticewasgivenbyRogerSheath.ThesameappliestoGregEbelingwhenhewas
appointedamember
of
the
show
sub
committee
whilst
contracted
to
the
Association
as
theshowmanager.
Thememberwillbepermittedtotakepartindiscussionsaboutthecontractbutmustnot
takepartinanydecisionoftheCommitteewithrespecttothatcontract.Itisnotobviousin
theminutesoftheCommitteethatRogerSheathrecusedhimselffromthecommittee
whenhewasbeingappointed.Howeverwehavebeeninformedthatheleftthemeeting
andwasnotpresentduringthediscussionsonhisappointment.
OBLIGATIONTO
DISCLOSE
CONFLICT
OF
INTEREST
TO
THE
ANNUAL
GENERAL
MEETING(AGM)
Whereacommitteememberhasaconflictofinterestassetoutabove,thereisalsoan
obligationtodisclosethenatureandextentofthatconflictofinterestinthestatement
presentedbytheAssociationtoitsmembersatthenextAGM(s65(1)(a)). Thisprovision
haspenaltiesattachedtoitfornoncompliance.
WestresstheimportancefortheAssociationtomakethisdeclarationattheupcoming
AGM.
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FINANCIAL RESULTS FourWheelDriveNSW&ACTInc
4WDAdventureShow
STATEMENTOFFINANCIALPERFORMANCE
fortheperiod5February2010to11October2010
IncomeSales Exhibitors 220,527
Entrancesales 82,355
OthersalesIncome 5,089
TotalIncome 307,971
LessExpenseVenueandstagingcostsSitecosts Leaseofsite 68,069
GroundLayout 3,248
Security 10,236
Cleaning 5,966
Entertainment 5,141
HireofPlantandEquipment 36,486
ClubLabourCosts 5,000
Otherstaging costs CateringforExhibitors/Staff 4,000
Ticketing
costs
7,374
MiscellaneousCosts 104
AdministrationExpensesBankFees 630
AccountingFees 650
ShowandProjectManagementContractors 129,446
PostageandStationary 3,667
Legalfees 1,238
Insurance 8,759
Telephone 4,008
TravelCosts
12,831
MeetingCosts 168
TestTrackConstruction 23,320
TestTrackMaterials 18,433
MarketingCostsAdvertisingandPromotion 206,174
TotalExpenses 554,945
OperatingProfit/(Loss) 246,974
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OtherIncomeInterestIncome 39
NetProfit/(Loss) 246,934
REPORTOF THE AUDITORSREVIEWOFTH EFINANCIAL STATEMENT
Thestatementoffinancialperformancespansthefinancialyearended30June2010and
theperiod1July2010to11October2010.Thereportcoversrevenueandexpenditure
applicabletothe4WDAdventureShowheldbetween27Augustand29August,2010.
Section72oftheAssociationsIncorporationAct(1991providesthatthecommitteeisresponsibleforthepreparationofthefinancialreport.TheAustralianaccountingstandards
requirethatthefinancialreportbepreparedinaccordancewiththeapplicablefinancial
reportingframework,andforsuchinternalcontrolasitdeterminesisnecessarytoenable
thepreparationofthefinancialreportthatisfreefrommaterialmisstatement,whether
duetofraudorerror.
Ourprocedureshaveincludedverificationofreconciledbalances,examination,onatest
basis,ofevidencesupportingtheamountsandotherdisclosuresinthefinancialreport.
The
results
of
our
tests
did
not
reveal
any
irregularities
or
material
misstatement.
Ourreviewisnotafinancialauditasthiswouldbynecessityrequireanexaminationbyus
oftheassetsandliabilitiesoftheAssociation.TheAssociationhasappointedauditorsfor
thispurpose.Accordinglywedonotexpressanauditopiniononthefinancialstatement.
Theexpenditureincludesanamountof$41,753spentdevelopingthetrack.Under
Australianaccountingstandardsitwouldbepossibletoamortisethisamountoverthelife
oftheleaseonthetrack.Wehavebeeninformedthataleasehasbeennegotiatedandwe
havesighted
minutes
of
joint
meetings
held
between
Sydney
Dragway
and
representatives
oftheAssociationsexecutivewhereintentiontoleasewasdiscussed.Howeveralease
contractoverlandisrequiredtobeinwritingandintheabsenceofaleasetheexpenditure
cannotbeamortised.
Asat31October2010tradecreditorswere$42,386.Howeverasourreviewwasrestricted
totheaccountingrecordsoftheshowweareunawareofthefundsheldbytheAssociation
tocoverthis.(seeearliersectionofthisreportoninsolvency).
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CONTINUINGLIABILITIES
WehavebeenprovidedwithacopyofanagreementbetweentheAssociationand
WesternSydneyInternationalDragwayLTDABN38588445216.Thiscontractisalicence
agreementandprovidesfortheuseofthesite.UndertheagreementtheAssociationis
requiredtopay$76,000.00+GSTin2011and$95,000.00+GSTin2012.Werecommendthatlegaladvicebeobtainedtodetermineifthisliabilityisdependent
upontheshowbeingheldintheseyearsorotherwise.SEPARATIONOF FUNCTIONSINTERNALCONTROL
Themechanismsinregardtobudgetoversightoftheshowappeartobebadlydesigned
andinsomecasesnotfullyimplemented.
Normallyacleardistinctionismadebetweenthoseresponsibleforinputtingreceiptsinto
anaccountingsystemandprocessingpayments.Thisisrequiredforpropersegregationof
roles.
WithregardtotheapprovalofpaymentsprocessitappearsthatthecontractedProject
Manager
approvedpayments
to
third
party
suppliers
after
they
were
verified
by
the
show
manager.ThisiscontrarytoindustrypracticewherebytheClient(Inthiscasethe
Association)approvespaymentuponverificationbytheContractor(s).Thisrequiresthat
fromtheclientssidesomeoneisfamiliarwiththebudgetandinapositiontoapprove
paymentsandthatthatpersonhavenovestedinterestintheprojectbywayof
remuneration.
TheProjectManager(acontractedposition)workedwiththeShowManager(acontracted
position)andmadethepaymentsincludingprocessingtheaccountingentriesrelatingto
them.The
Project
Manager
was
able
to
make
payments
electronically
without
the
need
to
referencetoathirdparty(foramountsunder$5000).
Whilstthisisefficient,andwerecognisetheproblemsofseparationoffunctionsinsmall
organisations,itisaweaknessofinternalcontrolprocedures.
Theabovecommentsarenotmeanttocastanydoubtontheintegrityandhonestyofthe
ShowMangerortheProjectManager.
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WHATWENTWRONG?Theaimofthispartofourreviewistoexploretheeventhistoryanditsoutcomesfroman
eventmanagementperspectiveasdistinctfromaprobity/governanceperspective.
AssuchthisreportaimstoexplorethoseareasrelatingtotheAssociationsbusinessmodel
thatmayhavecontributedtotheeventsfinanciallossaswellassuggestionsthatmaybe
helpfulinrelationtotheAssociationsendeavourswithregardtofutureevents.
EVENTHISTORYCONCEPTUALISATION&LEADTIME
Itappearsthattheshowwasoriginallyconceivedearlyin2009howeverforvarious
reasonsafeasibility
study
was
not
prepared
until
December
2009.
This
report
was
put
to
theAssociationsExecutiveCommitteeandon18January2010approvalwasgivento
commencepreparationsforholdingtheshowsubjecttoreviewtotakepartattheendof
March2010. TheexecutivecontractedGregEbeling(whohadpreparedthefeasibility
report)inthecapacityoftheshow(event)manager. Thecontractwasexecutedon22
February2010onbehalfoftheAssociationbyRogerSheath(actingPresident)andRon
Owen(Treasurer).Thecommencementdateitemizedinthecontractwas16January2010.
Theprovisionsinthecontractfortheservicestobeprovidedareextractedbelow:
TheEvent
Manager
will
provide
the
following
services:
1. Managethe2010Sydney4WDAdventureShowtotherequirementsofthe
organisingcommittee.
2. Developplanningdocumentsforthe2010showasrequired.
3. ManageallaspectsoftheSydney4WDAdventureShow.
4. ManagetheExhibitorstothe2010Sydney4WDAdventureShow
(a)Seekoutexhibitorsandnegotiateexhibitorscontracts
(b)Completeinitialregistrationandallocationofsites,finaliseregistrations
and siteallocations,inconsultationwiththeExhibitionmanagerand
Committee,and
generally
resolve
problems
that
arise
from
time
to
time
(c)SeekoutreplacementExhibitorsfollowinganywithdrawalswherever
possible
(d)FinalisearrangementswithExhibitorsandothersiteholders(asadvised
bytheCommittee)
(e)RecorddetailsofExhibitorpreferences,includingtheirpower
requirements
(f)ProvidedetailstotheTreasurertomaintainthesiteallocationregister.
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5. Developvenuelayoutplanandnegotiatevenuerequirementswiththe
SydneySpeedwayCommittee.
6. Recommendandmanagecontractorsasrequiredtodelivertheeventand
withinapproved
guidelines.
7. Negotiateallcontractservicesandensureallcontractsandpurchasesare
completedtotheacceptablelevel,signedoffandpaid.
8. Managethedevelopmentofshoweventsincludingtesttracksandother
programsapprovedbytheorganisingcommittee.
9. AttendmanagementCommitteemeetings,asrequired,andothermeetings
asrequiredbytheCommittee.
10. WorkwiththeMarketingManagerinpromotingtheshowandseeking
sponsorshipopportunities.
11. ProvideongoingfeedbacktotheManagementCommittee.
12. ActasmaincontactfortheSydney4WDAdventureShow.
13. Undertakeapostshowexhibitorevaluationandprovideapostshow
debriefingreporttotheCommittee&attendthepostshowdebriefing
meeting.
TheEventdateswereestablishedfortheweekendcommencingthe27th
August2010.
Theleadtimewasthereforeseven(7)months.Webelievethatthisleadtimefroman
eventsindustryperspectiveinrelationtoaninauguraleventwastooshortandeventually
contributedinparttotheeventualfinanciallossoftheevent.Theshortleadtimewould
haveputunduepressureontheidentifiedincomestreams.
EVENTHISTORY LEADTIMEINRELATIONTOSPONSORS:
InrelationtoSponsorshiptheshorttimeframe(allowingforfullconceptdevelopment,
graphicmaterial
elements,
sponsor
benefit
analysis
and
eventual
sponsorship
prospectus)
wouldnothaveallowedenoughtimetosecuremajorsponsorsasthey,inmanycases,
wouldhaveallocatedtheirpromotionalbudgetsfortheupcomingfinancialyear.This
wouldhavealsobeencompoundedbythefactthatthiswasaninauguralandtherefore
untestedevent.Theinformationfeedbackconfirmedthistobethecase.
Ourdiscussionswithcommitteemembersrevealedthattherewasashortageofmanpower
available,orallocated,toconcentrateonsecuringsponsorships.Thecontractexecuted
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withtheShowManageronlyprovidesforhimtoworkwiththemarketingmanagerin
promotingtheshowandseekingsponsorshipopportunities.
Assponsorshipissoimportanttoincomeadedicatedmarketingpersoninthisroleshould
beconsidered
and
no
decision
to
proceed
with
any
future
show
should
be
made
until
the
sponsorhasbeencontracted.
EVENTHISTORYLEADTIMEIN RELATIONTOEXHIBITORS:
TheleadtimeinrelationtoExhibitorsincomestream,constrainsoutcomesinverymuch
thesamewayasitimpactedonsponsorsabove. Whyistimeafactor?Withregardto
exhibitorsandotherthirdpartyindustrysuppliersapushpullmechanismevolvesover
time.Thatistosaythatasmoreandmoreexhibitorssignup,theircompetitorsand
auxiliarysuppliersfeeltheneedtoparticipateandmomentumbuildsupovertime.It
appearsanecdotallythatthe124exhibitorswhodidsignupachievedapositive
commercialoutcomeandthatmessagewillcirculatethroughouttheindustry.
EVENTHISTORYLEADTIMEIN RELATIONTOTICKETSALES:
TheleadtimeInrelationtoticketsalesimpactsthroughtheavailabletimetomarketthe
eventandthewordofmouththatfollowsonasaconsequence.Wehavefoundinour
experience
that
word
of
mouth
advertising
is
by
far
the
most
powerful
marketing
tool
for
eventbasedproducts.Itappearsthatasystemforpresalesfortheeventwasnotputin
place.
WehavebeeninformedthatMikeWhitneywasengagedtoappearontheMattyJohns
showonChannel7.AfterhisappearancetheAssociationswebsitereceivedsomanyhits
thatitcausedtheservertocrash.Thefailuretohaveaticketpresalesfacilityonthesite
duringthisperiodofheightenedactivitywasalostopportunity.
Presales
are
the
driving
force
behind
word
of
mouth.
At
BBQs,
Clubs
and
Pubs
throughout
thelandthewordgoesoutHiFred Ivejustboughtanearlybirddiscountfamilypack
tickettothe4WDAdventureShowareyougoing?
Thereareanumberofprofessionalticketoutletsthatcansupplythisserviceatan
affordableprice.Whencomparedtotheamountofdollarsthatcanbespentonadvertising
presalesandwordofmoutharethemostpenetratingandcosteffectiveformof
advertisingbarnone.
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Therearemanywaystoachievepresales,includingthroughyourownwebsite,by
arrangementwithyouraffiliatedAssociationsorbyenteringintoanagreementwithan
organisationsuchasTicketek.
EVENTHISTORY:BENCHMARKSAN DASSUMPTIONS.
Ofallthefactorsleadingtotheeventsfinanciallossthefailuretocorrectlyresearchand
benchmarktheeventsprospectstothecorrectmodelsresultedinafalsesetof
expectationsthatcompoundedthedecisionmakingprocessthatfollowed.
Ourperusalofthefeasibilityreportrevealsthattheeventwasbenchmarkedtoexisting
eventswithparticularemphasisontheRosehillandQueanbeyanshows.Thisapproachwas
flawed asthoseeventshadbeeninplaceforanumberofyearsandhaveestablished
themselvesinthemarketplace.Thebenchmarkschosenshouldhavehadanappropriate
discountappliedtothemtoreflectthatthiswasaneweventtotheSydneymarketplaceor
benchmarktheeventtothoseothereventsinauguraloutings.
Astimemovedforwardandfailurestoachieveincometargetsbecameapparent,itappears
thattheAssociationanditsprojectmanagementwerestillbeingmisledbytheoriginal
assumptionsandfailedtoreevaluatethoseassumptions.Asanexample,thebudget asat
May
2010,
entered
into
the
MYOB
accounting
program
used
by
the
Association,
provided
for$477,739 inExhibitorincome.ThefinalExhibitorincomecameinat$220,527.A
shortfallof$257,212.
Howevertheexpenseswhichwouldhavebeenknownfairlyaccuratelyatanygiventime
weresittingsomewherecloseto$683,900.(Orhigherifcostcuttinghadnottakenplace)
Thiswouldindicatethatatanygiventime,evenifgatesaletargetswereachievedthe
organizationfacedaloss.
Atsome
point
it
must
have
become
apparent
that
arevenue
shortfall
would
occur
well
beforetheeventtookplaceandyettheassumptionsstillheldsway.
Wehavebeensuppliedwithseveraldocumentswhichhavebeentitled4WDShow
Budgetwhichwesummariseinthetablebelow:
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Date Projected
incomefrom
exhibitors
Projectedtotal
Income
Budgeted
Expenses
ProjectedProfit
17January
2010
475,000
1,160,208 756,000 404,208
21January2010#1 1,362,600
22April2010 544,501 752,021 683900 68,121
May2010 477,739 752,739 683.900 68,839
Actual 220,527 307,971 554,945 246,075
#1 EstimatesuppliedbyGregEbeling
WehaveassumedthatthebudgetpreparedlateAprilwasoneofthedocumentsreferred
to
as
being
discussed
at
the
executive
meeting
held
on
3
May
2010.
At
this
point
the
perceivedincomeasviewedthroughtheapprovedbudgetwouldhavebeen$752,021.We
arepuzzledastohowthesebudgetedprojectionswerejustifiedinthelightofthelow
exhibitorsaleswhichhadbeendiscussed22daysearlierattheexecutivemeetingheldon
31stMarch,2010.
Wehavesightedarevisedbudget/cashflowdocumentdated11August2010whichstill
projectedaprofit.Thisbudgetcontainedanoptimisticexpectationthatincomefromticket
saleswouldbe$250,000whichwastheoriginalassumptionsmadeinthefeasibilitystudy
datedDecember
2010.
Actual
ticket
sales
were
$82,355.
Indiscussionswithmembersoftheexecutiveandtheshowsubcommitteewehavebeen
informedthattheywereofthebeliefthattheChannel7Sunriseprogramweregoingto
covertheshowandprovideleaduppromotionpriortotheevent.Thepublicrelations
companyknownasStrutPR&Eventswereexpectedtofacilitatethisaspartoftheir
engagement.ThecoveragebySunrisedidnoteventuate.
EVENTHISTORY:BUDGETOVERSIGHT.
TheresponsibilityalwaysremainswiththeClientwithregardtothedecisionmaking
processinrelationtoproceedornotproceed,withaproject,shoulditappearthataloss
maybeincurred.ThisstipulationisputinplaceduetotheClientsoutcomessometimes
beingatvariancetotheContractorsoutcomes.Ifaprojectiscancelledtheclientcanavoid
aperceivedlosswhereastheContractorwillincuralossofincome.Itisanindustry
standardthatprecludesanyconflictsofinterest.
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Attheexecutivemeetingheldon18January2010itwasagreed thatcertaintargetshadto
bemetbytheendofMarch2010toallowtheeventtoproceed.Thesetargetsincluded
mediasupportandthetakeupofexhibitorsitesaccompaniedbypaymentsofdeposits.At
thetime
it
appears
that
this
was
understood
by
the
executive,
the
contractor
Show
ManagerandtheProjectManager.Thecontractswiththeshowmanagerandtheproject
managercontainedprovisionwhichallowedforterminationatanytimebythegivingof
twoweeksnotice.
TheinitialviabilityreportfromtheShowManagerdated31December2009containedthe
statement; Itisessentialthattheshowexpensesarecoveredpriortoopeningtothe
generalpublic.Thiswillreducethefinancialrisk.Unfortunatelythesamereportalsowas
overoptimisticinprojectingrevenuebetween$1,014,220 and $1,298,440.
Wehaveattemptedtoestablishwhatreviewwasundertakenbytheexecutiveinsupport
ofthedecisiontoproceed.Unfortunatelytheminutesofboththeexecutivecommittee
andtheshowsubcommitteearelackinginthisrespect.
Extractfromminutesoftheexecutivemeetingheldon18January2010:
TheCommitteeagreedthatthefollowingtargetshavetobemetbyendofMarch,
2010toallowtheeventtoproceed.Mediasupportconfirmed.Takeupofsitesby
exhibitorsanddepositspaid.CommitmentfromClubsforsupport.
Extractfromminutesoftheexecutivemeetingheldon8thFebruary,2010.TheAssociationExecutiveCommitteearepleasedtoadvisememberclubsthata
decisionhasbeenmadetomoveforwardintheplanningoftheSYDNEY4WD
ADVENTURESHOWafterthereportpresentedtothecommitteeconfirmedthepotentialviabilityoftheproject.
Theminutesoftheexecutivemeetingdated 31stMarch,2010.Containthefollowing
references;
ReportfromGregEbeling
AlistofCompaniescontactedandresultsupto30/03/2010.350contacted,22
committed,6pending,322Noreply,7No,60Confidentofresponse.Exhibitors
currentcommitmentis13%¤tpotentialbeingnegotiatedis18%of
breakevenwithin3weeksoflaunch.
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ProfitandLoss[BudgetAnalysis]toendofMarch2010.Theincomeisdownbut
Gregexplainedthiswasdueto2weeksdelayingettingwebsiteupandrunning.
Reviewcomment:
The
minutes
reveal
that
at
the
end
of
March
only
13%
of
the
targetsaleshadbeenmeet.Thelowsalesbeingachievedshouldhavesetalarm
bellsringing.TheendofMarchwasthedatethathadbeendecidedinJanuaryfora
reviewtooccurtodecidewhetherornottoproceedwiththeshow.
DavidRossiterthenmovedthefollowing,secondedbyBruceClose,Carried.
AttheJanuaryExecmeetingTheCommitteeagreedthatthefollowingtargetshave
tobemetbyendofMarch,2010toallowtheeventtoproceed.Mediasupport
confirmed.Takeupofsitesbyexhibitorsanddepositspaid.
Reviewcomment:Thisresolutionrevealsthattheexecutivecommitteewere
remindingthemselvesofthepreviousresolutionrequiringcertaintargetstobe
met.Thereisnodetailintheminutestoindicatehowthecommitteesatisfied
themselvesthatthetargetshadbeenachieved.Thusitisnotpossibleforus to
provideanyanalysisinrelationtotheprojections.Howeverwerefertotherevised
budgetedprojectionsdated22April(setoutabove).Therewasadisconnect
betweenthebudgetthecommitteeappearstohavebeenworkingfromandthe
salesexperiencetothedateofthismeeting.
Theminutesofthesameexecutivemeeting(dated 31stMarch,2010)containthe
following:
26siteshavebeenbookedfromcompaniesrangingfromsmallexhibitorstomajor
internationalcompanies,ARBbeingoneexampleandanother66prospectivesites
beingfollowedupbytheShowteamSupportfortheshowfromClubshasbeen
goodwithalargenumberofClubspresentattherecentGreaterSydneyRegion
informationmeeting.TheExecutivehassurveyedPresidentsandtodate15Clubs
haveresponded
indicating
their
support.
InthelightofthistheExecutivehasgiventheirformalsupportfortheshow
subcommitteetomoveforward.
Meetingsheldbytheexecutivecommitteebetween31March2010 and17June2010
haveonlyminimalreferencetotheshowwhichwereproduceinfullbelow.
ExtractfromMinutesoftheExecutivemeeting12thApril,2010
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20104WDAdventureShow:AcashflowstatementwasnottabledandRoger
Sheathwillprepareitbeforeweeksend.
Extractfrom
Minutes
of
the
Executive
meeting
3rd
May,
2010.
20104WDAdventureShow:ArevisedcashflowstatementwastabledbyRoger
Sheath.
Thereisnoreferenceintheminutesfor12Aprilor3Mayofanydiscussionor
considerationbeinggiventotheviabilityoroftheshowandthedecisiontoproceed
appearstohavebeenlockedinatthemeetingof31March.
ItalsoappearsthatafirmgraspofthepositionwasnotunderstoodbytheExecutive
Committee.Certaininformationathandatthattimewithregardtolackofsponsorshipand
alargeshortfallinexhibitorresponseshouldhavegainedtheirattention.Werefertothe
executiveminutesof31Marchreproducedaboveandtheminutesreproducedbelow.
Theexecutiveminutesdated17June2010state:
someexhibitorshavebeenslowtopayfortheirsites.37%ofspacehasbeen
bookedandinvoicessentout.33%ofadvertisershaveconfirmedattendancebut
havenotreturnedapplicationforms.About$150,000hasbeencommitted,by
exhibitors,whichisabout40%ofexpected.
Ataminimumitappearsitisapparentthattheexecutivesrequirementtonotproceedif
revenuehadnotexceededexpenseshadnotbeenfulfilled.
Wehaveestablishedthatmanyreports,includingsomefinancialreports,presentedtothe
committeewereoralreports.Otherreportsmentionedincommitteeminuteshavenot
beenattachedtotheminutesandwehavenotbeenabletosightthem.Consequentlyitis
notapparent
to
us
what
information
was
available
to
the
executive
at
any
given
time.
ItisapparentfromourphoneinterviewswithcommitteemembersthataroundlateJuly,
earlyAugust,theyhadbecomeawarethattherewouldbeashortfallandtheybelievedthe
shortfallwouldbeapproximately$50,0007. Itwasexpressedtousthatthiswouldhave
beenacceptablegiventhatabout$42,000hadbeenspentondevelopingthetrackasset.
7Theamountandtheexactdateisuncertainaswehavereceivedconflictingreportsfromexecutive
members.
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Abouttwoweekspriortotheshowtherealizationthatthelosswouldbegreatersetin.
Unfortunatelybythistimeitwastoolatetocancelasmostcostshadbeenfirmly
contractedand
were
set.
EVENTHISTORY:GATERECEIPTS&STAFFINGOVERSIGHT.
Itappearsthatentrypointsandticketsalesfortheeventwereunderthecontrolofthe
DragwayVenueManagementteam.Italsoappearsanecdotallythatactualattendancemay
haveexceededgatesales.Thatistosaythatanunknownnumberofattendeesmayhave
gainedfreeentrance.Thesemainlyoccurredintheareaofthethirdcarpark.
Asanindustrystandard,ticketcollectionandsalesatthegateshouldnotberelinquished
toathirdpartywithnovestedinterestsintheoutcomes.Ticketsalesshouldbemanaged
bythePromotersstaff(InthiscasetheAssociation)withseniorstaffmemberoversight.
WehavebeeninformedthatthetreasureroftheAssociationdidattendtheticketsales
boothstoobtainanoversightofthesalesprocessandcompletedareconciliationofthe
cashproceedsagainstthebodycountasprovidedbyDragwayinacomputerizedprintout.
CONSIDERATIONS REGARDING FUTURE EVENTS.Beforeanydecisionismadetoproceedtoholdingthe4WDAdventureShowin2011
carefulconsiderationneedstobegiventothefinancialpositionoftheAssociationandin
particularifithasadequateaccesstofundsintheeventthatafinanciallosswasincurred.
Itisoutsideofourtermsofappointmenttoprovideananalysisofexpensesincurred.
Howeverwehaveidentifiedapproximately$70,000ofnonrecurringcosts.Evenifthese
costsavingareachievedrevenuewouldstillhavetoincreaseby$176,000tobreakeven.
ItisourrecommendationthattheAssociationshouldnotproceedwiththe20114WD
AdventureShowunderthesamearrangementsaswereputinplaceforthe2010show.
TheAssociation,beingavoluntaryorganisation,doesnothavetherequiredskillsand
capitalisationandlackstherequireddedicatedstaffinglevelstoachieveasuccessful
outcome.Inadditiontothistheleadtimeasoutlinedabovewouldnotallowsufficienttime
todeliverasuccessfuloutcome.
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HowevertheAssociationhasinvestedinandnowownsabrandassetthathasbuiltupa
degreeofgoodwillamongstthepublicandexhibitors.Toretainthatassetvalueitis
importantthattheshowshouldcontinuein2011otherwisetheassetvaluewilldisappear.
OnebusinessmodelthattheAssociationmayconsiderwouldbetoapproacha
professionalEventsOrganisationwithaviewtowardsnegotiatingadealthatwouldgive
theAssociationafreecarriedinterestinrelationtofutureevents.Overtime,iftheevent
provedtobefinanciallysuccessfultheAssociationcouldrecoupitslosses/investment.In
thissituationtherewouldbenoriskofanyfurtherfinancialloss.
OneofthepartiesthatmaybeapproachableistheeventorganizersoftheSouth
Australian4WD&AdventureShowwhoappeartohaveanalliancewiththePerthevent
organizers.
Wesetoutbelowanumberofsynergiesandadvantagesthatshouldappealtothemwhich
couldbeusedtoyouradvantageinanynegotiation.
1. Theyhaveacompatiblebrandnamethattheyhaveestablishedovertime.By
obtainingrightstotheAssociationsshowbrandtheywouldgaincontinuitywith
regardtotheirmarketingstrategies.
2. ItwouldgivetheirorganisationimmediateexposuretotheNSWmarketthroughan
existingevent.Theirpromotionalmaterialseemstoindicatethattheyarelooking
toachieveanationalcalendar.
3. Theyhavesponsorshipandexhibitorcontactsinplacethattheycouldswinginto
NSW.ThiswouldbeinadditiontotheexhibitorgoodwillthattheAssociationcould
providefromthe2010show.Thiswouldhelpnullifytheshortleadtimesas
discussedinthesectionsabove.Thecombinationoftheseelementswouldoffer
theirorganisationanincomestreamthatcouldcoverbasecostsandreducetheir
financialriskprofile.
4. Theirorganisationwouldgainthesupportofyourmembershipwiththeadded
possibilityof
volunteers
at
the
event.
In
addition
the
Association
can
offer
them
accesstotheAssociationstesttrackeitherasapartofthepackageorasaseparate
financialarrangement.
WithregardtothismodelitneedstobepointedoutthattheAssociationsassetvalue
decreaseswitheveryweekthatgoesby.Yourindustrycompetitorsaremorethanlikely
waitingforanannouncementthatyouwillnotproceedwiththe2011showandwillmove
toestablishtheirownshowin2011or2012.
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